Iran’s break with dollar easier said than done

Al Monitor | : A little over two weeks ago, Iran eliminated another function of the US dollar in its internal workings in a move positioned amid yearslong plans to reduce dependency on the greenback. The consequences will be manifold and interconnected, but there are discrepancies in views concerning what will happen as a result among experts and officials.

On Feb. 28, the Ministry of Industry, Mine and Trade announced by way of a directive that all traders are henceforth barred from registering their import orders in US dollars. The abrupt directive that is effective immediately was put into motion per a government request conveyed through a letter penned by Central Bank of Iran (CBI) head Valiollah Seif.

In the missive, Seif argued that since Iran’s banking system has no access to dollar transactions because of decadeslong sanctions, using the currency in imports translates into having to employ a network of foreign exchange bureaus instead of banks while also going against the country’s policy of “completely removing the dollar” from its international business dealings. The latter is indeed a policy that Iran is pursuing on several fronts.

For instance, Tehran is actively seeking bilateral or multilateral currency swap deals with its chief trade partners and has already one in place with Turkey. Furthermore, it previously announced a plan to halt the use of US dollars as the currency of choice in financial and foreign exchange reports from the beginning of the current Iranian year (ending March 20). But that plan ended up being postponed because a sudden break with the greenback was not deemed feasible as oil revenues are priced in US dollars, though it remains on the CBI’s agenda.

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