Oil Exporters Ditching Dollar, Switching to Other Currencies

[Tokhme khar]

Oil Exporters Ditching Dollar, Switching to Other Currencies
© AFP 2018 / ATTA KENARE
Business

Iran has decided to replace the dollar with the euro in foreign trade, thus joining an informal club of states, seeking to reduce reliance on the US currency in the oil industry.

Iranian government bodies and companies are being encouraged to use the euro as the main currency in their reports, statistics, publications and financial data.

“The dollar in Iran has no place in our transactions today, with traders preferring alternative currencies for their transactions. There’s no longer any need to continue using dollar-based invoices,” said Mehdi Kasraeipour, the Central Bank’s Director of Foreign Exchange Rules and Policies Affairs.

Tehran has responded to the US’ and its allies’ decision to extend anti-Iranian sanctions in March, which the Islamic Republic describes as “US-led economic collusion.”

“This is a politically motivated decision. Transactions in dollars go through American banks, which pose certain risks to Iran. There are no such risks in transactions in euros,“ said Alexander Razuvaev, director of the analytical department at Alpari.

CC0
Iran Inching Closer to Bidding Farewell to US Dollar
Iran remains the largest manufacturer and exporter of hydrocarbon raw materials in the world, with EU member-states and China being its major beneficiaries. According to the Organization of Petroleum Exporting Countries, Tehran reaps some $70 billion dollars annually from sales of oil. The American dollar is often indicated as the deal currency between the country-exporter and the buyer, with reference oil being rated high even at stock exchanges in London and New York, which makes the dollar so special, granting it the status of the world’s most popular reserve currency.
Experts believe that the US should sound the alarm as Iran has shifted to the euro in its oil dealings; many oil exporters and importers are dissatisfied with the heavy dependence on the American currency. The world is trending to a so-called de-dollarization of the world energy market: such countries as Russia, China, Venezuela, and now Iran, are already on the list.

Since 2016, the St. Petersburg International Mercantile Exchange has been trading for Russian crude in rubles, Venezuela stopped accepting dollars for oil transactions last year, demanding the euro instead, while the Shanghai Exchange launched China’s first yuan-based crude oil futures last month.

Alexey Kalachev, analyst at the company Finama investment, stated that there were no restrictions in bilateral trade transactions in national currencies, which would become a means for Russia, Iran and Venezuela to bypass the risks of dollar transactions being blocked.

“A national currency must be easily convertible and be on the list of reserve currencies in order to become an alternative to dollar in energy transactions globally. China, which has launched yuan-based oil futures contracts, is the closest to the goal,” Kalachev said.

Last week, Iran’s Supreme Leader Ayatollah Ali Khamenei held “foreign intelligence” accountable for the “recent issues on the currency market,” asking the country’s secret services to “defuse the plots against the Islamic Republic.”

The Iranian rial has weakened as US President Donald Trump’s administration approaches a May 12 deadline to stay in or unilaterally pull out of the 2015 nuclear deal that eased the lion’s share of sanctions on Tehran. Despite the implementation of the accord, the risk of further restrictions and penalties has forced multiple companies to avoid or strictly limit their trade and investment in Iran.

The views expressed in this article are solely those of the speakers and do not necessarily reflect the official position of Sputnik.

https://sputniknews.com/business/201804241063850677-oil-exporters-ditch-dollar/

 

[Samlee]

Why Don't You Ask For Payment in Rials????????

 

[ashok321]

Mullahs rig the price of moolah in Iran
The Economist · April 21, 2018

FOR the second time in as many months, Iran’s “dollar patrol” is on the streets. The country’s currency, the rial, has lost a third of its value on the black market since September. On April 9th it sank to a record low of 61,000 to the dollar (when the official rate was 37,850). The next day the government imposed a rate of 42,000 and vowed to arrest anyone who bought or sold rials for what they are actually worth—as it did during the previous currency crisis, which was only in February.

Some are nonetheless flouting the rules, demanding 56,000 rials or so for a dollar. There were long lines and, surprise, surprise, dollar shortages at the handful of exchanges using the official rate. A lack of confidence in the rial reflects a lack of confidence in the economy. The housing market is stagnant and the banking sector is shaky. Iranians are snapping up foreign currency because it is one of the few sound investments available.


Something similar happened in 2012. Back then Iran was under crippling sanctions and suffered from an annual inflation rate of around 25%. Many Iranians thought those days were over when, in 2015, Iran signed a deal with world powers that imposed restrictions on its nuclear programme in exchange for sanctions relief. President Hassan Rouhani expected to attract large amounts of foreign investment and recoup $50bn in frozen assets, equivalent to 12% of GDP.

Those benefits have not all materialised. The government is quick to blame Donald Trump, the American president, who is threatening to withdraw from the agreement (and may do so next month). The fear of fresh sanctions no doubt dampens investment. So do American sanctions (related to other aspects of Iran’s behaviour) that remain in place and discourage big banks from handling Iranian transactions. In 2016 Iran recorded just $3.3bn in foreign inflows. Israel, with a similar GDP and one-tenth the population, drew $12.3bn.

But Iran’s corrupt, opaque economy would probably be struggling even without Mr Trump. Companies linked to the Revolutionary Guards have revenues equivalent to a large share of GDP. Their empire spans construction, mining and telecommunications. A foundation linked to the supreme leader holds $95bn in assets, according to an investigation by Reuters in 2013. Many banks are on the brink of insolvency, in part because of pyramid schemes that swindled millions of poor Iranians. The head of parliament’s economic committee said in April that some $30bn in capital fled the country at the end of last year.

From the outside Iran looks ascendant, using proxies to expand its reach across the Middle East. In Syria it is establishing a permanent military presence. In Yemen it dragged arch-rival Saudi Arabia into a ruinous war at little cost to itself. At home, however, the regime looks increasingly brittle. In late December thousands of Iranians unexpectedly took to the streets to vent their frustrations. A subsequent poll by the University of Maryland found that 69% of Iranians think the economy is in bad shape, up from 49% two years earlier. Two-thirds of them blame mismanagement and corruption, rather than sanctions. Nearly half think Iran spends too much money on foreign adventures.

The protests stopped after the regime killed or locked up lots of protesters, but it is now battling discontent on other fronts. Dozens of young women have been arrested for doffing their headscarves in public to protest the official dress code. In February there were deadly clashes between the police and Sufis, who have long been harassed by the authorities. After a rare uproar in parliament this winter, Mr Rouhani backtracked on plans to cut subsidies.

Looming over all this is the question of who will succeed Ali Khamenei, the 78-year-old supreme leader who is rumoured to have suffered from prostate cancer. The presumed front-runner, Ebrahim Raisi, embarrassed himself last year when he ran for the presidency—and lost by 19 points. Whoever takes charge will inherit a restive, youthful country that has been mismanaged for decades. The nuclear pact created hopes for change. Unmet expectations may pose a bigger threat to the regime than sanctions ever did.

This article appeared in the Middle East and Africa section of the print edition under the headline "Rial v reality"
The Economist · April 21, 2018

Why Don't You Ask For Payment in Rials????????

Iran would stand to lose.
The Rial is sliding all the time.

 

[Samlee]

Iran would stand to lose.
The Rial is sliding all the time.

No I Mean Asking For Rials As Payment Would Create Demand For Iranian Currency And Help Increase It's Worth

 

[Chinese-Dragon]

Why switch from the Dollar to the Euro. Wasn't it the EU that blocked Iran's access to SWIFT in the first place?

 

[ashok321]

Why switch from the Dollar to the Euro. Wasn't it the EU that blocked Iran's access to SWIFT in the first place?

EU has no power on this exclusive American banking payment system SWIFT which is controlled by Federal reserves regulations in tandem with American banks. SWIFT is connected when you remit the USD.

EU cant do anything on this.

Swift key is generated in the US.

EU can only endorse the US sanction and enforce.
USD is routed through the US banks.

No I Mean Asking For Rials As Payment Would Create Demand For Iranian Currency And Help Increase It's Worth

It would be like going forward one step and going back two steps for Iran.
Would not work. Rial is volatile and vulnerable against sanctions. Look at the past history of Rial.

 

[somebozo]

other than iran this could be complete bS..a large chunk of oil technology is purchased in dollar therefore dollar remains the most valuable currency to sell oil..

 

[Samlee]

It would be like going forward one step and going back two steps for Iran.
Would not work. Rial is volatile and vulnerable against sanctions. Look at the past history of Rial.

Yeah Good Point

 

[Hamartia Antidote]

other than iran this could be complete bS..a large chunk of oil technology is purchased in dollar therefore dollar remains the most valuable currency to sell oil..

Just bookmark your response so when a similar post about Iran dumping the dollar happens in 2019 we can simply paste our answers.