By Umid Niayesh, Temkin Jafarov

International sanctions imposed on Iran due to its disputed nuclear program has forced the country towards bartering goods with oil and using national currencies instead of the US dollar or Euro in trade with foreign countries.

The Islamic Republic recently launched ruble/rial trade with Russia. Gholam Reza Panahi, the deputy governor for currency affairs of Bank Melli of Iran (BMI) said on April 25 that a mechanism that enables Iranian exporters to transfer payments in rubles from their Russian clients to Iran through the Moscow-based Mir Business Bank has been established.

It is while Iran and the P5+1 (the US, UK, France, Russia, China, and Germany) reached a nuclear framework agreement on April 2 that raised hopes for achieving a comprehensive nuclear deal by June 30 and lifting of economic sanctions on Iran, including the restrictive measures against the country’s banking system.

The possible agreement would provide Tehran with access to almost $100 billion of its blocked assets abroad and connection to international money transportation system, Swift.

The Russian ruble has experienced a sharp fall since sanctions were put in place over the Ukraine crisis. Iran’s rial however is more stable now, after President Hassan Rouhani took the office in August 2013, but still experiences fluctuations.

Fluctuations of ruble and rial make up the main risk factor in replacing the national currencies with the international currencies in Iran-Russia mutual trade, Pedram Soltani, vice president of Iran Chamber of Commerce, Industries and Mines believes. However he underlined the importance of moving towards the use of national currencies in mutual transactions with high volume.

“I believe that bilateral monetary agreements between the countries, especially those which have high economic and commercial exchanges should be formed gradually,” Soltani told Trend April 30.

“However the instability of the national currency of the countries is the main risk of such cooperation, but can be managed by risk reducing mechanisms through forming the foreign exchange market,” he added.

He further said that developing countries should gradually reduce their reliance on limited number of international currencies to put an end to the monopoly of certain countries in the world financial system.

Soltani also touched upon the future of the Iran-west trade in post-sanctions period, saying there is no doubt that trade and investment activities between Iran and the West will experience growth and prosperity again.

While responding a question about the Iran-Russia trade after the sanctions are lifted he said that it will be affected negatively in short-term, but in mid-term Tehran-Moscow trade would be boosted.

Removing the sanction will lead to growth of Iran’s economy and overcoming the current economic recession, he said, adding as a result Iran’s exportable products to Russia and the country’s demands for imports from Moscow will both increase.

Iran-Russia trade turnover was about $2.3 billion in pre-sanctions period. The Islamic Republic imported $1.76 billion worth of goods from Moscow in 2011, meanwhile the country’s exports to Russia accounted for about $500 million.

According to the Iranian Customs Administration Tehran exported $296 million worth of none-oil goods to Russia in last fiscal year (ended on March 20). Iran ’s imports from Russia stood at $667 million in the same period.

/By Trend/