By Dominic Dudley
The Iranian government is to stop using the US dollar in its official statements, according to a report in the local English-language daily the Financial Tribune.
The decision was announced by Central Bank of Iran governor Valiollah Seif during a television interview on the evening of January 29 and, according to the paper, is due to take effect from the start of the new fiscal year on 21 March. It will affect all official financial and foreign exchange reports.
The move is significant in the light of the recent ‘Muslim ban’ by US President Donald Trump, which prevents anyone from Iran and six other Muslim-majority countries from entering the US. The Iranian government has vowed to take “reciprocal measures” and has said it will stop issuing visas to US citizens. Some exceptions to this may be made though. Iran’s Ministry of Foreign Affairs has said that it has yet to decide on whether to allow a US freestyle wrestling team into the country. The team is due to compete in the Wrestling World Cup in Kermanshah province in mid-February.
While the White House has said the order to bar Iranians and others was made to tackle the threat of terrorism, it is notable that since 1975 no Americans have been killed in terrorist attacks in the US by the citizens of the countries included in the ban. It has also been widely noted that Trump’s business empire does not extend to the seven targeted countries but others where he does have business interests have not been included in the order, even though their citizens have been involved in terrorist outrages in the US.
As a result of years of sanctions imposed by a succession of US administrations, Iran has very little trade with the US. Its most important trading partner is the UAE, which accounts for around 24% of all Iranian imports and exports. China is not far behind with 22%, followed by Turkey, India and the EU, all of which account for around 6% of Iran’s trade.
This leaves open the question of what Iran will use to replace the dollar. Seif said in the television interview that “we have to set a currency as the basis of financial reporting that has better stability and greater application in our foreign trade,” according to the Financial Tribune.
He added that Iran has the option of “selecting a basket of currencies or choosing the currency that plays the biggest part in foreign trade”. That suggests that the euro could be a logical alternative for the dollar.
However, the decision to drop the dollar could prove to be complicated for Iran, given that its most important export is oil which is priced in dollars. The country is on course to earn $41bn from oil sales this fiscal year. Switching its reporting to another currency will add a degree of currency risk and volatility and is likely to complicate matters for the authorities. At this stage, however, it is not clear how they will deal with this issue.
The article originally published at The Forbes magazine