Countries subjected to US-led sanctions are finding creative ways to overcome their ill effects as demonstrated by arrangements made between Iran and Russia. Arrangements have been made for exporters in the two countries to receive payments in local currency using branches in their respective capitals. This is a major step forward in thwarting the illegally-imposed sanctions on both countries.
Monday May 4, 2015, 09:14 DST
Iran and Russia have taken major steps to boost trade between the two countries by using local currencies, bypassing the dollar exchange mechanism. Tehran announced that it plans to establish joint rial accounts for Russian banks in Iran.
“Representatives from two Russian banks visited Tehran last week and discussed the matter with officials from the Central Bank of Iran (CBI),” said Mehdi Sanai, Iran's ambassador to Moscow.
“Once the CBI gives its approval, the Russian banks will have joint rial-based accounts in Iran,” Sanai was quoted by IRNA as saying.
The aim is to facilitate receipt of payments by Iranian exporters to Russia. Arrangements have been made with Mir Business Bank (MBB)—the Moscow-based offshoot of Bank Melli Iran (BMI)—to facilitate such transactions. BMI board members recently visited the Russian capital and made arrangements to activate its currency exchange office in Moscow.
On April 26, Gholam-Reza Panahi, deputy governor for currency affairs of Bank Melli Iran, said the mechanism would enable Iranian exporters to transfer payments in rubles from their Russian clients to Iran through Mir Business Bank.
MBB will also facilitate opening of letters of credit for Iranian exporters. Both Iran and Russia have been subjected to a series of draconian US-engineered sanctions that are aimed at crippling their economies. The precipitous drop in the price of oil since last June is part of the same policy. Barter trade and trading in local currencies have been found to be useful mechanisms for bypassing the dollar and euro and overcoming the negative effects of sanctions.
The US and its European allies have imposed sanctions on Iran by alleging that Iran’s nuclear program has a military component, an allegation Tehran has vigorously denied. Russian businesses and individuals have been subjected to sanctions over the US-European engineered crisis in Ukraine. The US and its Nato allies accuse Moscow of supporting anti-government protesters in eastern and southern Ukraine.
The legitimately elected government of Ukraine was overthrown through a US-Nato sponsored coup d’etat and while Russia is trying to protect its citizens in Ukraine, the West accuses it of instigating anti-government protesters. Russia denies the allegation. Instead, it has accused—not without justification—of imposing an anti-Russian regime in Kiev. While these allegations are traded, both Russia and Iran have found a way around these sanctions.
Tehran is also working on plans to start similar local currency trade plans with Turkey and Iraq. Arrangements with Turkey are fairly advanced while those with Iraq are still being worked out.