The Iranian government has introduced new restrictions on the use of the US dollar by blocking imports priced in the currency, in what appears to be a fresh attempt to halt a slide in the value of its own currency.
That means, no dollar is allowed to be used in transactions with Iran. What’s going on?
According to local media reports, as of February 28, any purchase orders or other import documentation based on US dollars will not be processed by customs officials.
The move comes as a result of a directive from the Ministry of Industry, Mines and Trade to the Central Bank of Iran (CBI).
Considering that the use of the dollar is banned for Iran and traders are literally using alternative currencies in their transactions, there is no longer any reason to proceed with invoices that use the dollar as the base rate.
Additionally, Iran had sought to switch to non-dollar based trade twice previously:
● January 1, 2015:
CBI announced that the country would stop using dollar during trading with other countries, only CNY, EUR, TRL, RUB and KRW were allowable.
● January 1, 2016:
It was once again reported that CBI stopped dollar payment.
According to the Director of Foreign Exchange Rules and Policies Affairs of CBI, It’s been for a long time that Iran’s banking sector cannot use the dollar as a result of the sanctions.
Therefore, the decision will not create major trouble for traders because the share of the greenback in Iran’s trade activities is not high.
However, Forbes.com, the American financial media says there are negative impacts on Iranian import
Nonetheless, many traded goods are still usually priced in dollars and the dollar remains the most important currency used in international trade, so the new rules are bound to have some impacts.
Alternatively, they may opt to use the euro. However, the extra layer of currency swapping involved may add to the cost of imports into Iran which could then feed in to higher inflation.
Iran appeals to Moscow to cut off dollar-transaction. So far, oil producing countries including Venezuela, Saudi Arab and Russia have been making efforts in de-dollarise transaction.
Early in January this year, State Bank of Pakistan officially approved that CNY would be used in bilateral trading as well as investing activities with China. And regulation has been carried out to promote CNY payment.
Also referring to our previous article, RMB is used for bilateral trade between Pakistan and China:
No Dollars But Only RMB in Trade Between Pakistan & China?!
Payment Notices
According to the official,under the current circumstance, the merchants are required to:
❶ Inform the suppliers to change the base currency from the dollar to other currencies so that the related import documents could be processed at Iran’s entry points.
❷ Identify their terms of payment, i.e. via banking system or bureaux de change, at the time of making their purchase order.
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