Iran says importers can pay for oil using domestic currency

February 29, 2012 - 16:14
The Governor of the Iranian Central Bank Mahmoud Bahmani said that Iran will accept both gold and importing countries’ national currencies as payment for its oil.

"In trade with foreign nations Iran will not limit itself to the U.S. dollar. Our trade partners may provide payment in its own currency. If the country wishes, it can pay us in gold, and we will accept it without any reservations," Bahmani said.

Iran’s move is part of its efforts to move away from the hegemony of the petro-dollar. The U.S. has applied sanctions on entities that trade with Iran. It also successfully pressured Belgium’s SWIFT, owner of the SWIFT system, to refrain from doing business with Iranian banks, Bloomberg reported.

According to the IRNA news agency, any nation can pay in its own currency, and Iran has already accepted goods as payment from China and India.

“A separate barter arrangement also exists. Iran imports goods from China and India instead of the hard currency and faces no problem in this regard,” Bahmani further said.

Bahmani reassured importers that the central bank would supply “needed foreign currencies” to them and they would face “no problem”.

Local business experts say Iran has already agreed with Turkey, South Korea and Japan to trade in their national currencies, the Financial Times reported.

Turkey, South Korea, India and China have all increased their gold reserves in recent years.

Iran has already started to receive Indian rupees and Chinese renminbi instead of dollars for its oil sales to India and China, the two biggest importers of its crude.

Tehran is also in talks with some Asian businesses and governments about paying for rice and palm oil imports in currencies other than the dollar, importers say.

Central banks bought a record 439.7 metric tons of gold last year and will continue adding bullion in 2012, according to the producer-funded World Gold Council.

“This is a confirmation of gold’s status as a store of value, a universal currency,” Michael Cuggino, who helps manage about $15 billion of assets at Permanent Portfolio (PRPFX) Funds in San Francisco, told Bloomberg. “It transcends national borders.”

Gold has rallied for 11 years as investors sought a hedge against inflation and as the dollar fell.

(Source: agencies)