The Iranian Riyal has lost nearly two-thirds of its US dollar value over the past three years [Thaier al-Sudani/Reuters]
Tehran, Iran – The government
Iranian presented a project to replace the
US dollar with the Euro in official financial relations, according to government media reports.
Friday's move (ndt 13 apr.) is considered part of efforts to circumvent restrictions on the accessibility of the dollar currency, as a result of tensions with Washington, as well as preventing general instability on the markets generated by fluctuations of the Iranian Rial against the dollar.
In a cabinet meeting, the government has decided that all ministries, State organizations and companies should refer to the exchange rate with the euro, which the Central Bank of Iran will have the task of communicating frequently, the IRNA news agency reported.
It is unclear when this decision will take effect, but the entrepreneurs have said that they will wait to know the implementation methods before these new conditions can take effect.
“I suppose if they use the euro as their official currency, this will reduce the psychological impact of the rial fluctuations on the dollar”, he said, ad Al Jazeera, Newsha Sheikh Soleimani, which imports raw materials for the processing of bricks and ceramics in Tehran.
“Our company operates mainly in euros, but some invoices are issued based on the rial-dollar exchange rate” but his company recently had to suspend all transactions due to uncertainty over the value of the foreign currency.
“I welcome any move that can bring stability to the foreign exchange market”.
The loss of value
Valiollah Seif, head of the Central Bank, he had already said that the use of the dollar in financial transactions is not "logical"..
Iran's trade revenue is mainly in euros due to sanctions on the US dollar, he stated. Therefore, Seif added, the country's financial reporting should use a more stable and widely used reference currency in trade.
As part of the agreement Iranian nuclear power of the 2015 with world powers, all sanctions related to Iran's controversial nuclear program have been lifted.
Despite this, due above all to persistent tensions with the United States, There are still limitations on Iran's accessibility to US currency.
These restrictions have contributed to the fall in the value of the rial against the dollar in recent months.
The dollar traded at an all-time high of 60.000 Rial last week, teasing, among Iranians, serious concerns about the stability that the President Hassan Rouhani had brought about the economy by controlling exchange rates.
Since last year, the rial lost approximately 50% of its value compared to the US currency, which some Iranians buy in large quantities as an investment in times of great economic uncertainty.
A sudden drop in the value of the Rial is expected to cause an increase in the price of imported goods and increase the inflation rate.
To control the currency crisis, the government last week froze free trade in the us currency by introducing an official rate of 42.000 rials for every dollar.
The Central Bank said it would provide dollars only to those registered to use them for specific purposes, while the free exchange of foreign currency will be deemed illegal.
Seif, Head of the Central Bank, faced lawmakers' fury last week, when he took the parliamentary podium to explain the new forex policies. He suggested to the supreme leader
Ayatollah Ali Khamenei the use of the euro in foreign trade to replace the US dollar.
A short term fix?
In the meantime, a currency trader told Al Jazeera that these new policies are “good news for importers and exporters”, but which have generated confusion for its business.
“Even if the government replaces the dollar with the euro, the dollar is still traded and used as an investment by many in the free market.", he said, preferring to remain anonymous.
“I hope these decisions are not just temporary measures – like a fever-reducing pill – because international restrictions on the dollar affect our economic stability”.
There have been growing concerns among Iranian businesses about a possible US withdrawal from the Iran nuclear deal.
US President Donald Trump should decide the 12 May if his administration confirms sanctions that were lifted as part of the nuclear deal.
He believes the deal isn't working because it doesn't address Iran's missile program, as well as its military presence in the region.
Iran says its missiles are for defensive purposes.
*****
L’“man who whispers to the powerful” expresses his opinion in one of his usual Sunday letters to the editor of The weather, second newspaper of the capital. The reader will wonder why these sporadic spaces are given to those who are extremely distant from our positions in many respects. Well, after meeting him, the reason is easy to say: l’ “man who whispers to the powerful” can say things, sometimes, more interesting than others. No offense to those who don't whisper anything to anyone… On the contrary…(N.d.R.)