Iran, Russia move to conduct trade in national currencies despite US sanctions

TEHRAN/MOSCOW: Iran and Russia reached an agreement to conduct trade payments in their respective national currencies, a move aimed at circumventing United States (US) imposed sanctions.

The Governor of Central Bank of the Islamic Republic of Iran announced that the initiative seeks to reduce reliance on the US dollar.

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The agreement comes at a time when both countries face economic pressures from Western sanctions. Iran has been grappling with stringent sanctions imposed by the US since it withdrew from the Joint Comprehensive Plan of Action (JCPOA) in 2018.

The sanctions crippled the Middle Eastern country’s economy, limiting its ability to engage in international trade and access global financial markets.

Similarly, Russia was targeted following its military actions in Ukraine. The Russo-Ukraine War has completely isolated the Eurasian giant from many Western economies reliant on its gas and oil.

By seeking to trade in their own currencies, Iran and Russia aim to improve their economic ties and create a more resilient trading framework.

This will allow the two to mitigate the impact of the crippling sanctions and reduce their vulnerability to fluctuations in the US dollar.

The use of national currencies can also aid in a smoother transaction as it will eliminate the need for currency conversion and associated costs.  

For  Iran, this move presents an opportunity to stabalise its economy be expanding trade with a key partner. Russia is one of  Iran’s largest trade partners, and increased economic cooperation could lead to greater access to goods and investment.

The partnership may also help the Middle Eastern state to strengthen its position in regional politics, as it seeks to build alliances with countries that share similar interests in countering US influence.

Meanwhile, for Russia the agreement allows for it to diversify its trade relationships and reduce dependence on Western markets. Russia can make greater inroads in the region economically. It can also open door for joint ventures in sectors such as energy, agriculture and infrastructure development.   

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However, the US is likely to view the agreement with anger, as it has consistently sought to isolate the two economically. The move might also signal a growing trend among nations to seek alternatives to the US dollar, which can very well undermine its influence and effectiveness of sanctions.