Iran and Turkey Agree on Trade Using National Currencies

Valiollah Seif and Murat Cetinkaya, the governors of the central banks of Iran and Turkey, signed a bilateral rial-lira swap agreement. According to IRNA, the signing of this document coincided with the visit of Eshaq Jahangiri, the first vice president of Iran, to Turkey on Thursday, October 19. This agreement aims to facilitate bilateral trade, direct investment in both countries, and eliminate third-party currencies (dollar and euro) in converting rial to lira and lira to rial. Previously, in bilateral exchanges, rial was first converted to dollar or euro and then to lira, which increased transaction costs due to two stages of fees. During Turkish President Recep Tayyip Erdogan's visit to Tehran on October 4, Iranian President Hassan Rouhani expressed hope that by developing banking cooperation and using national currencies in trade transactions, the two sides could increase their trade volume to $30 billion. Currently, Turkey's exports to Iran amount to $4.9 billion, while its imports are $4.6 billion. "Signing bilateral and multilateral monetary agreements with trading partner countries" is one of the key points of Iran's sixth development plan. Meanwhile, the Research Center of the Parliament also stated in its 2014 recommendations that trade with 16 countries exceeds $500 million, and if bilateral monetary agreements are signed with eight countries, including China, India, South Korea, Turkey, the UAE, Taiwan, Pakistan, and Russia, more than 55% of imports could be settled bilaterally without the need for intermediary currencies. Despite the JCPOA agreement, according to Iranian economic and banking officials, major European banks still show reluctance to operate in Iran due to potential US sanctions. With the possibility of the US exiting the JCPOA, Iran's banking transactions may face even more difficulties. Trading in national currencies could reduce countries' dependence on the dollar and euro, thus preventing complete financial isolation of Iran during sanctions. Valiollah Seif, the governor of the Central Bank of Iran, who traveled to Ankara on October 10 to prepare for the monetary agreement with Turkey, acknowledged in a meeting with his counterpart that European banks still have fears about cooperating with Iran. However, he stated that Iran's banking conditions are not comparable to those before the JCPOA.