Iran has moved closer to carrying out its threat to shift a significant part of its foreign exchange reserves and oil earnings out of US dollars into the euro and other currencies.
Iran’s central bank governor, Ebrahim Sheibany, warned Washington – in an exclusive interview with Emerging Markets – that Iran will not bow to US pressure in the run-up to a UN vote on its nuclear programme.
Instead, OPEC’s second largest oil exporter will pursue all available forms of redress – including through the IMF, and possibly in the international courts – of damage caused by the US Treasury department’s designation last week of Bank Saderat, one of Iran’s largest banks, as a terrorist financier.
Sheibany added that Iran could now have “no choice” but to shift out of the US dollar. “In a country like the US, when they have an international currency like the dollar, they should take care of it,” Sheibany observed.
“This [move against Bank Saderat] may cause us to distance ourselves from [the dollar], and I’m sure other countries are looking at us … [and, seeing such unilateral action] will be more cautious. Even now we are using other currencies, and this encourages us to get away from the dollar.”
Tehran calls this “protecting reserves”. That means using “not just the euro – we are using other [Asian and regional] currencies,” Sheibany said, adding that this could start a trend of reserve diversification.
“We can put our currencies in neighbours’ banks, and we also have very good relations with European banks.” He mentioned Bahraini and Saudi banks as possible repositories.
Sheibany, an economist more often associated with Iran’s reformists, said Tehran was considering legal action against the US.
He cited Article One, Section Four, of the IMF’s Articles of Agreement – which says the Fund’s purpose is “to assist in the establishment of a multilateral system of payments” – and argued that the US Treasury’s “unilateral, inapproporaite and illegal” action was “in contravention of multilateral rules and … of the provisions of the [IMF] Article.”
“We intend to take all legal recourse available to us and expect that the IMF… also to take an appropriate stance against this unilateral and illegal action, that can seriously disturb international payments.”
What form Iran’s action will take has yet to be worked out. It will “actively pursue” its arguments both legally and through the IMF. Sheibany is writing to the Fund’s managing director, Rodrigo Rato, on the issue.
An IMF source observed that while Article One sets out the Fund’s purpose it is not, unlike many other articles, legally binding.
US Treasury undersecretary Tim Adams pointed out in an interview yesterday with Emerging Markets that terrorist financing will be a key issues for the G7 finance ministers’ meeting today.
Iran’s “use of the financial system for proliferation purposes” would be among the topics discussed, he said.
“Keeping the global financial system free from illicit activities, from those who seek to use it for the proliferation of weapons of mass destruction and other activities is vital,” he said.
Adams dismissed fears of a widespread sell-off of the US dollar. “We watch these issues very closely, and spend a lot of time engaging with various entities around the world, but we see absolutely no sign of a lessening in interest of holding US assets or the US dollar,” he said.
The US Treasury claims that Bank Saderat is a vehicle for transferring hundreds of millions of dollars to “terrorist organisations”, including Lebanese Hizbollah and Hamas, which now forms Palestine’s elected government.
Sheibani countered: “This action by the Treasury Department is 100% political.” He added: “Our banks are very transparent… Maybe the reason [for designation] is that [Saderat] has a branch in Lebanon, but this is not a reason for such action.”
Treasury’s move comes as tensions reached new heights over the Islamic Republic’s nuclear programme and its alleged support for radical groups such as Hizbollah. The so-called P5+1 governments – China, France, Russia, the UK, the US and Germany – are talking about action on the nuclear crisis ahead of the UN Security Council session on possible sanctions in the next few weeks