The US has employed economic sanctions on Russia and Iran in hopes of crippling them financially, making it more difficult for them to compete for trade in the region. RNA - However, Russia and Iran are working together to ditch the dollar to weaken the effects of US sanctions. The two are working to develop a new financial transfer system to replace the US-controlled SWIFT. This system would circumvent third country sanctions.
According to Russian presidential adviser for international affairs Yuri Ushakov, “In order to protect bilateral trade and economic ties from third country sanctions, measures are taken on the expansion of direct payments, the use of national currencies, the improvement interactions between the Russian financial transfers system and the Iranian Sepam, as an alternative for payments to SWIFT.”
The international SWIFT interbank communication system, used by more than 10,800 organizations in more than 200 countries, said in October 2014 that it was under pressure from several states which had sanctions against Russia, but did not plan to capitulate to their demands.
However, the Bank of Russia created its own transaction system as an alternative to ensure financial services go on in the event SWIFT decides to end its working relationship with Russia. In conjunction with moving away from SWIFT, the Russian Ministry of Finance reported that the country will not borrow in US dollars anymore until at least 2021.
Earlier this year, it was also revealed that Moscow and Beijing are working on a way to reduce US dollar dependency as Russia plans to issue its first yuan-denominated bond. These are aimed at helping Russian and Iranian economies deal with US tariffs and sanctions, and also help Russia expand its list of foreign lenders.
Russia was sanctioned by the US following the country’s alleged involvement in the Ukrainian conflict and its annexation of Crimea. Iran meanwhile is sanctioned because of its pursuit of nuclear energy and support for anti-Israel resistance groups like Hezbollah and Islamic Jihad.
Because the US dollar is the de facto currency of the world, sanctions can have a devastating effect on a country. However, as sanctions are being increasingly placed on states that resist US economic hegemony, they can collaborate to counter the effects of such sanctions.
According to Fars News Agancy, one solution to end the dollar dominance would be to use a global cryptocurrency. Iranian Minister of Communication Technology and Information Azari Jahromi in 2018 called a meeting with the board of the main banks of Iran and several state institutions, to discuss the creation of a “digital currency based on Blockchain”.
Meanwhile, the CryptoRuble is a digital currency currently in development and commissioned by Russian President Vladimir Putin, demonstrating that the Eurasian giant is prioritizing de-dollarization.
Although getting rid of the dollar is not a simple task, Russia and Iran have already taken some measures to move away from the greenback, and more importantly, replacing SWIFT together.
With Russia and Iran occupying a shared space in the Caucasus, Caspian Sea and Central Asia, they are natural partners. Moreover, as they are both sanctioned by the US, their relationship has only intensified so they can work in a partnership to overcome the effects of the economic attack. It is for this reason that they have no other choice but to cooperate together to circumvent the US-led sanctions. And as things are developing, they are most likely to be joined by China, Venezuela, Cuba, North Korea and many others.
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