Iran and Russia have finalized an agreement to trade using their local currencies instead of the U.S. dollar, according to Iranian state media.
“Platforms such as non-SWIFT messaging systems and establishing bilateral brokerage relations using national currencies are now being used by banks and businesses in Iran and Russia,” state media reported.
Both Iran and Russia are under U.S. sanctions.
American Faith reported that sanctions imposed on Russia following Russia’s military action in Ukraine have shaken the foundation of the U.S. dollar’s global dominance.
The freeze of half of Russia’s $640 billion in gold and FX reserves ignited fears in nations, leading to a strategic re-evaluation of their reliance on the dollar.
Stephen Jen, CEO of Eurizon SLJ Capital Limited, detailed, “What happened in 2022 was a very sharp plummeting in the dollar share in real-terms,” indicating that these changes came as a direct response to the sanctions imposed on Russia.
This reaction engendered a major reassessment regarding currency diversification in nations such as Saudi Arabia, China, India, and Turkey.
The intergovernmental organization, BRICS, which includes Russia, reportedly considered a gold-back reserve currency, although member nations denied the push for a new common currency.
A new expansion of BRICS, however, may affect the global financial landscape.
The BRICS consortium (comprising Brazil, Russia, India, China, and South Africa) is set to see its share in global GDP jump to 30% in January 2024, as per a research report from the State Bank of India.
This rise is from the current 26%, and it comes in the wake of six nations—Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates—preparing to join the BRICS fold, according to TASS.
Notably, these nations collectively contribute 4% to the global economic output.
