Iran and Russia are working on a trade solution powered by CBDCs and “digital financial assets” (DFA), an Iranian official has confirmed.
Speaking to Russian media outlet Izvestia, Rahimi Mohsen, trade attache of the Iranian Embassy in Russia, said that “countries” are “exploring the use of DFA and central bank digital currencies.”
Mohsen claimed that CBDC-backed “options” could “simplify trade” between Tehran and Moscow.
Iran and Russia: ‘There is a Need to Create Regulations for CBDC Trading’
The attaché stated that CBDCs, including the digital ruble and an Iranian project, called crypto-rial, “have the potential to reduce the impact of sanctions.”
Russia has been hit by various sanctions packages from the United States, the European Union and its allies since the outbreak of war in Ukraine in 2022.
Meanwhile, Iran faces new sanctions following a missile attack on Israel in mid-April, the British government announced last week.
Remarks that Iran obtains weapons from Russia have raised concerns in Israel about the implications of expanding Moscow-Tehran defense ties https://t.co/Vrof9d07EP
— Bloomberg (@business) April 26, 2024
Mohsen acknowledged that “difficulties still exist” with CBDC-related payments, but said lawmakers need to “create infrastructure and regulations for new payment methods.”
He added that Iran “intends to work with Russia” to “implement” the new regulations, as “Tehran maintains an effective trade partnership with Moscow.”
The sanctions package makes Iran and Moscow “more interested than ever” in cooperating, said Maxim Chereshnev, chairman of Russia’s Council for the Development of Foreign Trade and International Economic Relations.
Chereshnev added that the CBDC-backed “partnership” with Iran is “strategically important” for Moscow.
The move allows Moscow to “strengthen” its “influence in the Middle East and Central Asia,” he explained.
Non-USD Fiat Trading Is Heavily Harming Russian Companies: Expert
The chairman added that “the inability to make payments in dollars and euros” had forced Russia and Iran to use their own fiat currencies in trade deals.
But Chereshnev explained that this causes difficulties in converting currency.
He added that there was also a “gap” between the market exchange rate of Iran’s currency and the state-controlled exchange rate.
Therefore, Russian businesses currently incur losses of “around 20-25%” on every trade deal they make using fiat.
Chereshnev said that a CBDC would help alleviate this. He said that “the launch of settlements made using DFA and CBDC could “simplify trade between countries” such as Iran and Russia.
He also said technological advances will allow traders to “increase transparency, and increase the security of transactions.”
Russia’s Shoigu meets with Iranian counterpart, says ready to expand military cooperation, RIA says https://t.co/YArtccYyFR
— Reuters Iran (@ReutersIran) April 26, 2024
More Russian Partners Ready for CBDC Trading?
Russian banks and other companies have started issuing DFA: blockchain-powered securities, commodities, and more; as they seek to increase domestic investment options.
Earlier this year, President Vladimir Putin signed a law allowing Russian companies to engage in cross-border DFA trading using Russian-issued tokens.
The law also allows companies to conduct cross-border trade using digital rubles. However, experts note that this law does not allow Russian companies to use other countries’ DFAs or CBDCs in trade deals.
Several other Russian allies have begun accelerating their own digital fiat projects. This includes Belarus, which will use the Hyperledger Fabric blockchain network.
In February, Mikhail Demidenko, Deputy Head of Strategic Research and Development of the National Bank of Belarus, said:
“That [goal] is essentially the decentralization of cross-border payments. The problem in the modern world is that all payments between countries are made through the banking systems of major currency issuers such as the dollar and the euro.”
The US on Wednesday announced sanctions against nearly 300 companies and individuals, including in China and the United Arab Emirates, for allegedly supporting Russia’s invasion of Ukraine. https://t.co/0Y7FQwrP5H
— Bloomberg (@business) May 1, 2024
Russian lawmakers also floated the idea of doing business with China using the Beijing-backed digital ruble and digital yuan.