Turkey and Iran to trade in local currencies rather than US dollars

Jun 23, 2012 12:00 AM

Turkey is planning a money exchange structure with Iran which will cut the usage of $ as much as possible and develop trade with the two countries’ national currencies, Energy Minister Taner Yildiz has said.
The minister’s statement came at a time when Iran, suffering from money transaction problems due to a hard US embargo, is seeking opportunities in the Turkish banking sector.

Turkey has already taken steps to trade with local currencies with a number of countries including Russia, China and the Islamic republic. Yildiz said that Turkey has already been using gold in Iranian trade. Iran bought gold worth $ 1.2 bn in April of this year alone.
“Annually we use between 80 and 82 tons of gold [in trade with Iran].”

Turkey aims at increasing gold production to 34-36 tpy in the short run from the current 24 tons, the minister also said.
“Along with the private companies, the public sector also contributes to this.”

Trade between Turkey and Iran has risen sharply over the past decade, and Turkey was regarded as a possible weak link in international sanctions against Iran. Earlier, Washington granted Turkey a 180-day exception from financial sanctions as a result of the cut in oil purchases from Iran made by Turkish refiner Tupras.
Turkey was Iran’s fifth-largest oil customer in 2011, buying around 200,000 bpd, 30 % of its total imports and more than 7 % of Iran’s oil exports. Turkey cut its imports from Iran to 140,000 bpd in May from an average of 210,000 bpd in the first four months of this year, shipping data showed.

Rupee deal
India’s Bharat Petroleum Corp has made its first payment for Iranian oil in rupees, two industry sources said, becoming the first refiner to use a payment channel that skirts tightening Western sanctions on Iran’s trade.
India is Iran’s second-largest oil buyer, but has struggled to find ways to pay for the oil as Western sanctions curb international financial payments destined for Tehran’s coffers.

Since December 2010 refiners in India have been using Turkey’s Halkbank to pay their annual oil import bill of more than $ 10 bn, after a previous payment channel was blocked.
Tehran and New Delhi agreed in January to settle 45 % of the oil trade in rupees to ensure that payments would continue should any problem arise with the Halkbank agreement, and also as a way to encourage more exports from India to Iran that could be settled in rupees.

Iranian banks look into Turkey
Separately, Iran’s Bank Pasargad has applied for a license to operate in Turkey, a banking sector official told on June 18, but its bid was seen as having little chance of success given global efforts to isolate Tehran over its nuclear program.
Pasargad’s move is a fresh sign of the strengthening commercial ties between the neighbouring countries seen in recent years but coincides with growing pressure on Turkey and other countries from the United States to curb oil purchases from Iran.

Turkish media outlets reported that three Iranian banks, including Bank Tejerat, had applied to the Turkish banking watchdog for a banking license.
Bank Pasargad was the only Iranian bank to apply recently to the BDDK, the Turkish banking regulator, doing so around 20 days ago, a Turkish banking official was quoted as saying.

“These three banks applied four to five years ago and only one of them was viewed favourably,” a source close to the Iranian banking sector said.
“In this environment, when the whole world is pressuring Iran, it is impossible for the BDDK to approve. Even if they provide 300 mm Turkish Liras in ($ 166 mm) capital, why and how should the BDDK approve this?” this source said.

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