Iran confirms taking gold as payment for oil

February 28, 2012 at 20:48

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Iran is to accept gold as payment for oil and other commodities in what is seen as a fresh attempt to skirt international sanctions on the country’s nuclear programme and ease their impact on Iranian businesses and consumers.

“In addition to the U.S dollar and currencies of the trading countries, Iran will take gold in its commercial transactions with other countries,” Mahmoud Bahmani, Iran’s central bank governor, told domestic Iranian news agencies.

In recent months, Western powers, notably the U.S. and the European Union, have tightened financial sanctions on the Islamic regime in an attempt to force Iran to scale back or halt its efforts to enrich uranium.

Since then, Tehran has struggled to repatriate the hard currency it earns from crude oil exports, its main foreign currency earner and the economic lifeblood of the country.

This has forced the government to consider alternative ways to receive payment or pay for imports.

Already, Iran has started to receive Indian rupees and Chinese renminbi instead of dollars for its oil sales from India and China, the two biggest importers of its crude oil.

A separate barter arrangement also exists. “Iran imports goods from China and India instead of the hard currency and faces no problem in this regard,” Mr Bahmani said. It is not clear how these barter deals work. It is also unclear if these agreements are designed to allow Iran to import grain to feed its population of 74 million or to help these countries clear the debt they have accrued through purchases of Iranian oil.

Mr Bahmani made clear that Iran’s trade with other countries would not be limited to the dollar and “any country could pay with either its own currency or gold.”

Local business people say Iran has already agreed with Turkey, South Korea, and Japan to carry out trade in their national currencies. Turkey said on Tuesday it was talking with countries such as Saudi Arabia and Libya to diversify its energy supply, which depends heavily on Iranian oil.

But Taner Yildiz, energy minister, added that Ankara was not bound by the US or the EU sanctions. “Turkey will never lose its strategic co-operation with Iran,” he said. Turkey, South Korea, India, and China have all increased their gold reserves in recent years.

Tehran is also in talks with some Asian businesses and governments about paying for rice and palm oil imports in currencies other than the dollar, importers say.

Mr Bahmani’s comments come less than a month after Iran’s oil minister, Rostam Ghasemi, said Tehran had not resorted to barter deals yet. At the time Mr Ghasemi did not reject the possibility of exchanging Iranian oil for goods from other countries.

Sanctions imposed by the EU and US have hit Iranian consumers and businesses hard in recent months. The national currency, the rial, has weakened by about 30 per cent since October, pushing up the price of of imported goods. In an effort to contain inflation and stabilise the currency, the government has said it will provide importers with hard currency at the official rate, which is more than 30 per cent lower than the open market rate.

Mr Bahmani reassured importers on Tuesday that the central bank would supply “needed foreign currencies” to them and they would face “no problem.”