Al-Monitor | Navid Kalhor: While the nuclear deal struck between Iran and six world powers in 2015 lifted international sanctions, it failed to remove primary US restrictions on dollar transactions. As such, some in Iran have grown to view currency swap agreements (CSAs) with other countries as a way to overcomeremaining US sanctions. This is even though many swaps do not becomeoperationaland these kinds of schemes are likeliest to be secured in times of mutual crises and emergency or in the case of China, to expand trade in ones national currency at the expense of the dollars dominance in global trade.
Iran formally signed its first currency swap deal withTurkeylast October, and the two countries recently issued their first local currencyletters of credit. This is a major step since the Islamic Republics previous memoranda of understanding on this issue with other countries never really came into effect. Nonetheless, the implementation of CSAs involves high risks in volatile economies, such as that of Iran.
In this vein, the Central Bank of Iran (CBI) has in the past highlighted the prerequisites formonetary agreementswith other governments. It points to a series of intertwined factors that contribute to the successful conduct of currency swaps. The most significant among the latter are concerns surrounding: