CBI Governor, Dr. Hemmati

Central Bank of to Launch Official Market

overnor of the says if Iran is disconnected from the Belgium-based fi- nancial messaging service SWIFT (the Society for World- Gwide Interbank Financial Telecommu- nications), alternative systems will be used to preserve ties with its trading partners. Abdolnasser Hemmati made the comments as SWIFT said this week that it was suspending access of some Iranian banks. It made the decision, according to a statement, “in the of the stability and in- tegrity of the wider global financial system.” SWIFT, however, said the decision was “regrettable”. That decision came after the US re-sanctioned Iran last week after Donald Trump abandoned an interna- tional nuclear deal signed in 2015 that aimed to curb Iran’s nuclear programs. US Treasury Secretary Steven Mnuchin had said sanctions could be slapped on SWIFT itself if it worked with the roughly 50

6 December 2018 | No. 17 Preview Issue Iran banks listed under the uni- long been imposed on Iran and mechanism is widely viewed as lateral US sanctions. the Joint Comprehensive Plan the moment of truth on whether SWIFT facilitates cross-bor- of Action (Iran nuclear deal) did the EU is genuinely willing and der transactions tied to more nothing to improve Iran’s bank- able to live up to its promises to than 11,000 banks around the ing relations with the outside preserve the Iran nuclear deal. globe. Mnuchin said Thursday world, the lawmaker rued. The SPV is planned to serve as that SWIFT will be cutting off “No, the sanctions will not af- a exchange mechanism, the Central Bank of Iran as well. fect foreign currency rates,” using neither US , nor “I understand that SWIFT will Pour-Ebrahimi said when monetary exchanges between be discontinuing service to the asked whether or not the new EU nations and Iran. Instead, it Central Bank of Iran and desig- US sanctions would trigger a would utilize “” as a form nated Iranian financial institu- shock to the already volatile of virtual currency. An Iranian tions,” Mnuchin said in a tweet. currency market. company selling goods to a “SWIFT is making the right de- Referring to the role of in European firm would accumu- cision to protect the integrity banking transactions, Asado- late “credits” that could be later of the international financial llah Gharekhani, spokesman used to buy other goods from system.” for the Majlis Energy Commis- European firms. The decision by SWIFT means sion, said keeping up the cur- There are rumors that no Eu- the CBI will be cut off from the rent trend i.e. imposing new ropean nation is willing to international banking system. restrictions on Iran’s ties to host the SPV, fearing further The new US SWIFT has disconnected the other countries, will lead to the ramifications from the hostile sanctions CBI in the past, when the Oba- weakening of the dollar, which Trump administration. How- ma administration was push- currently has a 60% share in ever, sources close to the pro- had been ing Iran to engage in diplomatic global banking transactions. cess told the Guardian that anticipated talks that led to the 2015 nucle- The US has failed, he recalled, candidates have come forward, by the CBI ar agreement. But Iran observ- in its unending attempts to crip- and it is the discussion of the ers tell CNN that the Trump ple Iran’s economy by imposing details that has stalled the es- and the administration wasn’t likely to unfair sanctions and threaten- tablishment of the SPV. necessary replicate the success of those ing other countries wanting For example, it is yet to be deter- sanctions. to conduct normal trade with mined how a German company planning Getting Ready . operating in the US would be for even Hemmati said in an interview “It was recently revealed that able to avoid secondary sanc- a worse published on the CBI website SWIFT largely benefits the US tions for using the SPV. US sec- that the new US sanctions had alone and many countries are retary of state, Mike Pompeo’s, scenario is been anticipated by the CBI contemplating another route to recent announcement that in place The and the necessary planning do banking.” some countries will receive necessary for even a worse scenario is in Housing the SPV temporary waivers from the place. Despite rumors that no one is sanctions further complicates talks have “The necessary talks have been willing to host a European trade the process. been held held by trading partners and the mechanism office to work with SWIFT took the banking indus- by trading method of doing business with Iran due to fears of US sanc- try out of wire and telex trans- them has been coordinated,” tions, France and Germany fers and catapulted it into the partners the senior banker said. have been named as viable world of telecommunication. and the Mohammad Reza Pour-Ebra- options. The old system had no central himi, who heads the Majlis Either France or Germany code system for bank identifi- method Economic Commission, told might become the host na- cation, it was not secured and of doing IBENA that new sanctions do tion for the European it was, at best, haphazard. With business not threaten the economy. house, usually referred to as a SWIFT, more than 200 coun- “The US has taken every pos- “special purpose vehicle” (SPV) tries and tens of thousands of with them sible hostile measure against — a payment mechanism that banks are in sync and connect- has been Iran and there is nothing left for would allow European compa- ed. The SWIFT system is based coordinated, it to do anymore,” he said as a nies to bypass US restrictions out of Belgium, but because of matter of fact. on Iran, Sputnik reported. US banking involvement, it falls Tough banking sanctions have The establishment of the new under US federal banking su- HEMMATI

Monthly Economic Magazine December 2018 | No. 17 Preview Issue 7 pervision. It is US our heads to our detriment... Official Currency Market involvement that makes That is why it was right to legal- The Central Bank of Iran will using SWIFT safer and more ly protect European companies soon launch a formal foreign protected than other meth- from sanctions... That is why it currency market where deal- ods of money transfer. It also is indispensable to strengthen ings will take place at free rates, guards against the pitfalls of European autonomy by setting the bank’s governor said Mon- – a favorite up payment channels that are day. tool of terrorists and drug king- independent of the U.S., creat- Abdolnasser Hemmati said pins – and it also serves as a ing a European monetary fund this in his Instagram post, not- protection against potential and setting up an independent ing that currency deals will be financial crashes. As a super- SWIFT system.” both in the form of vising body, the United States If Europe follows through and and hawalah and will be based receives information about all succeeds in developing an on “auction mechanism.” transactions taking place via independent money transfer The function of the market SWIFT. system, there is certain to be will be to “discover prices” and Certain forces in parts of Eu- a flaw in that system’s secu- provide for the people’s small rope and in , however, are rity network. A central axiom needs and services. trying to create an alternative in that system will be the pro- The announcement comes as to SWIFT that will avoid those tection of anonymity, and that the CBI and the government safeguards that are so valua- is nothing but a glorified open has been struggling to stabilize ble. invitation for those who engage the currency market after rial German’s Foreign Minister in terrorism and illegal activity. lost approximately two-thirds Heiki Mass is at the forefront It will make – of its value in the past eight of the movement to create an- and the like. months. other, independent, SWIFT-like China would love this new President money transfer system specifi- banking scheme. The under- appointed Hemmati in July to cally in order to keep the United belly of the world will jump all replace as the CBI States off their back and out of over it. The lack of supervision boss and tasked him with stabi- their Iran-related hair. If the plan and the fact that there will be no lizing the currency market in the works, the implications are dev- reporting or regulations are too face of mounting US pressure. astating and the impact will be enticing to pass up. US bank- Hemmati is a former managing far greater than US sanctions ing regulations are very strict, director of and against Iran. much stricter than in Europe or headed the Central Insurance Mass’s plan was outlined in a in China. company of Iran. very long piece in the German Creating an alternative to In late September a top govern- The market daily Handelsblatt. The foreign SWIFT will successfully insu- ment body, headed by Rouhani will be minister laid out a strategy to late Iran’s banking industry and the heads of parliament check the United States and from US actions and prevent and the judiciary, gave the cen- launched to create a counterbalance to the ultimate victory over Iran tral bank governor authority with the the United States. He used the that the United States is work- to intervene in the foreign ex- particip- term “counterbalance” several ing toward. It has the very real change market and to manage times, especially when point- potential to destabilize the it – an authority his predeces- ation of ing out how the United States region by keeping Iran above sor was apparently denied. banks and has overstepped their role and water and out of reach. Partly due to CBI intervention, crossed, to use his expression, If successful, this will be a huge the currency market seems money red lines. Translation: the Unit- blow to American banks, which relatively stable since the US exchange ed States is interfering big time have until now, through the use reimposed the second round ers under with their business dealings of SWIFT, been the conduit for of penalties targeting Iran’s with Iran. world business. banking and oil sectors. CBI Mass wrote: “In this situation, it The rial pared some of its loss- manage- is of strategic significance that Central Bank of Iran to es during the past week against ment we say clearly to Washington: Launch Official Currency major . we want to work together, but Market The US dollar was traded at we will not allow you to act over Central Bank of Iran to Launch 131,000 rials on Monday, down HEMMATI

8 December 2018 | No. 17 Preview Issue from the previous day’s 136,000 ment on his Instagram page: rials. Other sources quoted the “the launch of this market with USD exchange rate at 128,000 the objective of free trade, in- rials in the unofficial market. cluding cash and currency Fara Bourse Well Placed transfers (international rates) It is not clear where the new by brokers (authorized banks currency market will be based, and exchange offices) have but most likely it will be hosted been the concerns of the Cen- by the over-the-counter market tral Bank in recent months,” Iran Fara Bourse as the market He added: “Several meetings has launched coin futures were held with the presence in the past. of experts and experts in the Hemmati said the decision and to launch a forex had been capital, especially banks and reached after meetings with currency exchanges in the cen- banking and capital market tral bank, and various aspects experts as well as banks and of the issue were examined. exchange bureaux. Hemmati continued: Finally, “The market will be launched we started to summarize the with the participation of banks launch of the free cash and ex- and certified money exchange change market, based on the shops under CBI management,” auction mechanism, with the Hemmati wrote, adding that the aim of discovering the price of focus of the market will initially the currency and facilitating be on spot trading. the provision of services and He added that exporters can the wisdom of the people. also offer some of their curren- The head of the Central Bank cy earnings in this market and added that the market will be hoped that the move would re- set up in the near future with sult in more transparency for the focus on cash transac- a moderate exchange rate to tions, with the participation of be formed and would act as a authorized banks and currency model for the trade of commer- exchangers and central bank’s cial in the secondary supervision. market. “Exporters can also place part As per a CBI directive released of their export currency on the Monday, export earnings below market in the framework of the Finally, we started to one million are accepted announced regulation,” he said. summarize the launch from the mandatory offering on Hermmati added: “I hope this of the free cash and the secondary market where action will bring transparen- rates tend to be lower than the cy to the formation of the ex- exchange market, open market. change rate equilibrium, and based on the auction Abdel Nasser Hemmati, head of will be a useful experience for mechanism, with the the Central Bank of the Islamic commercial transactions in the Republic of Iran, announced Nima System.” aim of discovering the Sunday evening that he would NIMA is the Persian acronym price of the currency organize a currency exchange for the CBI’s monitored online and facilitating the and meet the needs of the peo- exchange system launched ple with the participation of days after the rial rate was fixed provision of services banks, authorized exchange at 42,000 against the green- and the wisdom of the offices and central bank super- back in April. The move was visors and directors in the near conceived to foster transparen- people future. cy and manage import require- He wrote with the announce- ments. HEMMATI

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