Iran and Russia are exploring the use of central bank digital currencies (CBDC) and digital financial assets (DFA) for trade solutions. In a statement to the Russian media outlet Izvestia, the trade attaché of the Iranian Embassy in Russia, Rahimi Mohsen, mentioned that the use of DFAs and CBDCs could simplify trade between Tehran and Moscow. The aim is to create a more efficient trade environment between the two nations and potentially mitigate the impact of sanctions that both countries are facing. This comes as Russia has been hit with sanctions following the war in Ukraine and Iran is facing fresh sanctions due to a missile strike on Israel.
The current difficulties with CBDC-related payments are acknowledged by Mohsen, who highlights the need for the creation of infrastructure and regulations for new payment methods. There is a plan to cooperate with Russia in implementing these new regulations to facilitate effective trade between the two countries. Maxim Chereshnev, the Chairman of Russia’s Council for the Development of Foreign Trade and International Economic Relations, believes that the cooperation between Iran and Russia in the CBDC space is strategically important for Moscow. This partnership could strengthen Moscow’s influence in regions like the Middle East and Central Asia.
Using non-USD fiat currencies in trade deals has proven costly for Russian firms due to difficulties in currency conversion and discrepancies in exchange rates. Russian companies face losses of about 20-25% in every trade deal made using fiat currencies. Chereshnev suggests that the introduction of CBDCs can alleviate these issues and simplify trade between states like Iran and Russia. The use of DFAs and CBDCs in settlements can increase transparency and security in transactions, making trade more efficient and profitable for both parties.
Russian banks and firms are already beginning to issue DFAs and explore blockchain-powered securities and commodities to increase investment options domestically. Earlier this year, President Vladimir Putin signed a law allowing Russian firms to engage in cross-border DFA trade using Russian-issued tokens. However, the law does not currently permit the use of other countries’ DFAs or CBDCs in trade deals. Several of Russia’s allies, such as Belarus, are also accelerating their own digital fiat projects to decentralize cross-border payments and reduce reliance on major currencies like the dollar and euro.
The potential for doing business with China using the digital ruble and the digital yuan is also being explored by Russian lawmakers. This further highlights the trend towards digitalization in international trade and the importance of leveraging CBDCs and DFAs for more efficient and secure transactions. As global geopolitical tensions continue to impact traditional trade channels and currency systems, the adoption of digital assets like CBDCs presents new opportunities for countries like Iran and Russia to strengthen their trade partnerships and mitigate the impact of sanctions. The cooperation between Iran and Russia in exploring CBDC-powered trade solutions signals a shift towards a more digital and interconnected global economy.
