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MIDDLE EAST In Focus-Middle East

The New Resistance Economy: Iran and Allies Move to Leave US ‘Dollar System’

Joint meeting between Russian President Vladimir Putin, President of Iran Hassan Rouhani (left) and President of Turkey Recep Tayyip Erdogan in February 2019.
Joint meeting between Russian President Vladimir Putin, President of Iran Hassan Rouhani (left) and President of Turkey Recep Tayyip Erdogan in February 2019. (Photo: Kremlin.ru)

The United States’ heavy-handed approach toward sanctions may have consequences far more severe than the US is prepared for.

As Iran is inching ever closer to renege on the terms of the 2015 nuclear deal (JCPOA), and thus do away with the one international treaty which laid down the promise of normalization between the Islamic Republic and the western world, Tehran is also looking to step out of the global economic system and create an alternative space within which nations would be immune to US sanctions. 

Speaking to the press a few days before Christmas, Ali Rabiee, a spokesman of the Iranian government, warned that his country felt entitled to resume its nuclear research program since most signatories to the JCPOA had failed to hold their end of the bargain. “Iran can be dissuaded from further reducing its nuclear commitments if the Europeans remain fully committed to their obligations.”

But Iran’s ambitions lie well beyond its nuclear program. And while many will continue to argue that Tehran is in fact a security threat by virtue of its nuclear pursuit, Iran’s greatest “weapon” may soon be its ability to architect an alternative economic space for those nations who seek independence from Washington’s political and financial diktat.

Whether or not one agrees with the premise of the argument matters little … as we may well soon find out the combined effect of US President Donald Trump’s propensity to default on international agreements, his systematic desire to cast Iran out, and his penchant for sanctions as political weapons of choice could precipitate the end of America’s “empire” by forcing nations to seek assurances outside Washington’s mandate.

The ostracization of Iran may end up costing Washington more than it ever bargained for. 

Since the United States withdrew from the JCPOA in 2018, Iran has grown increasingly critical of France, Britain and Germany for what it calls their collective “failure” in protecting Iran’s economic interests in the face of Washington’s renewed economic belligerence. Needless to say that from an Iranian perspective it was the United States which drew first blood, anything after that is fair game – at least as far as Tehran frames it.

Crippled by suffocating sanctions and the ever-pressing threat of popular unrest due to heightened poverty, high unemployment, and widespread financial precarity before a shrinking market, Iran is considering making its boldest move yet – one which will likely send shockwaves across world markets and put into question both the validity and legitimacy of the U.S. Dollar System

Granted, this is not the first time that Iran has worked to challenge America’s monetary supremacy – one must add with some success. 

In 2008 The Iranian Oil Bourse was created to end the Islamic Republic’s reliance on the US dollar as its sole trading currency, thus setting a precedent that greatly infuriated US officials in that it emboldened other nations to consider the possibility of a world free of America’s monetary supremacism. Within a month of Tehran’s decision to leave the petrodollar, Russia announced it would allow the sale of its petroleum products in rubles. 

And so was planted the seed of economic sedition. 

As the Geopolitical Monitor puts it, “American economic, military and cultural dominance is dependent on and funded by the world’s use of the USD as the foreign reserve currency.” Any threat to such order has, understandably so, been identified as a direct existential threat. 

Much of the past decade has seen both the U.S. and Iran steadily draw their swords, each entrenched in its own sense of righteous politics. That said, September 2019 may have marked a point of no return. 

On September 20, 2019, days after Aramco was hit by a drone, the US Department of the Treasury’s Office of Foreign Assets Control announced a series of sanctions against the Central Bank of Iran, the National Development Fund of Iran, and Etemad Tejarate Pars Co. under its counterterrorism authority, Executive Order (E.O.) 13224. 

“Iran’s brazen attack against Saudi Arabia is unacceptable. Treasury’s action targets a crucial funding mechanism that the Iranian regime uses to support its terrorist network, including the Quds Force, Hezbollah, and other militants that spread terror and destabilize the region. The United States will continue its maximum pressure campaign against Iran’s repressive regime, which attempts to achieve its revolutionary agenda through regional aggression while squandering the country’s oil proceeds,” said Treasury Secretary Steven T. Mnuchin on the matter.

“Iran’s Central Bank and the National Development Fund were ostensibly intended to safeguard the welfare of the Iranian people, but have been used instead by this corrupt regime to move Iran’s foreign currency reserves for terrorist proxies,” Mnuchin added.

Iran has to this day denied any and all involvement in the Aramco attack.

As Washington hardened its stance against Iran, slapping fresh sanctions against both institutions and individuals, the idea was born of a coalition that would oversee the creation of a financial market that would exist beyond America’s reach.

Earlier this December at a conference in Kuala Lumpur, Malaysia backed the premise of a new trading structure that would operate around the gold standard and barter to allow countries under sanctions to not only operate but strive. 

“I have suggested that we revisit the idea of trading using the gold dinar and barter trade among us,” Reuters cited Malaysian Prime Minister Mahathir Mohamad as saying, referring to the gold coin of early Islam. He added, “We are seriously looking into this and we hope that we will be able to find a mechanism to put it into effect.”

If Iran has suffered the brunt of Washington’s ire it is not alone in facing restriction. Turkey and Qatar have too had to periodically deal with the threat of sanctions against their respective government for going against the grain of America’s narrative  – or better yet America’s interests. 

But the why is beside the point. For all intents and purposes, America’s sanctions are pushing its victims to unite together so that they could all survive.

Pushed far beyond what it could absorb in terms of economic threat, Iran is playing the region’s nerves and Washington’s irrational use of sanctions to support the establishment of an alternative economic system – a move it already describes as resistance economy against neo-imperialism.

Playing right in the hand of Iran’s narrative, Turkish President Recep Tayyip Erdogan called on Muslim countries to ditch the US dollar, and switch to their national currencies instead. The Turkish leader warned that the issue “has gained urgency amid talks of trade wars,” adding that Muslim nations should protect their financial markets from “shocks and manipulation” with their own payment systems.

Iran is most definitely no longer alone in trying to disappear America’s monopoly on trade and thus political and military influence. It does not intend to stop at the creation of a new trading system either – Iran also ambitions to reinvent the way we bank and conceptualize monetary policies.

In July 2019, The Tehran News agency reported that Iran intends to launch a gold-backed cryptocurrency. Shahab Javanmardi, CEO of the Iranian Information and Communication Technology FANAP confirmed that the Central Bank of Iran already approved the issuance of new cryptocurrencies.

He noted, “Iran’s cryptocurrency will be supported by gold, but its function is similar to other cryptocurrencies. The crypto asset is designed to maximize the use of Iranian frozen bank assets.”

Interestingly Iran’s move towards cryptocurrency has been mirrored by two other major regional players: China and Russia to protect their respective interests in reviving the Silk Road. 

If the US dollar reigns king today, recent political shifts and wavering alliances could soon spell the end of America’s monopoly – or so says Mark Carney, the Bank of England governor.

In a speech at the annual Jackson Hole gathering of central bankers in the US, he warned that the world’s reliance on the US dollar “won’t hold” and needs to be replaced by a new international monetary and financial system based on many more global currencies. 

He added, “The deficiencies of the international monetary and financial system have become increasingly potent. Even a passing acquaintance with monetary history suggests that this centre won’t hold.”

Catherine Perez-Shakdam

Catherine is a Research Fellow at the Henry Jackson Society and a former consultant to the UN Security Council on Yemen. Her work has been published in the Times of Israel, the Jerusalem Post, the Daily Express, Epoch Times and countless other media.

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