Russia and Iran Fully Abandon the US Dollar in Bilateral Trade

In a significant move toward de-dollarization, Russia and Iran have officially ceased using the U.S. dollar for bilateral trade, opting instead for their respective national currencies—the Russian ruble and the Iranian rial. This strategic decision is part of broader efforts by both nations to counter the impact of U.S.-led sanctions and strengthen their economic partnership.

The announcement was made by Mohammad-Reza Farzin, the governor of the Central Bank of Iran (CBI), during the 11th Conference on Modern Banking and Payment Systems in Tehran. “Our mutual agreement to completely replace the U.S. dollar in trade and transactions demonstrates our commitment to economic sovereignty and the rejection of unjust sanctions,” Farzin stated.

The Mechanics of the Transition

Russia and Iran finalized this initiative through agreements established in December 2023. These arrangements introduced a framework for the use of national currencies in trade, enabling smoother financial transactions while bypassing the dollar-dominated global financial system.

To facilitate this shift, the two countries integrated their banking systems—Russia’s Mir payment network and Iran’s Shetab system—allowing for seamless use of domestic debit cards in both nations. This move eliminates reliance on SWIFT, the international interbank communication system from which both nations have been partially excluded due to sanctions.

Economic and Geopolitical Implications

This decision is part of a larger global trend of de-dollarization among countries seeking alternatives to the U.S. dollar in international trade. For Iran and Russia, this strategy represents a way to mitigate the economic pressures of sanctions while fostering closer financial and trade ties.

The trade volume between the two nations has increased significantly in recent years, with both countries collaborating across sectors including energy, defense, and agriculture. By settling payments in rubles and rials, Russia and Iran can stabilize their bilateral trade and reduce exposure to currency exchange volatility driven by geopolitical events.

A Growing De-Dollarization Movement

The Russia-Iran agreement is emblematic of a larger shift seen across nations targeted by Western sanctions. Countries such as China, India, and Brazil have explored or implemented mechanisms to reduce their dependence on the dollar in trade. This trend challenges the long-standing dominance of the U.S. dollar as the world’s primary reserve and trading currency.

Criticism and Challenges

While the move has been hailed as a step toward economic independence, critics note potential challenges, including fluctuations in the ruble and rial exchange rates and the limited global acceptance of both currencies. However, officials in Moscow and Tehran remain optimistic about the long-term benefits.

Russian Finance Minister Anton Siluanov commented, “This is a natural progression for nations seeking a fair and balanced global economic system. By reducing our dependence on the U.S. dollar, we pave the way for greater financial stability.”

Strengthening a Strategic Alliance

Beyond its economic significance, the agreement reflects the deepening strategic partnership between Moscow and Tehran. Both nations face increasing isolation from Western nations, and their growing collaboration signals a united front against economic coercion.

As other nations watch closely, the Russia-Iran agreement serves as a potential model for countries exploring alternatives to the U.S. dollar. Whether this marks the beginning of a significant global shift remains to be seen, but for now, Moscow and Tehran have taken a definitive step toward financial and economic autonomy.