The ruble has come under increasing pressure in recent weeks as Russia's economy struggles with Western sanctions
The ruble has come under increasing pressure as Russia's economy struggles with Western sanctions. AFP

KEY POINTS

  • The US and UK recently slapped Iran with new sanctions over its attacks in Israel
  • Russia was sanctioned by Western governments over its Ukraine invasion
  • The initiative will explore the use of Iran's crypto-rial and Russia's digital ruble for bilateral trade

Iran and Russia are working on new ways through which the two nations can carry out trade transactions, and among the new methods are central bank digital currencies and digital financial assets (DFAs), an Iranian official said Thursday.

Rahimi Mohsen, the Iranian Embassy's trade attaché in Russia, told Russian broadsheet newspaper Izvestia in a report published Thursday that the cooperation in CBDCs and DFAs is expected not only to "simplify" trade transactions between the countries but also to "mitigate the impact of sanctions," as per a Google translation.

Under the said partnership, the two countries will explore the use of the digital ruble and the crypto-rial in cross-country trade, considering how both countries have been sanctioned by the U.S. and several other Western governments. Russia was sanctioned by the U.S. and other European nations over its invasion of Ukraine. Iran, on the other hand, was just recently slapped with fresh sanctions by the U.S. and the United Kingdom following its first direct attacks in Israel last month.

The initiative should help resolve some of the biggest issues that fiat traders have complained of, including conversion issues, said Maxim Chereshnev, chairman of the Russian Development of Foreign Trade and International Economic Relations Board of Council. He said the differences in conversion rates has placed the Russian market on the losing side. With CBDCs and DFAs, losses may not be as significant as "about 20-25%" in business operations costs due to fiat conversion discrepancies.

Iran first announced its "crypto-rial" late in 2022. At the time, the Iran-Greece Chamber of Commerce noted that the Central Bank of Iran's (CBI) CBDC is expected to become a new type of national currency like Iranian banknotes and coins and will also involve smart contracts.

Russia began testing its digital ruble with consumers last year in a bid to help the country evade sanctions while also tightening oversight of its citizens' financial transactions.

Some nonprofits have already raised concerns about the possible abuse of the Russian digital ruble. "In the wrong hands, this data could be used to spy on citizens' private transactions," Atlantic Council researchers said. The government's goals in issuing a CBDC have also not been made clear to regular Russian citizens as they are unsure if it was a safe and effective way for financial activities, as per a survey.

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