Establishment of Oil Bank on the cards – Iran

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A senior Iranian economic official announced on Sunday Tehran is seeking to establish an oil bank to increase investments in Iran’s energy sector.

“The bank’s initial funding capital stands at $300m but it will certainly increase to $800m very rapidly because the bank will be widely welcomed by private contractors and companies in the oil sector,” a member of the oil bank’s founding board told semi-official Fars News Agency.

“Our goal is investment in the energy sector but the priority of investments will be the oil sector since this sector needs investment and it will make activities in Rial and foreign currencies,” the Iranian official said while elaborating on the goals of the establishment of an Oil Bank in Iran.

US President Barack Obama issued an executive order on New Year’s Eve that imposed fresh sanctions on financial institutions that deal with the Central Bank of Iran, Tehran’s main clearing house for oil payments. The US also persuaded the European countries to impose the same embargos against the CBI.

Washington says the extra sanctions aim to sap Iran’s oil sales, most of which are processed by the apex bank. Many analysts believe that Western moves would prove futile.

During the last two years, Iran has been replacing dollar with other currencies in its trade with the outside world, especially in its oil trade with India, China, Russia and Japan. Late in November, the Reserve Bank of India (RBI) issued the needed permission to the Central Bank of Iran to open rupee accounts with two Indian banks, namely UCO and IDBI, as a long-lasting solution to the two countries’ payment problems. Both accounts were opened in the respective banks’ Mumbai branches.

A top official of city-based UCO Bank said while payments for his country’s oil imports would initially be in rupees, it would be then converted into a separate currency, which was yet to be decided by the apex bank.

Russia, which has long opposed oil sanctions against Iran, is pushing its ruble as an international currency and encouraging its use in bilateral settlements with the Islamic Republic.

In 2010, Moscow began offering to exchange ruble for Chinese yuan as the two nations look to boost bilateral transactions in their own currencies and reduce their reliance on the dollar.

Tehran and Moscow announced in January that they have started using their own currencies instead of the US dollar in their bilateral trade exchanges.

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