Examining the issue of Western sanctions against countries using digital currencies and the crypto cooperation between Iran and Russia in launching a joint digital currency to solve this issue.
Interview with Hadi Tizhoush, Head of the Iran-Russia Chamber of Commerce
The cryptocurrency and digital currency industry has rapidly advanced in the global market due to its unique features, and today we witness many individuals and organizations dealing with this topic in their daily lives. However, despite all the benefits and positive aspects in this field, many challenges and problems still affect countries, which need significant attention.
In this article, we aim to separately address the issue of Western sanctions against countries in the use of digital currencies, and specifically discuss the two countries of Iran and Russia in the Persian Gulf region and their cooperation in launching a shared digital currency to solve this problem.
Western Sanctions Against Iran and Russia
Western countries’ sanctions against some countries, including Iran and Russia, are not new, and for a long time, we have witnessed the imposition of these sanctions on these nations. These sanctions include financial, trade, and export restrictions that directly impact the economies of the targeted countries.
In this regard, in a recent interview with Hadi Tizhoush, the Head of the Iran-Russia Chamber of Commerce, he noted:
“Given the sanctions imposed on both countries, any method that can reduce or nullify the impact of these sanctions should certainly be considered. The use of cryptocurrencies is one such method, and if implemented with proper planning, it can facilitate monetary exchanges and yield favorable results in the field of trade. However, this requires the necessary preparations and infrastructures to be in place.” -Hadi Tizhoush
At the same time, such sanctions have been heavily criticized due to the failure of targeted countries to comply with certain international principles and laws, and some nations are seeking their removal or mitigation.
Nevertheless, international sanctions continue to be used as a political tool to exert pressure on the targeted countries.
In this context, both Iran and Russia have long been trying to find new solutions to develop their economies. In Iran, due to international sanctions and a lack of access to foreign banks, digital currencies have become an economic solution.
In Russia, continued efforts to enhance military power, influence in various parts of the world, and using digital currencies to develop the technology sector and reduce dependence on the US dollar have also been seen as economic solutions.
Iran and Russia’s efforts to use digital currencies to bypass Western sanctions, and their cooperation in the field of digital currencies, are among the significant topics in global economics.
The use of cryptocurrencies as a way to bypass Western sanctions, due to their independence from third parties, operation independent of banks and financial institutions, and the ability to transfer these digital assets quickly and easily, has made them a suitable tool for solving such issues. Additionally, the use of digital currencies reduces reliance on the global banking system, which is crucial for countries like Iran and Russia, as the West controls this system.
In line with this, Russia and Iran are currently cooperating in cryptocurrencies, and the joint cryptocurrency project between Iran and Russia is one of the results of this collaboration. The goal of this project is to create a stable digital currency for the Persian Gulf region. Given the severe price volatility in the cryptocurrency market, using a stable digital currency could help reduce price fluctuations, facilitate commercial transactions between countries, and expand the digital currency market in the region.
Iran and Russia Cooperation in the Field of Digital Currencies
Russia and Iran are two large countries that have always been important globally due to their geographical positions and rich natural resources. Notably, Russia faced extensive Western sanctions following its military invasion of Ukraine, which led it to strengthen its relations with Iran and China.
Due to security concerns and cryptocurrency regulations, Iran and Russia have long been working to adopt cryptocurrencies as a tool for foreign trade and cooperation in this field.
Hadi Tizhoush pointed out that in recent years, especially after the sanctions on Russia, some Russian and Iranian officials have openly discussed the potential of using digital currencies instead of the US dollar.
Tizhoush continued by saying that during a meeting with e-commerce businesses held on January 17, 2023, Alireza Peymanak, then head of the Iran Trade Promotion Organization, announced the launch of a joint cryptocurrency between Iran and Russia. The Russian news agency Vedomosti also reported this; stating that the token is expected to be used as a payment method in foreign trade and will be known as the “Token of the Persian Gulf Region.”
In simpler terms, the primary goal of the joint cryptocurrency between Iran and Russia is to enable cross-border transactions using cryptocurrencies instead of fiat currencies like the US dollar, Russian ruble, or Iranian rial.
At that time, it was announced that Iranian platforms, in collaboration with their Russian counterparts, would expand their regional markets. Additionally, there were plans to connect Iran’s banking network to “Mir” (Russia’s payment system). According to him, connecting the banking networks of both countries and supporting the ruble-rial duo, given the current trade conditions, was of greater and more critical importance.
According to Alexander Brazhnikov, Executive Director of the Russian Association of Crypto Industry and Blockchain, who attended the Iran TechnoBlock Conference, this token will be a “stablecoin” backed by gold. Media reports suggest that this currency is initially expected to be used in the “Astrakhan Special Economic Zone,” a region in Russia where Iranian shipments are accepted.
In an interview with IRNA’s research group, Mohammadreza Sharafi, a member of the Iran Blockchain Association, mentioned that cryptocurrency plays a role in economic activities and emphasized its primary utility, which is speeding up and transforming processes related to the transfer and exchange of value.
Sharafi pointed out that cryptocurrencies are a universal code used worldwide at various levels, but have not yet been used for transactions between governments. Governments have also lacked structured plans in this area. He concluded that the only way to use this technology to accelerate monetary transfers is to define shared platforms.
In another part of his interview, Hadi Tizhoush, head of the Iran-Russia Chamber of Commerce, said:
“Iran and Russia are both countries that have either prohibited or restricted the use of cryptocurrencies and digital assets to some extent, while at the same time trying to bypass global sanctions by using cryptocurrencies in foreign trade. This makes the implementation of this initiative somewhat challenging. Since then, the status of the announced plan remains unclear.” -Hadi Tizhoush
Why Did Iran and Russia Decide to Collaborate on Digital Currencies?
The collaboration between Iran and Russia in the field of cryptocurrencies is driven by several factors. The first factor is the economic and financial sanctions imposed by Western governments on these two countries. Using cryptocurrencies could serve as a new solution for economic development.
The second factor is the political and military tensions in the region. Iran and Russia seek to strengthen their relations in the Persian Gulf region, and cooperation in the field of cryptocurrencies could be one of the solutions to achieve this goal.
The high value of cryptocurrencies is the third reason that strengthens the joint cryptocurrency collaboration between Iran and Russia. Given the rapid growth of the cryptocurrency market in recent years, the use of these assets could lead to high revenue and profit for these countries.
Overall, the joint stablecoin project between Iran and Russia represents a positive collaboration in the field of cryptocurrencies and could help reduce the volatility of digital currency prices, facilitate trade transactions between countries, and expand the digital currency market in the region.
This digital currency is expected to enable Iran and Russia to soon eliminate currencies like the dollar and euro from their trade and reduce their dependence on these currencies. Given the sanctions imposed by the US on both countries, these measures could significantly aid the growth of foreign trade between Iran, Russia, and other countries.
Will the Cooperation Between Iran and Russia in Launching a Shared Cryptocurrency Be Successful?
Despite the ongoing efforts of both countries to launch a joint cryptocurrency, no one can definitively answer this question yet. The idea is still in its early stages, and many details are not yet fully clarified.
Additionally, if this initiative is successful, the US and other Western countries may take action to limit the use of this joint cryptocurrency. Nevertheless, given the sanctions imposed on both countries, this cooperation could significantly boost foreign trade between the two nations.
It is worth mentioning that Alexey Dedov, Russia’s new ambassador in Tehran, noted during his recent visit in early April 2024, that the two countries “will continue to develop their cooperation in all areas, including digital currencies.”
According to Dedov, Tehran and Moscow have much higher potential compared to the current figures in terms of cooperation and economic interactions.
He also highlighted that “this document is a very solid agreement that covers almost all aspects of Iran-Russia cooperation.”
The new Russian ambassador in Tehran believes that the increase in the use of national currencies in regional and international transactions will continue and expand, asserting that “the de-dollarization trend will continue and grow.”
Recently, Alireza Peymanpak announced the opening of the first branch of a Russian bank in Iran. Peymanpak tweeted: “Following continuous efforts and the pursuit of the Trade Promotion Organization, VTB Bank, the second largest Russian bank, has established its representative office in Iran.”
This is the first Russian bank to have a direct presence in Iran and will be effective in transferring part of the foreign exchange revenues from the trust network to the banking network and improving trade transparency.
Sharafi also mentioned that while there is no direct connection between the establishment of the Russian bank and the use of the joint cryptocurrency, having foreign banks in Iran significantly supports the development of trade relations with the country that established the central bank, especially in the context of sanctions where this need appears very important and necessary.
Conclusion
Overall, it seems that Tehran and Moscow’s decision to gradually eliminate the US dollar from banking and trade transactions is another sign of increasing cooperation and friendship between the two countries.
According to the head of the Iran-Russia Chamber of Commerce, experts on de-dollarization—referring to the end of the dollar’s dominance as the primary international trade currency—believe that de-dollarization should not be interpreted as replacing one currency with the dollar. Instead, de-dollarization is a state where the credibility of other currencies increases in parallel with the dollar, and the dollar is no longer dominant in global trade. Digital currencies are one of these options.
Experts and specialists in this field note that the Iran-Russia cryptocurrency and its replacement for currencies like the dollar and euro are still not operational and require specific infrastructure that needs to be established by both countries.
However, it should not be overlooked that while this collaboration strengthens Iran-Russia relations either bilaterally or within the Eurasian Economic Union framework, it cannot address all financial, banking, and trade challenges arising from comprehensive Western sanctions against both countries.
We will have to wait and see when this joint project will come to fruition and whether Iran and Russia’s efforts to circumvent international sanctions through the use of digital currencies and active participation in foreign trade can mitigate the negative effects of global sanctions and create a better future for the economies of these countries.
