Iran Cuts its U.S. Reserves to 20%; Asks Japan to Pay for Oil in Yen
By Jason Simpkins
In an effort to cut its holdings of the U.S. dollar, Iran has asked Japanese refiners to begin using the yen to pay for imported crude oil. Iran is requesting yen-based transactions “for any/all of your forthcoming Iranian crude oil liftings,” according to a letter obtained by Bloomberg News.
The letter was sent to Japanese refiners and was signed by Ali A. Arshi, the general manager of crude oil marketing exports in Tehran at the National Iranian Oil Co.
The decision is likely the result of a weak dollar, as well as escalating tensions over Iran’s nuclear program. The greenback recently hit a 26-year low versus the British pound, and came within a half cent of posting a record low against the euro.
The dollar remains the currency of choice in most international transactions. Were that to change, the demand for dollars would decrease markedly, and so would the dollar’s value.
Meanwhile, the Iranian government’s refusal to suspend its nuclear initiative is based on the assertion that the country is solely interested in nuclear power for electricity. The United States disagrees, however, suggesting that the country is really interested in developing the technology for use in weapons systems.
Two rounds of U.N. sanctions have failed to curb Iran’s activities. In late June, members of the U.N. made it clear that they would refrain from imposing any further sanctions on the country if Iran would at least stop expanding its program while they attempt to restart diplomatic relations.
In the past, weapons inspectors have reported difficulty in obtaining information regarding the precise scope and purpose of Iran’s nuclear program. As Iran remains elusive on the subject, U.S. officials have grown increasingly uneasy.
Another contributor to the escalating tensions are recent U.S. accusations that Iran is hampering its progress in Iraq by providing Iraqi militants with weapons and training. Iran has refuted the claims, leaving the situation unresolved and both sides dissatisfied.
Iran is cutting its U.S. dollar reserves to less than 20% of its total foreign currency holdings and will likely be in the market for euros as well as yen as the value of the dollar decreases and tensions continue to increase.
