Iran has proposed creating a new currency to do trade with China, Russia, India, Pakistan, and other members of the Shanghai Cooperation Organization (SCO).
Tehran sent a letter to the SCO in early 2022 suggesting that a new currency could help the Eurasian nations strengthen their bilateral trade with each other, according to Iran’s foreign minister for economic diplomacy, Mehdi Safari.
A Eurasian currency would also make it easier for these countries to circumvent unilateral Western sanctions, which are illegal under international law.
Such a development would directly challenge the US-dominated financial system and the status of the dollar as the de facto global reserve currency. The US dollar is still used in the majority of global trade transactions, although the overall percentage is shrinking by the year.
Brazil’s left-wing leader Lula da Silva has similarly pledged that, if he wins the October 2022 presidential elections, he will create a new currency for trade within Latin America, called the Sur (“South”), in order to combat “the dependency on the dollar”.
The Shanghai Cooperation Organization is a Eurasian political and economic alliance that brings together countries representing more than 40% of global population and roughly one-third of the world’s GDP.
The SCO was formed in the 2001, at first largely as a security organization aimed at combatting terrorism and extremism and promoting peace and stability in Asia.
In the two decades since, the SCO has evolved into a highly influential political and economic organization.
China, Russia, India, and Pakistan are all members of the SCO, along with the Central Asian countries of Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan.
Iran became accepted as a member of the SCO in September 2021, initiating a technical accession process that could take a year or two.
Afghanistan, Belarus, and Mongolia are also recognized as SCO observer states.
The Shanghai Cooperation Organization (SCO) was founded in 2001 by China and Russia, and has become a counterbalance to the US-led NATO cartel (though the SCO is not exactly a military alliance in the same way)
Iran is now a member. Belarus is likely next, then maybe Afghanistan pic.twitter.com/LzF0k3MyLN
— Benjamin Norton (@BenjaminNorton) September 17, 2021
On May 26, the Shanghai Cooperation Organization held its 17th forum meeting, via video. The conference was chaired by Russia.
Dozens of figures from the eight Eurasian member states discussed “more intensive interaction between the SCO states in the field of international security, economic cooperation matters and expanded cultural and humanitarian cooperation”, the organization reported.
Several members of the SCO, including Russia, Iran, and China, have been targeted by unilateral US sanctions, which violate international law.
A new Eurasian currency would help these sanctioned nations trade with each other, without the need of dollars and access to the US-controlled financial system.
Russia and China have sought to de-dollarize their economies for several years, recognizing how the US government has weaponized its currency through the use of financial sanctions.
The devastating Western sanctions imposed on Russia over its military intervention in Ukraine have accelerated this process of de-dollarization.
The Western proxy war on Russia has also led to a significant deepening of the integration of the Russian and Chinese economies.
While the US and EU isolate Moscow over Ukraine, China is strengthening its "rock solid" alliance with Russia, calling it its “most important strategic partner”
In response to Western sanctions, Russian banks are moving to a Chinese payment systemhttps://t.co/YMjtUqegbz
— Benjamin Norton (@BenjaminNorton) March 9, 2022
These sanctions have likewise encouraged countries in Asia to develop new forms of trade using other currencies.
China is purchasing Russian oil in its own currency, the yuan.
India and Russia are doing trade together in their own currencies, the rupee and ruble, respectively.
In 2020, Iran’s central bank effectively dropped the dollar and listed the Chinese yuan as its top foreign exchange currency.
China and Iran subsequently signed a historic 25-year cooperation agreement in 2021. As part of the deal, China will reportedly invest $400 billion to help develop Iran’s economy and infrastructure, in return for oil.