Russia, Iran, Consider Use Of Gold-Backed ‘Persian Token’ To Beat SWIFT Cut Off and Western Sanctions

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Alexander Brazhnikov, executive director of the Russian Association of the Crypto Industry and Blockchain, has been reported as saying that Russia and Iran are discussing ways to use a digital token, to be used as a stablecoin, a digital currency that is pegged to a “stable” reserve asset such as Gold. He added that a special economic zone in the southern Russian city of Astrakhan would begin to receive cargo from Iran later this year, something that is expected to kick off the use of the Gulf token. Russia possesses some of the world’s largest unmined Gold reserves, while the precious metal remains the world’s ‘unofficial’ currency during uncertain times – a position it has maintained for centuries.

Alexei Voylukov, vice president of the Association of Banks of Russia, for his part, stated that currently, there are settlements in dollars between Russia and Iran, but due to sanctions, payments are made in the two countries’ national currencies.

Russia and Iran started to expand the use of national currencies in foreign trade settlements last year against the backdrop of western sanctions slapped on the two countries.

The potential creation of a Persian Gulf Token by Russia and Iran should not threaten the dollar’s hegemony in the immediate term, but the initiative could help weaken it over time by encouraging other countries to pursue asset-backed currencies, Chris Devonshire-Ellis, Chairman of Dezan Shira & Associates, a pan-Asian investment firm, has stated “It may not just be gold. It could be other material assets, such as hydrocarbons, agriculture, other precious metals, gems and even fresh water,” he said.

Devonshire-Ellis added that, “Obviously in terms of gold, the countries to benefit would be those possessing large unmined gold reserves, such as Australia, Russia, South Africa, Indonesia, and Brazil.”

He explained that the emergence of a larger network of asset-backed tokens could help nations bypass western sanctions by providing them with an alternative to the SWIFT banking system, the US dollar, and the Euro. “Countries such as Venezuela, also heavily sanctioned but possessing the world’s largest oil reserves, would be keen to see this type of technological development,” he said.

He was echoed by Paul Goncharoff, Cryptocurrency Research Consultant at Dezan Shira & Associates, who described the possible creation of a Persian Gulf Token as a “tectonic shift”, which would have serious implications not only for the US dollar but also for central banks around the world.

He pointed out that the emergence of an asset-based token would present a serious challenge to traditional fiat currencies by providing “a very appealing safe haven alternative that cannot be weaponized against the owners and users of such tokens.”

Goncharoff argued: “Should this governmentally supported asset-backed token be officially launched and come into actively traded use, it will not be without significant resistance from several governments and the financial infrastructures that support trade in their fiat currencies.”

He said that he “would expect that this could get quite ugly, with exclusion zones set up in traditional banking venues such as New York, London, Frankfurt, Tokyo, and similar,” adding, “After all, hot wars have been started for less.”

The recent rapprochement between Russia and Iran makes it possible to establish almost any system of payments between them. In July 2022, Iranian Economic Minister Ehsan Khandouzi announced that Iran officially discarded the US dollar for trade with Russia. The same month, the Tehran Stock Exchange launched Rial – Ruble trading.

This came after numerous, major Russian banks were disconnected from the SWIFT international payment system as part of western sanctions against Russia. Prior to this, in 2019, SWIFT cut access for most Iranian banks under pressure from Washington, which earlier reinstated harsh economic sanctions against the country following then-US President Donald Trump’s announcement to unilaterally withdraw from the 2015 Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA).

Russia-Iran bilateral trade hit US$4 billion during 2022, with the promise of more to come. The two countries are increasingly aligned in hydrocarbon production and refinements in addition to other commercial areas such as automotive and agriculture. Both are members of and beneficiaries of the INSTC network, due to be completed in 2023 with pan-Iranian rail connectivity linking the Russian and Iranian Caspian Sea Ports to markets across Central and South Asia. Iran also has a free trade agreement with Russia via the Eurasian Economic Union and is a member of the China-led Shanghai Cooperation Organisation.

This article has been edited and amended from the article Creation of Persian Gulf Token Could Be ‘Tectonic Shift’ to Affect US Dollar that appeared in Sputnik on January 17, 2023.  

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