Oil, gas and Iran economic analyst
Iran has once again floated the idea of replacing the US dollar with local currencies in trade with its partners, but so far the push has gone nowhere.
None of Tehran’s counterparts, including Russia, has agreed to settle transactions in national currencies, leaving Iran isolated despite years of lobbying.
At the Shanghai Cooperation Organization (SCO) summit on September 1, President Masoud Pezeshkian repeated the call.
A day earlier in Tianjin, China, he unveiled a new initiative under the title “SCO Special Accounts and Settlements,”describing it as a three-pronged plan to “reduce the effects of illegal sanctions on SCO members.”
What’s the proposal?
According to Pezeshkian, the initiative has three components:
Pezeshkian argued that the plan could boost the “economic resilience” of SCO countries and turn the bloc into “a successful model for building a multipolar, fair financial order resistant to external pressure.”
Is it realistic?
The hurdles are steep.
SCO members’ national currencies lack international credibility and many are volatile. The Iranian rial has lost 99 percent of its value in the past two decades, while the Russian ruble has sharply fluctuated since the Ukraine war.
Over the past five years, all SCO currencies—except Tajikistan’s—have depreciated.
Trade imbalances add to the problem.
Chinese customs data show China’s exports to India, Pakistan, and Uzbekistan are seven times larger than its imports from them. With Tajikistan, the imbalance reaches tenfold.
China, with a $150 billion annual trade surplus with those countries, is unlikely to accept settlement in their weak currencies—and even if it did, they would be of little use in trade with third parties.
Energy trade underscores the limits further.
Of China’s $512 billion in total trade with SCO members last year, $90 billion was fossil fuel imports. About 80 percent of global energy transactions—especially oil—are conducted in US dollars. Even the euro and pound play only marginal roles.
Beyond energy, the dominance of the dollar and euro in global commerce is overwhelming: the dollar accounts for more than 65 percent of trade transactions, the euro about 20 percent.
China’s yuan makes up just 3–4 percent, mostly in neighboring countries.
The core problem
Above all, Iran remains on FATF’s blacklist, which restricts transactions regardless of currency. Whether in dollars, euros, yuan, or local money, doing business with Iran carries legal and financial risks.
For these reasons, Tehran’s latest de-dollarization push is less a practical plan than an aspirational talking point.
Currency weakness, trade imbalances, dollar dominance in energy, and Iran’s isolation from the global financial system make the proposal unworkable.
Adding to the difficulty, Washington has taken a firm line against such initiatives, warning the BRICS bloc over de-dollarization efforts and threatening more sanctions and tariffs if they advance.
Treasury’s Office of Foreign Assets Control (OFAC) said the Houston-based company contracted in May 2022 with Venezuela’s state-run airline EMTRASUR, a subsidiary of CONVIASA, to transport car parts from Mexico to Argentina.
The flight used an aircraft that had previously been blocked for being operated by Mahan Air and was crewed by Iranian nationals.
OFAC said the transactions amounted to apparent breaches of US sanctions on Iran, Venezuela, weapons proliferation and terrorism.
“Fracht conferred a direct financial benefit of approximately $935,000 to the blocked entity EMTRASUR, providing substantial revenue to the Maduro regime and specifically relating to use of an aircraft blocked for terrorism and proliferation,” the Treasury statement said.
Washington blacklisted Mahan Air in 2011, accusing it of supporting Iran’s Islamic Revolutionary Guard Corps. Although the aircraft later changed registration to a Venezuelan tail number, OFAC said it remained blocked property because of its origin and continuing links to the Iranian airline.
The Treasury added that Fracht executives disregarded internal compliance procedures and red flags, such as the aircraft’s Venezuelan registration and EMTRASUR’s ownership, when approving the charter. The case was deemed “egregious” and not voluntarily disclosed.
Still, the penalty was reduced from a potential $2.1 million after Fracht cooperated with investigators and undertook extensive compliance reforms, including firing the employee who arranged the deal and hiring nine sanctions specialists.
The United States has repeatedly accused Mahan Air of using commercial cover to move military equipment and personnel to support Tehran’s allies in the Middle East.
The clash over Babak Zanjani, whom Iranian media outlets say Tehran has recruited back into business as new sanctions loom, appears to indicate policy divisions among key institutions as the country reels from a damaging war in June.
Judiciary spokesman Asghar Jahangir on Wednesday rejected a statement last month by the central bank's governor saying Zanjani had only repaid about $15 million of a total $1.9 billion in oil revenue he was convicted of embezzling.
“At a time when the country needs calm, the judiciary cautioned central bank governor Mohammadreza Farzin to avoid comments that could disturb public opinion,” Jahangir added. The matter “rests solely with the courts," he said.
Zanjani's original 2016 conviction on fraud and money laundering charges earned him a death sentence, which was commuted to a 20-year prison term last year by Iran's Supreme Leader Ali Khamenei. He was released in April.
A wily evader of Western sanctions on Iran, Zanjani was widely reviled by many Iranians struggling in straitened economic circumstances but prized by officialdom for his craft in securing oil exports, the main source of state revenue.
“The defendant served his sentence without a single day’s leave until the introduction of his assets, which were even greater in value than the debt,” Jahangir said. “Claims that these assets were not returned have no valid legal basis.”
From air fresheners to oil billions
Babak Zanjani, born in 1951, was the prime defendant in one of Iran’s biggest corruption cases. He once said that during his military service he was the driver of the central bank governor and used the connection to trade hard currency—an account the bank has denied.
What is clear is that he developed ties with the Revolutionary Guards’ Khatam al-Anbia engineering arm through Ahmad Vahid Dastjerdi, then head of the IRGC cooperative foundation.
Before that, Zanjani had worked in small businesses, from producing air fresheners on Kish Island to selling sheep hides abroad. His fortunes changed in 2007 when he began supplying parts for IRGC projects.
In 2010, Zanjani became a crucial oil broker under Oil Minister Rostam Ghasemi. He acquired Malaysia’s First Islamic Investment Bank to channel oil revenues and built a network of exchanges in the United Arab Emirates and Tajikistan.
A 2012 decree signed by three ministers and the central bank governor allowed 14.5 percent of oil revenues to flow into his bank—a key focus of his eventual indictment.
In the last year and a half of Mahmoud Ahmadinejad’s presidency, Zanjani not only took delivery of crude shipments offshore but also received that 14.5 percent of oil sales directly, leaving him with a large debt to the oil ministry.
At the same time, his Sorinet holding bought domestic carrier Qeshm Air, extending his empire into aviation.
Fall and rise
Only months before his downfall, Zanjani called himself an “economic Basij member,” a reference to a domestic enforcement militia loyal to the Islamic authorities.
In 2013, after disputes with then-President Hassan Rouhani's government, he was arrested. In March 2016 judiciary spokesman Gholamhossein Mohseni Eje’i announced that Zanjani and two associates had been convicted as so-called corruptors on earth and sentenced to death.
The Supreme Court upheld the ruling but allowed clemency if he returned the funds.
“As the assets were returned and the debt was settled, the Supreme Leader granted clemency, reducing his sentence to 20 years,” his lawyer said in April 2024. He was released in December 2024.
Reports this year suggested Zanjani had resumed business activities, including launching an airline called Dot-One with 32 aircraft, as well as ventures in ride-hailing, shipping and rail imports.
In May, an $800 million contract between the transport ministry and a company linked to him marked his apparent full rehabilitation, sparking controversy.
