Threatening the Petrodollar, Iran Plans Hormuz Strait Tolls in Rial
REPUBLIKA.CO.ID, TEHERAN – Iran is reportedly drafting a plan to require payment of transit fees across the Strait of Hormuz in its currency, the rial. This would disrupt the petrodollar system, which has long enabled US economic supremacy.
The Chairman of Iran’s Parliamentary National Security Commission stated that, based on a parliamentary proposal, transit fees through the Strait of Hormuz would be paid in Iran’s national currency, the rial, according to a post on X from the Iranian consulate general in Mumbai on Friday.
The move also appears designed to threaten the petrodollar system. Through the scheme that began with an agreement with Saudi Arabia in 1974, Middle Eastern oil transactions are required to use the US dollar, with profits reinvested in the US. This system has allowed the US dollar to remain dominant even after it ceased to be backed by gold in 1973.
For years, Washington has exploited the dollar’s dominance in international trade to exert influence and harm enemies and rivals, including Iran and China.
The supremacy of the US dollar is particularly evident in the global oil market, where around 80 per cent of transactions are settled in that currency, according to estimates from JP Morgan Chase in 2023.
As Iran controls the Strait of Hormuz, the channel from the Gulf for about one-fifth of global oil and liquefied natural gas supplies, Tehran and Beijing have found ways to promote the Chinese yuan as an alternative to the greenback, the nickname for the US dollar.
Under the de facto toll regime imposed by Iranian officials, commercial vessels are charged transit fees in yuan, according to several reports. This is the latest example of deepening China-Iran economic cooperation facilitated by the Chinese currency.
Although it is unclear how many vessels have made payments in yuan, at least two ships did so on 25 March, according to Lloyd’s List.
China’s Ministry of Commerce acknowledged Lloyd’s List reporting in a social media post last week, which appears to confirm the use of yuan to settle payments.
On Saturday, the Iranian embassy in Zimbabwe stated in a social media post that it is time to add “petroyuan” to the global oil market.
“On one hand, Iran aims to blame the United States, thus adding insult to injury,” Kenneth Rogoff, an economics professor at Harvard University and former chief economist at the International Monetary Fund (IMF), told Al Jazeera.
“On another level, Iran is very serious about choosing the yuan to avoid US sanctions and to develop its ally, China, which continues to redenominate its own trade, and BRICS countries to the yuan,” Rogoff said.