Iran Admits: We're Dumping Dollars

TEHRAN -- Iran holds less than 30 percent of its reserves in dollars and will continue to cut holdings in the U.S. currency to the "minimum level" needed to meet payment commitments, the central bank governor said on Wednesday.

"We are distancing (ourselves) from dollars, week by week, or month by month," Governor Ebrahim Sheibani told Reuters in an interview, adding that this was a "very natural" response to U.S. pressure on Iran over its nuclear programme.

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Washington has slapped sanctions on two big Iranian banks and three firms to push Tehran to stop work U.S. officials say is aimed at building atomic bombs, a charge Tehran denies.

The U.N Security Council has also imposed sanctions on Iran, barring the transfer of technology and know-how to the country's nuclear programme. More steps could follow if Iran is found to have ignored Wednesday's deadline to halt sensitive atomic work.

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Sheibani dismissed sanctions as "small stumbling blocks" without major effect and said Iran, the world's fourth largest oil exporter enjoying windfall earnings, was able to offset any costs to business using its own burgeoning reserves.

Iran's reserves were now at the "highest level ... in our history", Sheibani said without giving a total figure except to say they amounted to "tens of billions of dollars".

The central bank does not reveal the size of its holdings or a precise breakdown. But when asked about some Iranian press reports that suggested the country's dollar holdings were around 30 percent, he said: "Less than that."

Financial markets are wary of significant moves out of dollars by any central bank. Iran's long-mooted shift has been well factored into prices for some time, but a confirmed large-scale move could have a knock-on effect around the region.

Sheibani said one portion of the country's foreign reserves, the Oil Stabilisation Fund, stood at $11 billion now in February. He said this was about "the same size" as a year ago because of government project spending and financing imports.

Economists say the fund, mainly designed for use in times of need not periods of high oil prices like now, has also been used to finance current government spending, driving up inflation.

NATIONAL INTERESTS

Sheibani had indicated in September last year that Iran might shift from dollars after the U.S. slapped the sanctions on Bank Saderat, the first of the Iranian banks to be targeted.

"I said we would shift from the dollar to other currencies and we are doing that," the governor said in his office overlooking the sprawling Iranian capital.

"For years we kept our reserves in U.S. dollar and our transaction mostly was in dollar. Now, as I said, we are diversifying these activities and these reserves to protect our national interests," he said.

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Asked if the central bank had a target for the dollar portion of reserves, Sheibani replied: "We will keep it to the minimum level that we need, because still some of our payment is in dollar, and we are limiting that type of transaction."

Aside from the dollar portion, he said a "good part" was in euros and in Europe, traditionally a big trading partner with Iran, and the rest was in other currencies and gold.

Deputy governor Mohammad Javad Mojarrad said Iran started pushing for oil export payments in euros, calculated from the dollar price, after sanctions were imposed on Bank Saderat. This hastened the shift in reserves away from dollars, he said.

Iran receives over 50 percent of oil export sales in euros.

Sheibani dismissed as "baseless" the U.S. allegations that Bank Saderat was funnelling money to "terrorists" and charges that Bank Sepah was financing Iranian missile procurement.

"I hope sometime Americans come to reason and understand that the best way is to cooperate and respect other nations and not to accuse other nations' banks," he said, adding that Washington was harming the dollar's credibility not Iran.

Although Iranian officials brush off the impact of sanctions, bankers say already meagre foreign investment flows have slowed to trickle and Iranian businesses now pay higher charges to open letters of credit used in trade.

Most international banks have stopped dollar transactions with Iran, turning to euros or other currencies.

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