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Iran, Turkey to Establish Joint Bank in Face of US Sanctions

Iran, Turkey to Establish Joint Bank in Face of US Sanctions

Sunday, 2 June, 2019 - 09:00
Turkey's central bank headquarters in Ankara, Turkey. (File Photo: Reuters)
Ankara - Saeed Abdulrazzak
Iran and Turkey are working on establishing a new anti-sanctions financial mechanism to protect mutual trade and economic ties and face US sanctions, announced Iran’s Ambassador to Turkey Mohammad Farazmand.

The ambassador explained that Iran exports a large volume of gas to Turkey and needs a new mechanism to be created to ease financial transactions via both countries’ national currencies.

“We are on the process of establishing a joint bank, as well,” he told Mehr news agency.

Farazmand noted that all countries are entitled to develop common trade ties with each other and nothing illegal has been done in this regard, however, he said that this is not done to prevent US sanctions, and Tehran does not want to circumvent regulations.

“However, the US is carrying out economic terrorism besides sanctions on Iran which is violating our countries’ rights.”

Ankara is Tehran’s economic partner, as Turkey's trade with Iran in 2010 reached $10 billion, peaking in 2012 when it reached $21.9 billion, only to decline after that.

Earlier, Turkey's exports to Iran reached a record high of $9.9 billion, but in 2017 it fell sharply to $3.3 billion. The downward trend in 2018 continued to $2.4 billion.

Turkey's imports from Iran have dropped from $12.5 billion in 2011 to $7.5 billion in 2017 and $6.9 billion in 2018.

With the Turkish lira crisis that emerged last year, Ankara began to consider doing business with a number of countries including Iran, Russia, and China in local currencies but has not achieved concrete steps in this regard.

Turkey halted imports of crude oil from Iran in early May in compliance with US sanctions, from which Turkey was exempted for six months.

In other news, Turkey's financial markets have seen large-scale sell-off in recent months, casting a shadow over the future of the country's economy.

London-based research firm Capital Economics said in a note to its clients that the return to growth looks as though it will prove short-lived.

The note explained that the sell-off in “Turkish financial markets over the past couple of months has caused financial conditions to tighten. And we doubt that government spending will continue to rise at such a rapid pace.”

Turkey faces further political instability after the result of the key mayoral vote on May 06 in Istanbul was overturned and determined for June 23.

After three-quarters of negative growth, Turkey’s gross domestic product (gdp) grew 1.3 percent in Q1 of the year compared to the previous quarter, data from the Turkish Statistical Institute showed. But the effects of the recession mean that the economy is still 2.6 percent smaller than it had been a year earlier.

Turkey’s economy fell into recession for the first time since 2009 when it suffered two straight quarters of contraction to finish last year, after months of turmoil caused by the weakening lira and tensions with the United States.

Analysts believe the re-growth recorded in Q1 was driven by stimulus measures introduced by President Recep Tayyip Erdogan ahead of the polls on March 31 and could prove to be temporary.

The government tried to support the lira after it lost close to 30 percent of its value last year and boosted public spending ahead of the elections, but the lira receded in April bringing its losses since the beginning of the year to about 15 percent.

However, the volatility of the central bank’s foreign reserves, which inexplicably plunged in the run-up to the local elections, alarm the investors.

The central bank has since vowed to tighten spending, with governor Murat Cetinkaya saying he will take a firm stance against inflation, currently close to 20 percent, and protect its foreign currency reserves, reported AFP.

The Central Bank's financial and banking statistics showed that the total reserves reached $93.547 billion until the week ending May 24.

The central bank's net foreign exchange reserves rose to $73.92 billion as of May 24.

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