The American Dollar, which Ahmadinejad last year referred
to as a "worthless piece of paper", has once again become the currency of choice
for Iran's foreign currency reserves. The elimination of the Dollar as Iran's
foreign exchange currency lasted only two years. When the Ahmadinejad's
administration announced two years ago the conversion of its international
currency from the Dollar to the European Euro, much hue and cry followed the
event by the Iranian regime to support the move. Now, the announced decision to
revert to the American Dollar by Iran's Central Bank (CBI) was treated a low
level event. When Iran announced its decision at an OPEC meeting, other oil
producing countries refused to follow Iran's lead in 2008, but Ahmadinejad
insisted and made the switch. At that time, Iran took a loss from the switch in
favor of Euro. This year as Iran returned to the Dollar, Iran took another 22
percent loss for its switch.
At an OPEC summit in 2008, Iran's foreign minister Mottaki and oil minister
Nozari, along with Ahmadinejad, announced the country's switch from the US
Dollar to the Euro despite the attempts by others to dissuade them from this.
They said the proposal would only bring "laughter" from powerful OPEC members
and discredit Iran. Ahmadinejad's advisors, however, had a different opinion and
viewed their idea as a "revolution in oil relations."
As Ahmadinejad was reading his text and announcing the switch, objections to the
idea rose in the hall. King Abdullah of Saudi Arabia left the session presumably
to drink tea and coffee, while the heads of the United Arab Emirates, Bahrain
and Kuwait followed him out. But Ahmadinejad continued.
BBC later reported that the Iranian president had referred to the dollar as a
"worthless piece of paper" and called on oil deals to be conducted in another
On May 31, 2010, Iran's Jam-e Jam daily reported that, "The CBI has begun to
convert its reserves into the Dollar, as part of its effort to diversify the
country's currency reserves."
According to the news report, "A plan has been prepared by the CBI in three
stages, and has apparently been approved, the first part of which has begun this
month. The plan seeks to eventually convert about 45 billion dollars of the
country's foreign currency reserves into the US Dollar during the next 4 months.
15 billion Euros will be converted in the first phase of the plan."
Shortly after, the state-run Press TV confirmed the report.
The decision was reported while the Euro's value had dropped by more than 17
percent in the past two months, and the value of the US Dollar has increased by
about 20 percent. In other words, the value of Iran's foreign currency reserves
fell by about 17 percent as the US Dollar gained about 5 percent in value.
Because of this change and return, Iran's central bank has taken a 22 percent
loss in the value of its reserves.
The government's and banks' debts to the central bank dropped from 905,926
billion Rials (about 90 billion Dollars) in November of 2008 to about 776,486
billion Rials (about 77 billion Dollars) in November of 2009. According to CBI
reports, the value of its assets fell by 11.6 percent during the last 12 months
to 1,137,455 Rials in November 2009.