Turkey and Iran have issued the first letter of credit (L/C) using their own currencies.

Using L/Cs denominated in Iranian rial and Turkish lira aims to facilitate trade transactions between the two countries.

Several advantages

The use of the rial and lira also aims to lower foreign currency risks. Both countries have recently been forced to depreciate their currencies.

The move also means that traders in the two countries will no longer be reliant on variations in the value of US dollars or euros that have typically been used for L/C transactions in Turkey and Iran.

Trading ties

In October 2017 the Turkish and Iranian central banks signed a rial-lira currency swap agreement with the goal of preparing the ground for expanding economic and trade ties.

The value of trade between the two countries currently stands at $6 billion. This figure is expected to increase substantially through the use of the national currencies in bilateral trade.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.