Iran has asked Japanese refiners to switch to yen rather than US dollar denominated letters of credit (L/Cs) to pay for all crude oil purchases.

This says Tehran would counter the risk that US dollar transfers may be frozen by increased sanctions.

Finally approved

The use of yen-based L/Cs for crude oil "has finally been approved" by the Iranian central bank and the National Iranian Oil Company (NIOC), according to a letter seen by the Bloomberg news agency.

It says NIOC's general manager of crude oil marketing and exports in Tehran, Ali A Arshi, sent the letter to Japanese refiners who have been asked to open yen denominated L/Cs with immediate effect.

Iran wants yen-based transactions "for any/all of your forthcoming Iranian crude oil liftings," the letter says.

Sanctions

Iran has been backing away from US dollar denominated transactions since Washington began to put pressure on it last year to curb its nuclear programme, which Tehran has so far failed to do.

Iran now operates under two sets of UN-sponsored sanctions that have restricted activities in its banking sector.

L/Cs under pressure

Last year Iranian officials urged the use of L/Cs in euros while Tehran has also said it will shift its foreign currency reserves from dollars to euros and use the euro in oil deals in response to pressure on its banking sector and economy. (DC World News, 20 December 2006)

Iranian L/Cs have been discouraged for more than a year now since the US began threatening foreign banks with fines and lost business if they continued their operations in Iran (DC World News, 14 June 2006).

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