Japan's Nippon Oil is to start opening letters of credit (L/Cs) to pay for Iranian oil in yen rather than in US dollars.

The first payments to be made in the Japanese currency for crude oil contracts will be made during October.

Currency diversion

Iran has been increasingly opening L/Cs selling oil in currencies other than the US dollar, partly because of sanctions imposed on its financial sector, but mainly because of the weakening US dollar.

These factors prompted Iran last year to insert a clause into oil contracts enabling it to require payment in currencies other than the US dollar, and Tehran says it does not seek to change the original value of the oil contracts being traded.

Official comments

A top official has given reasons why Iran has asked customers in Japan to pay for their crude oil in yen instead of dollars.

"As long as the dollar is weak, the best decision is for us to move away from it - and we will want as much revenue as possible in non-US dollar currencies," international affairs director of National Iranian Oil Company, Hojjatollah Ghanimifard, said recently.

Not political

"This is not a political gesture; we're losing our purchasing power if we stick with the dollar," he added.

After Japan begins opening L/Cs in yen, more than 70 per cent of Iran's oil revenue will be in currencies other than the US dollar according to Ghanimifard.

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