Alwaght- In today’s world, due to the entanglement of the economies, the banking system as a currency connector and facilitator of the transactions is one of the main parts of the trade, and banks and credit institutes play a major role in expansion of the markets and growth and prosperity of trade and economy. Therefore, countries have tried to develop new regional financial mechanisms to boost their economic relations by strengthening their banking and financial cooperation. The Muslim countries that are considerable in number and population are aspiring to play an important role in the global trade.
To this end, the Islamic Development Bank held a meeting gathering together finance ministers of the Muslim countries on Saturday and Sunday in Jeddah, Saudi Arabia, discussing ways to shore up inter-member trade and financial transactions. The summit ended with signing 77 financial contracts worth of $5.4 billion among 24 members.
“These agreements are aimed at broadening the range of coverage of the operations and projects in various sectors such as health, farming, food security transportation, energy, small and medium businesses, education, and humanitarian aids,” Mohammad al-Jasser, the head of IsDB said, adding: “The ministers discussed the impacts of economic crisis on the countries. They made significant directions and proposals to the Islamic Development Bank to use partnership to repulse the crises and work on new innovative mechanisms.”
Iran’s Minister of Economy and Finance Ehsan Khandozi who participated in the Jeddah summit emphasized that one of the actions that the IsDB can take is to establish institutions and create financial instruments to help investment in research and development and transfer and application of technical knowledge in member countries. According to Khandozi, another measure that the bank can put on its agenda is to support technology enterprises of member countries in the form of providing facilities and direct financing to these companies in order to strengthen their financial structure and ability in R&D and application of the technical knowledge produced.
The Iranian minister held bilaterals with economic officials of the Persian Gulf Arab countries on the sidelines of the summit and made proposals for intra-Islamic cooperation boost. In a meeting with the finance minister of Oman, Khandozi demanded the formation of joint committees to speed up the implementation of investment and customs agreements between the two countries. He also referred to the recent visit of the minister of industry of Oman to Tehran and said that the meeting with him was positive. At the same time, he described the meeting of the Omani official on the sidelines of the meeting as an “opportunity for the two sides to start finalizing joint investment and customs agreements.”
“Iran has the necessary preparation to finalize the agreements between the two countries, the preliminary work of which has been done,” Khandozi continued.
Minister of Finance of Oman Sultan al-Hasabi, for his turn, described the relations between the two countries “continuous and balance-making” in the region. Al-Hasabi attributed the trips of Iranian investors and businessmen to Oman to the clear prospects that followed the visit of Iran’s President Seyyed Ibrahim Raisi to Oman. Referring to the grounds of cooperation in such sectors as oil and gas, the Omani minister stressed on the need for the two countries to exchange experiences in investment.
The Iranian minister also had bilaterals with Emirati and Saudi counterparts and told them about the significance of the Iranian role in the region and in the Muslim world, adding that Iran is ready to play a wider role in the IsDB. In these meetings, the improvement of economic and trade relations and the removal of customs barriers between Iran and the Arab countries were also highlighted, and the ministers announced their readiness to increase cooperation at all levels.
The IsDB is one of the major international development financial institutions and one of the specialized institutions of the Organization of the Islamic Cooperation (OIC) and was established with the aim of advancing the economic development and social progress of member countries and Muslim communities of non-member countries, based on the principles of Islamic Sharia. Currently, its members are 57 countries from the four continents of Asia, Africa, Europe and America. The main focus of this bank is on financing the infrastructure and development projects of the countries, and all of its operations are based on the Sharia, and, thus, it can make a significant contribution to the development of the infrastructure in Muslim countries.
Iranian-Arab financial cooperation beef-up
Presence of the Islamic Republic of Iran and regional countries in the IsDB can catalyze an expansion of their financial and trade relations. Though at present the bank’s financial resources are limited, the member states can cooperate to ratchet up its banking system and do their financial transactions within its framework. This can work like an instrument amplifying their financial systems’ connections.
Today, one of the main factors empowering economic growth and development of countries is the wide financial resources that banks provide to governments and the private sector so that they can implement their long-term and large-scale projects, and Iran and the Arab states, due to their strong position in the IsDB, can develop the economic infrastructure in the region using funds provided by this financial institution. Given the progress in political relations that followed recent Iran-Saudi Arabia détente agreement, Arab monarchies have expressed their interest to partner Iran in trade and economy.
Given the Iranian fundamental problems in currency transactions with other countries because of the US sanctions, Tehran can neutralize the sanctions through establishing regional mechanisms using IsDB. Such mechanism has already been adopted by Iran and Russia to circumvent the Western sanctions.
Many western countries are not interested in investing in the Iranian market for fear of the punitive sanctions of Washington, and this is a good opportunity for the Arab countries to enter the Iranian market and gain profit in infrastructure projects, as the Saudi authorities emphasized after the agreement with the Islamic Republic. They said that there are many capacities for investment in Iran’s economic sectors and they will invest in the Islamic Republic. Having in mind that all commercial and economic activities are facilitated through banks, if the banking cooperation between Iran and the Arab countries is developed, commercial interactions will be made more easily.
Iran and the Persian Gulf Arab states have the biggest share in the IsDB and by augmentation of their trade and making profits, they can contribute to the bank’s infrastructural projects in less financially capable Muslim countries. Regional countries also can invest in the technology enterprises, as Iran’s Khandozi proposed, to help boost each other’s infrastructures and service sectors. Iran has huge potentials in technology enterprises and if necessary cash is injected into them, they can be useful to these countries and supply them with technology.
Facilitating currency transactions
Annually, thousands of Iranians visit Saudi Arabia for Hajj and, thus, currency transactions are numerous between Iran and Saudi Arabia. If bilateral banking transactions are bolstered, Iranians can meet their needs using Saudi banks without carrying cash to the Arab kingdom. Actually, the same system of payment and financial network used by EU members can be adopted by Muslim countries. This is crucial for Iran-Arab relations at a time many world countries are moving to dedollarization and use of national currencies.
Iran and the Persian Gulf countries will play an important role in the future economy of the world, which Russia and China plan to form with a multipolar structure, and the strengthening of regional financial and banking relations will enable them enhance their position for playing a role in the upcoming new world order. The broader these financial and commercial relations are, the harder it will be for Western countries to fail them, and since Iran has a lot of experience in neutralizing these destructive policies, it can also share them with Arab countries.
Iran has many capacities that can meet part of Arab countries’ import needs, and the costs will be way lower due to their proximity. Furthermore, Arab states, especially Saudi Arabia, have many construction projects whose materials can be provided by Iran. This can help Iranian companies expand production capacities and embrace boom. The effects of this cooperation can be observable when these countries manage to connect their banking and financial systems to each other and transact easily.
With the administration of President Sayyed Ibrahim Raisi of Iran Prioritizing business with Iran’s neighbors, they can expand their partnership if the other side shows a will. Among the Persian Gulf monarchies, the UAE has relatively good trade ties with Iran, and it is the third largest importer of goods from Iran and the main exporter of goods to it, and their trade creates a need for financial and banking cooperation in order to facilitate foreign exchange interactions with Iran. By removal of barriers and customs tariffs between Iran and the Arab countries, trade interactions in the Persian Gulf will be more prosperous and both sides can meet each other’s needs and circulate financial resources in the region instead of transferring them to Western banks.
Iran has shown it does what it takes to protect regional security, stability, and peace and now it is extending the hand of friendship to neighbors for trade and financial partnership that can be enhanced by the IsDB through improved banking cooperation. In recent years, Iranian-Arab trade relations dropped to their nadir due to tensions over a series of regional crises. However, Iran-Saudi Arabia reconciliation has changed the situation and prepared the ground for an upswing in trade and financial relations, with Arab countries voicing their interest to give a lift to cooperation with the Islamic Republic, progress in business and financial sectors can be seen in the future, and this, in turn, can improve regional trade.