“Recently, during a meeting between the Governor of the Iranian Central Bank and the Governor of the Russian Central Bank, the two countries reached an agreement to use their own currency instead of the US dollar in business transactions.”What does this news mean for companies exporting to Iran?

Effects of currency replacement for dollar

Iran and Russia’s transactions using their own currencies indicate that the two countries are bypassing the trading system of mainstream currencies such as the US dollar, the euro.This change could affect various aspects such as exchange rate fluctuations, facility of settlement, and bring additional monetary risks to export companies.

Risk of underground payments

Private money business in Iran is legal in the country, but there is a higher risk of losing money because of anonymous account payments, multiple intermediate links, etc. In China, underground financial business is illegal, and in recent years Chinese police have broken up several such cases.

Risk of designating third party overseas account payments

The case of a Qingdao company shows the risk of payments to designated third-party overseas accounts. In this case, a Chinese company infiltrated funds into Hong Kong’s third-party accounts on the instructions of an Iranian seller and the resulting funds could not be recovered.

Email hacking threatens bank accounts

In recent years, Chinese enterprises have been exposed to hacking account information when they agreed to send money to Iranian customers via email. This type of risk occurs in the case of mailbox passwords being stolen, resulting in the money being mistakenly hacked to the account designated by the hacker.

Iran threatens to confiscate bank information fraud

In the case of an Iranian company importing laser sculpture equipment from China, a buyer used the situation in which Iranian banks were frozen due to sanctions to compile bank information, cheat the seller's certificates, thus withdrawing goods without payment.

The risk of customized goods being rejected by buyers

There are many Chinese companies that, after accepting custom orders from Iranian companies, have encountered a buyer’s rejection or demand of a substantial price reduction after the goods arrive at the port. In the face of this situation, sellers often have to accept the price pressure to reduce losses.

Dealing with tactics.

Understanding and assessing exchange rate risk: When trading with Iran, we closely monitor exchange rate fluctuations and evaluate the possible impact on the transaction.
Avoid using underground money for transactions: Payments should be made using regular banking channels as much as possible.
Strict audit of the buyer’s credit: Before carrying out large transactions, a credit survey is carried out on the buyer through a credit rating agency.
Increase cybersecurity awareness: Double authentication of emails involving financial transactions ensures the security of the transfer account information.
Clear and strict implementation of contractual provisions: Ensure that the contract includes detailed payment terms and risk control measures.
Maintain good communication with buyers: Maintain close communication with the buyer during the transaction process, and understand the buyer's business situation and payment ability in a timely manner.
Access to professional legal and trade advice: When engaging in complex international trade, seek the help of professional legal and trade advisors.

The above analysis shows that although exports to Iran offer market opportunities, there are also many risks. Enterprises should fully assess these risks before entering the market and take effective risk management measures to ensure the smoothness of trade.