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Last Updated: Tuesday, 27 March 2007, 10:45 GMT 11:45 UK
Iran reduces US dollar exposure
Shoppers in a market in Tehran
Officials say the latest sanctions will not hurt the economy
Iran has significantly reduced the amount of US dollars it holds in its foreign reserves, the head of its central bank has revealed.

Dollars now make up 20% of reserves, in line with the policy of lower exposure to the currency, Ebrahim Sheibany said.

Iran has, for some time, encouraged oil importers to pay for their crude in other currencies such as euros.

The UN recently agreed to impose fresh sanctions on Iran after it refused to stop its uranium enrichment programme.

The assets of individuals and institutions involved in Iran's nuclear industry, which Tehran says is purely focused on civil energy production, are to be frozen.

Loans and other forms of financial aid to the country will also be restricted.

Currency diversification

We are distancing from the dollar
Ebrahim Sheibany, Iranian central bank boss

Mr Sheibany said it would continue to review its policy on foreign reserve holdings in light of what he described as "US hostility" to his country.

"At the time being, we are distancing from the dollar," he said at an Islamic finance conference in Malaysia.

"We are diversifying our reserves in different currencies. In dollars now, it is at a minimum level - maybe around 20% - because we need to keep that."

The new sanctions would not have a substantial impact on Iran's economy, Mr Sheibany argued, since they were limited to areas such as arms shipments.

He added that Iran, whose economy is heavily reliant on oil exports, would have no problem in servicing its debt and that its reserve levels were at a record high.

Paying for oil

Financial markets are closely monitoring Iran's oil trade to see the extent of business being conducted in currencies other than the dollar.

Iranian industry officials have said 60% of its oil trade with other Opec members is now in non-dollar currencies, although this figure has not been corroborated.

Barrels of oil
Oil business is the true test of Iran's dollar policy

The Reuters news agency reported Chinese sources as saying that state-owned oil producer Zhuhai Zhenrong Corporation had moved out of the dollar for its Iranian trade late last year.

If correct, this would be significant since Zhuhai imports 240,000 barrels of oil a day from Iran while China is one of Iran's most important customers.

Japanese oil producers continue to pay for their crude in US dollars, Reuters reported, pending an official request from Tehran to change their approach.

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