The LC has been opened based on an agreement singed between Iran and Turkey's central banks the previous year. In order to facilitate commercial exchanges with the adjacent nations, guide foreign exchange operations for real and legal individuals to banking system, use international payment instruments, reduce the risk of foreign exchange operations in recent years, Iran's Central Bank has put signing currency swap agreements on its agenda with Iran's major trade partners.
Based on the signed currency swap agreement of "Iran's rial" and "Turkey's lira" between two countries' central banks, Iran's Melli Bank opened the first LC for providing trade finance with Turkey, today.
In this model there is no need to the third currency such as US. dollar or euro for settlement. Furthermore, this approach minimizes the operation risk of merchants of two countries for purchasing, transferring and financial exchanges because of guiding foreign exchange operation to banking system. Added point, based on the model, LCs for Iranian merchants are in Turkey's lira and will be provided by the resources which has been seen in the swap agreement.
Importantly, due to the high trade volume between Iran and Turkey which is approximately $6 bn, using two countries' national currencies under the currency swap agreement will help to facilitate banking and trade affairs remarkably.
It is worth noting that during the Turkish President's visit to Iran last year, the draft of the bilateral swap of Iran's rial and Turkey's lira was agreed by two countries's central banks' governors.
