Since taking office in 2017, US President Donald Trump has implemented a tough policy towards Iran. In May 2018, Trump announced his withdrawal from the Iran Nuclear Agreement, and later imposed comprehensive sanctions on Iran and imposed an embargo on Iranian oil. The Iranian government has made many efforts to break the diplomatic deadlock. On March 27, 2021, Iranian Foreign Minister Mohammad Javad Zarif and Chinese Foreign Minister Wang Yi jointly signed the 25-year Comprehensive Cooperation Agreement between the People's Republic of China and the Islamic Republic of Iran, which contains an important information that the oil settlement and trade between China and Iran will be settled in Chinese RMB and digital RMB. The yuan became the currency of calculation for Iranian oil. This move on the one hand broke the diplomatic deadlock of the United States blockade of Iran, on the other hand, for Iran, accelerated its "de-dollarization" trend, and caused reactions from all walks of life in Iran.

I. Iran's domestic attitude towards the use of yuan for oil settlement

The central Bank of Iran announced the inclusion of more currencies in the new system and reduced the influence of the US dollar, allowing merchants with import business with Iran to conduct currency matching with their corresponding countries to settle payments, and completely stopped using the US dollar in commodity transactions with some countries. The move accelerated the "de-dollarization" of Iran.

The 25-Year Comprehensive Cooperation Agreement between the People's Republic of China and the Islamic Republic of Iran includes that oil settlement and trade transactions between China and Iran will be settled in Chinese renminbi and digital Renminbi, and the renminbi will become the currency of calculation for Iranian oil. Ayatollah Ali Khamenei, the supreme leader of Iran, was the main promoter of the signing of the 25-year cooperation document at that time, and he repeatedly stressed the need to promote the 25-year comprehensive cooperation agreement between China and Iran to enter the implementation stage.

Iranian President Raisi has said that the current priority is to "help the Iranian people out of difficulties", will purchase measures to increase the supply of daily necessities, in order to "avoid the impact of the dollar on the lunch of the Iranian people", stressing that it must get rid of the shackles of the dollar. He clarified the specific means of de-dollarization, using RMB instead of USD, not only replacing USD in the national foreign exchange reserves, but also directly using RMB for settlement in trade, especially oil transactions.

Kamyab, a former deputy governor of Iran's central bank, believes that Iran needs to move in the direction of "de-dollarization" and strive to achieve diverse currency agreements. "The Central Bank of Iran will stop using the US dollar when conducting transactions with foreign countries and will use other currencies when signing foreign trade contracts, including the Chinese yuan, the euro, the Turkish lira, the Russian ruble and the Korean won," he declared. Kamyab also said that Iran is currently considering the possibility of signing bilateral currency agreements with some countries on the use of other currencies. He believes that these agreements, which will help promote Iran's economic and trade activities, are planned to be signed in the near future.

Iran's oil minister also said the country was determined to increase oil exports despite the dollar restrictions and that Iran's oil sales would turn around in the coming months. This means that Iran will continue to ship oil to some markets around the world. Iran has been exporting some of its oil for the past few months. Iranian oil sellers have continued to ship about 20m tonnes of oil into the Chinese market in the 18 months to March, according to Refinitiv data, mostly in renminbi and euros.

Former Iranian Deputy Speaker of Parliament Mohammad Hassan and former Iranian President Hassan Rouhani expressed confidence in the current status quo in Iran. Mohammad Hassan stressed that Iran is fully capable of conducting business without relying on the US dollar, and the current oil price fluctuations do not pose a threat to Iran's domestic economy; Former Iranian President Hassan Rouhani said that in order to ease Iran's plight, Iran abandoned the US dollar and switched to the yuan settlement.

II. Us attitude towards the use of RMB for oil settlement

For the United States, since the establishment of the Bretton Woods system, the hegemony of the dollar has been a major reliance on its stable dominance in the world. The yuan settlement of oil is a big blow to the US.

Aditi Kumar, a professor at Harvard University, said a digital yuan could eventually make it easier for Iran and other countries to bypass the previous currency system, with yuan oil futures already taking hold and pricing power in Asia. This is a blow to the dollar's position.

Stephanie Siegel, a senior fellow at the Center for Strategic and International Studies (CSIS) in the United States, believes that China has launched a yuan-denominated oil futures contract and a yuan-based cross-border interbank payment system (CIPS) is a more ambitious plan, and these efforts are unlikely to succeed on a large scale in the short term. The US dollar remains the dominant currency in the international financial system, accounting for about two-thirds of central bank reserves, more than 40% of global payments and by far the most widely traded currency in the foreign exchange market. But cryptocurrencies represent another potential challenger if China is to implement the deep macroeconomic and financial sector reforms necessary to make its currency truly international.

On April 7, 2021, U.S. State Department spokesman Ned Price said that the United States is ready to return to the Iran nuclear agreement with the utmost sincerity, including the removal of all sanctions against Iran. Clearly, the United States has offered to compromise with Iran. Previously, the United States called for the gradual lifting of sanctions against Iran, depending on Iran's actual performance to determine the speed of lifting sanctions. However, for the plan of the United States to gradually lift sanctions, Iran announced a firm no, and demanded that sanctions must be fully lifted. It is difficult for the United States to continue to insist on toughness to bring Iran to its knees, and it can only lead to more passivity in the United States.

James Phillips, a senior fellow at the Heritage Foundation, believes that while Iran has sought to develop China into a strategic ally to offset U.S. power, China has avoided a formal alliance with Iran partly for fear of angering the United States and Arab countries threatened by Iran, from which China imports more oil than it does from Iran. And do more trade with them. He believes that the Biden administration must pay close attention to the evolving China-Iran relationship and work with Allies to restrain Iran from forging closer strategic ties with China, raising the political, economic and foreign policy costs and risks of China's support for Iran's hostile agenda. He proposed the countermeasures of the United States: (1) the escalation of sanctions against Iran. The Biden administration loosened the enforcement of many sanctions, reducing diplomatic leverage with Iran and encouraging a surge in Iranian oil exports to China. Reinstating the policy of maximum pressure sanctions would not only increase the prospects of a satisfactory nuclear deal between the United States and Iran, but also increase the risks of this trade with Iran, thereby reducing the expected benefits of China's trade with Iran. (2) Urge China to minimize its support for the Iranian regime. The United States should make it clear to China that Iran's disruptive influence in the Middle East threatens China's economic and trade interests and energy security. China, which has encouraged Iran to compromise on its nuclear program and end its proxy attacks on countries like the United States and its regional ally Saudi Arabia, would be one of the oil importers with the most to lose economically in the event of war or a prolonged crisis. (3) Imposing sanctions on China's imports of Iranian oil. The Biden administration has shown goodwill toward Iran and China by not sanctioning Chinese imports of Iranian oil, and the United States should impose new sanctions on the shipping networks and Chinese companies that facilitate this oil trade. China's economic future depends more on stable economic relations with the United States than on trade with Iran. (4) The United States has undermined China's support for Iran by working with its Allies. The Biden administration should increase the costs and risks of China's closer ties with Iran by making it clear to China through the Gulf Arab states and Israel that it will pay a high price if it strengthens its strategic ties with Iran.

The United States has asked Iran not to use the yuan to settle oil transactions with China, but to continue to use the dollar. The United States believes that the use of RMB in the settlement of oil transactions between China and Iran will shake the status of the petrodollar and endanger the interests of the United States. Previously, the New York Times also publicly pointed out that Iranian oil is continuously transported to China, but it is difficult for the United States to accept RMB settlement, because it will shake the foundation of the petrodollar and shake the hegemony of the dollar. It is obvious that the United States has its own purpose in returning to the Iran nuclear agreement, which is to further safeguard the petrodollar and ensure that the hegemony of the dollar will not be impacted. Dollar hegemony has become one of the few ways out of America's current internal predicament.

III. Prospects of the Iran nuclear deal and its impact on the petro yuan

Iran has dropped some of its main demands for reviving the nuclear deal, greatly improving the chances of an agreement. Two of the three conditions that Iran had originally insisted on have been dropped, the Iranian revolutionary Army remains on the US terrorist list, the International Atomic Energy Agency is allowed to continue its investigation, and it is uncertain whether Iran will be compensated if the US withdraws from the deal again in the future. Possible concessions could include the immediate unfreezing of $7 billion in Iranian assets, lifting sanctions on 17 Iranian banks and hundreds of entities, and allowing the country to ship 50 million barrels of crude oil to international markets within 120 days of a deal.

If the United States and Iran agree on a nuclear deal soon, the United States will block Iran's use of the yuan to settle oil. Iran faces a new international environment, under pressure from the United States, may re-adopt the United States as the main currency for settling oil and retain the yuan as one of the currencies for settling oil and gas.

At present, the Iranian nuclear agreement is subject to three obstacles: First, the tense relationship between Iran and the International Atomic Energy Agency interferes with the development process of the Iranian nuclear agreement. In June, Iran expanded its underground uranium enrichment activities by almost dismantling the IAEA's monitoring equipment in response to criticism of violations. Second, Iran has put forward some requirements to protect its own economic interests in the final paper. For example, Iran hopes to return to the 2015 Iran nuclear agreement, and the normal energy and economic and trade relations between Iran and Russia will not be affected by the European and American sanctions against Russia. The third is that the US needs to consult with its Allies, including Israel. In addition, different forces in the United States and Iran are divided on the issue of returning to the Iran nuclear agreement.

If the United States and Iran cannot reach a consensus on the Iranian nuclear agreement in the short term, Iran will insist on using the euro and RMB as the main currencies for settling oil transactions, and the Chinese RMB and China's newly launched digital RMB for oil settlement and trade transactions between China and Iran.