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Bonds News

UPDATE 2-Oil shift from USD would need broad backing-Iran FinMin

* Hosseini says raised issue with other states in past

* Iran finance minister: no such talks in recent days

* Says dollar dominance a “detriment” to global economy

* U.S. sanctions not hindering Iran trade-Hosseini

(Adds details on possible new U.S. sanctions, background)

By David Lawder

ISTANBUL, Oct 6 (Reuters) - Calling the U.S. dollar a “detriment” to the world economy, Iran’s finance minister said on Tuesday he has occasionally discussed with other countries the idea of shifting oil trade away from the dollar, but such a step would require broad agreement.

Minister of Economic Affairs and Finance Shamseddin Hosseini, speaking to reporters on the sidelines of the semiannual meetings of the International Monetary Fund and World Bank, said such discussions have happened in the past but not in recent days.

“Some of the countries right now accept this idea,” Hosseini said of a possible shift away from the dollar for oil. “But this is one of the subjects that needs more discussion and (to be) agreed on by everyone,” he said through an interpreter.

Big oil producers Russia and Saudi Arabia earlier on Tuesday denied a British newspaper report that Gulf Arab states were in secret talks with Russia, China, Japan and France to replace a basket of currencies in trading oil. The dollar eased on the report in the Independent.

Hosseini said Iran agrees with the idea of linking oil to a basket of currencies due to dollar weakness.

“Generally we believe that the dominance of the dollar to the economy of the world is to the detriment of everybody,” he said. “We are not alone in this belief.”

Hosseini said Iran has reaped billions of dollars of profits and averted losses by shifting reserves to the euro and other currencies from the dollar.

SANCTIONS CALLED INEFFECTIVE

The Iranian finance minister said U.S. sanctions and pressure on international banks to cut ties with Tehran have had little effect, as many foreign companies recognize profit opportunities with Iranian trade.

The sanctions are aimed at curbing Iran’s nuclear program, its missile developmen efforts and Washington says is its state sponsorship of terrorism.

“It’s not necessary for us to circumvent the sanctions. Our partners will find a way to come forward,” Hosseini said.

“Therefore after many years of sanctions, Iran continues to progress to and do its business. There are many secure ways to do business,” he added.

Hosseini’s comments came as a U.S. Treasury Department official said in Washington that the United States and other countries were developing “comprehensive” new sanctions in case Iran failed to demonstrate that it is not seeking to build nuclear weapons.

Stuart Levey, the Treasury’s undersecretary for terrorism and financial intelligence said the international sanctions plan would target “key vulnerabiliites and fissures in Iran,” but was not specific about what steps would be taken.

U.S. officials are being urged to consider a wide range of options, including choking off gasoline supplies, much of which Iran must import from other countries. They also are looking at ways to discourage big financial firms to provide insurance for shipments to Iran.

Hosseini said that sanctions on refined petroleum products would have little effect on Iran’s economy, because it can increase domestic refinery output and reduce consumption.

The U.S. Treasury Department has pressured banks in Europe, the Middle East and Asia to respect U.S. blacklisting of several Iranian state banks and a growing list of other firms, and has recently put pressure on Dubai, a traditional trading partner with Iran, to reduce its ties.

The Treasury has recently put pressure on banks and other firms in Dubai to comply with the U.S. sanctions, but Hosseini said Iranian banks operate freely with trading partners in Dubai.

Hosseini also said Iran would in about six months time offer a 1.5 billion-euro Islamic bond, or sukuk. About $1 billion euros of the proceeds would go towards its domestic energy sector, while the remainder would go to “other sectors,” without specifying them. (Reporting by David Lawder)

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