Tehran, 21 Sept. (AKI) - Iran's hardline president Mahmoud Ahmadinejad has ordered that the European currency, the euro, replace the US dollar for the country's foreign exchange reserves, Iranian media said on Monday. The edict, issued on 12 September was issued following a decision by the trustees of the country's foreign reserves, Iran's English-language daily The Tehran Times said on Monday, citing Iran's semi-official Mehr News Agency.

Following the switch, the interest rate for the facilities will be reduced from 12 to 5 percent and will help decouple Iran from the US banking system, Iran's official English-language news channel PressTV said.

In a statement by Iran's Central Bank deputy chief Reza Raei last December, the country's foreign exchange reserves topped 80 billion dollars.

Prior to the 12 September edict, Iran had already announced it had stopped selling crude oil in dollars and began using the euro in its oil transactions. Iran is the second largest exporter of crude oil among countries belonging to the OPEC oil cartel.

The Iranian decision was made as the US sought to isolate Tehran because of a dispute over the country's nuclear programme.

The US and other countries suspect Iran may covertly be building nuclear weapons.

However, Iran has consistently claimed its uranium enrichment programme is entirely peaceful and aimed solely at civilian nuclear power, in line with the Nuclear Non-Proliferation Treaty.

In 1999, Iraq, with the world's second largest oil reserves, decided to trade its oil in euros.

Venezuela has also tried to pressure OPEC into abandoning the dollar as the preferred petro-currency.