Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Iran Opens Oil Bourse - Harbinger of Trouble for New York and London?

Politics / Crude Oil Jul 19, 2011 - 04:19 PM GMT

By: OilPrice_Com

Politics

Best Financial Markets Analysis ArticleThe last three years of global recession have dealt a major blow to American capitalist ideas trumpeted throughout the world on the value of "free markets." Wall St has been revealed as a form of casino economy, with the bankster insiders gambling with other people's, and eventually, the government's money in the form of bailouts. As the Republicans in Congress, scenting victory in the 2012 presidential elections, hold a gun to the Obama administration's head and rating agencies consider downgrading U.S. government bonds in light of Washington's possible defaulting, many ideas around the world that previously seemed implausible because of the dominance of the U.S. economy are garnering renewed interest.


Not surprisingly, many of these concepts originate in countries not enamored with Washington's influence, perhaps none so more than "Axis of Evil" charter member Iran, which has seen its economy hammered by more than three decades of U.S.-led sanctions. Now Iran is working a program, that, if it succeeds, could help undermine the dollar's preeminence as the world's reserve currency more effectively than a Republican filibuster.

Iran's sly weapon against the Great Satan's currency? An oil bourse on Kish Island in the Persian Gulf, which has now begun selling high-grade Iranian crude oil.

Mohsen Qamsari, deputy director for international affairs of the Iranian National Oil Company was modest about the exchange's initial capabilities, saying, "The commodity stock exchange has been pursuing a mechanism for offering crude oil on the stock exchange for a long time, and it has taken the preliminary steps, to the extent possible. Considering the existing banking problems, foreign customers are not expected to be taking part in the first phase of offering crude oil on the stock exchange, and this will be done on a trial basis. Today Bahregan heavy, high quality, low sulfur crude oil with less sourness will be offered on the stock exchange for the first time. In the first phase, a 600,000 barrel shipment will be offered."

Given that the world currently consumes roughly 83 million barrels of crude oil each day, the initial oil offerings at the Iranian stock exchange are hardly going to make or break the market, but they do represent an attempt by a significant oil producer to divert revenue streams from New York Mercantile Exchange, the world's largest physical commodity futures exchange, which handles West Texas Intermediate benchmark futures, and London's Intercontinental Exchange, which deals in North Sea Brent. All trades are in dollars, effectively giving the U.S. currency a monopoly.

The Kish Exchange dates back to February 2008, when instead of Tehran, Kish was chosen because it had designated as a free trade zone. The Exchange was set up to trade contracts in euros, Iranian rials and a basket of other currencies other than dollars. The previous year, Iran had requested that its petroleum customers pay in non-dollar currencies. But the Exchange initially traded contracts only for oil-derived products, such as those used as feedstocks for plastics and pharmaceuticals. Now the institution has taken the next step.

Even as Congress remains tone-deaf to the recession's effect on American jobs and the economy, others have taken careful note. On 17 June 2008, addressing the 29th meeting of the Council of Ministers of the OPEC Fund for International Development in the Iranian city of Isfahan, Iranian President Mahmoud Ahmadinejad told those in attendance, "The fall in the value of the dollar is one of the biggest problems facing the world today. The damage caused by this has already affected the global economy, particularly those of the energy-exporting countries...

Therefore, I repeat my earlier suggestion, that a combination of the world's valid currencies should become a basis for oil transactions, or (OPEC) member countries should determine a new currency for oil transactions."

What it would take for Iran's new exchange to survive and flourish are some heavy-duty customers that Washington would be wary of picking a fight with, and Tehran already has one - China.

China, the world's largest buyer of Iranian crude oil, has renewed its annual import pacts for 2011. In 2010 Iran supplied about 12 percent of China's total crude imports. According to the latest report of the China Customs Organization, Iran's total oil exports to China stood at 8.549 million tons between January and April 2011, up 32 percent compared with the same period last year. Iran is currently China's third largest supplier of crude oil, providing China with nearly one million barrels per day.

China simply ignores Washington's squeals about sanctions, but it is concerned about the bottom line, and unless Iran makes its oil prices more attractive versus competing supplies from the rest of the Middle East or South American exporters, it may be hard for the OPEC member to boost its share in the rapidly expanding Chinese market.

Enter the Kish Exchange.

China's Ambassador to Tehran Yu Hung Yang, addressing the Iran-China trade conference in Tehran on Monday, said that the value of the two countries' trade exchanges surged 55 percent during the first four months of 2011 over the same period a year ago to $13.28 billion and further predicted that the figure would surpass $40 billion by the end of the year.

So much for sanctions, eh?

So, while Washington prepares to commit political hara-kiri, Iran is preparing to take away a little of the capitalist glow from New York and London. If the Chinese decide to start paying for their Iranian purchases strictly in yuan, expect the trickle away from the dollar in energy pricing to become a stampede. That ought to give Washington politicos an issue to think about besides gay marriage.

Source: http://oilprice.com/Energy/Crude-Oil/Iran-Opens...

This article was written by Dr. John CK Daly for Oilprice.com who offer detailed analysis on Crude Oil, Geopolitics, Gold and most other commodities. They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http://www.oilprice.com

© 2011 Copyright OilPrice.com- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in