The Iranian Euro Bourse

desertbear2 · Post by **desertbear2** » 22 Feb 2006, 23:26

clv101 wrote:Maybe they just don't want any more monopoly money dollars...

That's understandable. Many US citizens don't want any more of our own government's monopoly credit-dollars. Our ruling party will soon destroy not only our own economy but also very likely our access to ME energy reserves.

fishertrop · Post by **fishertrop** » 23 Feb 2006, 15:42

I think this may have already been posted eariler on this thread (but it's getting too long for me to check!)

http://www.atimes.com/atimes/Middle_East/HA21Ak01.html

I think there has already been some debate on this article and the author, but it does fill in some of the blanks that skeptik rightly rasies.

After a couple of years of apparent inaction, my colleague and I were invited to put together a consortium to tender for a project to create such an exchange and, after a presentation at the central bank in Tehran in May 2004, we were successful, as reported in The Guardian at the time.

Skeptik needs to be careful not to similarly quote the circular-referencing "IOB is a non event" articles tho - a la "who wants to live in Tehran anyway". Do you have to live in London to trade on the IPE ?

Joules · Post by **Joules** » 23 Feb 2006, 16:24

Cook says the Bourse will be on Kish island:
http://en.wikipedia.org/wiki/Kish,_Iran

Plans have been made to build an International Oil Bourse trading oil in petroeuros in the Kish Free Trade Zone, with an expected opening date during March 2006. Claims have been made that this is a threat to United States influence in the world economy (through the petrodollar) and that the US plans to attack Iran because of this.

During an international energy exhibition held on Kish running from November 15 to 18, 2005, the vice-president of the Kish Free Zone Organization (KFZO), AbdoRahman Nadimi Boushehri, referred to the planned International Oil Bourse, which will also deal in gas and petrochemicals, without specifying its expected starting date

Doesn't look such a bad place and it's a free trade zone:
http://www.kishisland.com/

MacG · Post by **MacG** » 23 Feb 2006, 20:32

I dont know what this is worth or how far to trust the website, but it looks kind of professional at a first glance.

http://www.petroenergyinfo.net/NewsView ... &ShowMod=C

MacG · Post by **MacG** » 23 Feb 2006, 20:51

Joules wrote:Doesn't look such a bad place and it's a free trade zone:
http://www.kishisland.com/

Most foreigners who visit the island are surprised to find another side of Iran. Although there are no bars, clubs or discos in
Kish, night life goes on joyfully till early morning. Live music, beach gatherings and other healthy entertainments, such as
night-scuba diving, tennis, carting, bicycling and other joyful events fill out the social night life of the islanders.

Like other parts of Iran, alcoholic beverages are forbidden on the Island. Women have to cover themselves in Islamic veils
and respect of Islamic laws prevails. After all, 90% of the Iranian population is Muslim.

Sure sound like a geyser of joy which will attract a a lot of people with mixed backgronds...
[/irony]

grinu · Post by **grinu** » 24 Feb 2006, 12:48

How can the dollar collapse in Iran? An explanation

Moneyfiles
US' debt is about 8,000,000,000,000 dollars. 45 percent is due to foreigners. How can the US make such high debts?

Thanks to OPEC's agreement (1971 and 1973) oil is exclusively sold in US-dollars. This creates a permanent demand for dollars on the exchange market.
Roughly 85 percent of the oil trade takes place completely outside the US. The related dollar cycle goes from exchange market, via oil buying countries, to oil producing countries, which spend them in different countries, which bring them back to the exchange market.

Back on the exchange market there are, generally and since decades, always dollars missing (more demand than offer.)

Reasons:
a. The volume and price of the traded oil generally increases. More dollars are needed over time.
b. Thanks to the free trade, many dollars stay in use in international trade outside the US.
c. Many foreign central banks keep dollars as strategic reserves.
d. The US Treasury issues bonds, which, when sold to foreigners, reduces the amount of dollars available abroad.
So, during decades, foreigners always needed more dollars. The US treasury issued extra dollars. And here it becomes very interesting. There is only one way to make these dollars available abroad. Spend them around the world! The US would purchase goods, services, shares, investments etc. But the US never had to deliver anything in return. The foreigners needed these dollars to buy oil. The purchases were just inscribed on the trade balances and the amounts added to the US' foreign debt. For the US, the oil trade works like a fairy credit card. Each time more dollars are needed abroad, this means "free" shopping. Nothing can be done about it.

Totally_Baffled · Post by **Totally_Baffled** » 24 Feb 2006, 13:51

grinu wrote:How can the dollar collapse in Iran? An explanation

Moneyfiles
US' debt is about 8,000,000,000,000 dollars. 45 percent is due to foreigners. How can the US make such high debts?

Thanks to OPEC's agreement (1971 and 1973) oil is exclusively sold in US-dollars. This creates a permanent demand for dollars on the exchange market.
Roughly 85 percent of the oil trade takes place completely outside the US. The related dollar cycle goes from exchange market, via oil buying countries, to oil producing countries, which spend them in different countries, which bring them back to the exchange market.

Back on the exchange market there are, generally and since decades, always dollars missing (more demand than offer.)

Reasons:
a. The volume and price of the traded oil generally increases. More dollars are needed over time.
b. Thanks to the free trade, many dollars stay in use in international trade outside the US.
c. Many foreign central banks keep dollars as strategic reserves.
d. The US Treasury issues bonds, which, when sold to foreigners, reduces the amount of dollars available abroad.
So, during decades, foreigners always needed more dollars. The US treasury issued extra dollars. And here it becomes very interesting. There is only one way to make these dollars available abroad. Spend them around the world! The US would purchase goods, services, shares, investments etc. But the US never had to deliver anything in return. The foreigners needed these dollars to buy oil. The purchases were just inscribed on the trade balances and the amounts added to the US' foreign debt. For the US, the oil trade works like a fairy credit card. Each time more dollars are needed abroad, this means "free" shopping. Nothing can be done about it.

Hold on a minute.

Ok I understand all this but - US debt is equil to roughly 75%-80% of GDP.

The dollar would collapse without petrodollars being recycled yes?

In which case why hasnt the Yen collapsed?

Japan has debts 120% of GDP ($5.5 Trillion)

Why hasnt the Euro collpased

France 85% debt of GDP
Italy 70-80%
Germany
Spain 70-80%

etc etc

These currencies are not supported by the oil trade.

So what is the beef?

fishertrop · Post by **fishertrop** » 24 Feb 2006, 20:55

A nice summary of the IOB-is-none-event arguments:

Let me kill off once and for all the Iranian oil bourse story
by Jerome a Paris
Fri Feb 24th, 2006 at 07:57:05 AM EDT
http://www.eurotrib.com/story/2006/2/24/7575/84230

Crazy scenarios involving Iran's purported attempts to create an oil bourse to start selling oil in euros make the rounds regularly, and even get recommended with alacrity on DKos.

These things WILL NOT HAPPEN, and we have, as a supposedly reality-based community, to focus on real issues and not imaginary ones.

So let me explain why an Iranian oil bourse will not work for the foreseeable future. I hope that this diary can be used as a handy reference when this crops up again in the future.

Personally, I don't disagree with 95% of this article, cept maybe the conclusions....

snow hope · Post by **snow hope** » 25 Feb 2006, 00:18

Not convinced Fischer. But we will see soon. There is a lot going on in the ME currently and it would not surprise me in the least for something like this to start up and for the whole of the ME to switch to the Euro in an instant.

Bozzio · Post by **Bozzio** » 25 Feb 2006, 08:29

Totally_Baffled wrote:Hold on a minute.

Ok I understand all this but - US debt is equil to roughly 75%-80% of GDP.

The dollar would collapse without petrodollars being recycled yes?

In which case why hasnt the Yen collapsed?

Japan has debts 120% of GDP ($5.5 Trillion)

Why hasnt the Euro collpased

Could it be because the US has a massive trade deficit as well as a massive national debt?

Japan's debt is currently 150% of GDP but consistently posts a trade surplus (with the odd exception). This keeps the Japanese economy strong despite having a large debt.

The burden on the US economy is getting bigger because of its trade deficit and collapse is only avoided because the dollar is the reserve currency in oil trading. Remove reserve status and the US economy might possibly weaken beyond hope.

Don't forget that a certain percentage of debt for most countries is due to holding securities and bonds in dollars in order to pay for oil on the market. If the dollar is removed as the trading currency of oil then those bonds can be credited back which the US will have to finance, increasing its debt even further. Likewise, if oil is traded in euros, even if only in part, the US will have to buy euros to enable it to carry out oil purchases. For the first time in years, America's trade in oil will therefore not be free and the economic cost of buying and holding euros will be yet another burden to an already struggling economy. Hence the removal of M3 disclosure in March by the Federal Reserve.

A quick glance on google listed this site which I found interesting.

http://mwhodges.home.att.net/reserves_a.htm

Totally_Baffled · Post by **Totally_Baffled** » 25 Feb 2006, 10:06

Could it be because the US has a massive trade deficit as well as a massive national debt?

Japan's debt is currently 150% of GDP but consistently posts a trade surplus (with the odd exception). This keeps the Japanese economy strong despite having a large debt.

Thats a fair point.

I guess the only reason the pound hasn't collapsed (because we have a massive trade deficit - almost as big as the US) is that our national debt is quite small at 37%-40% of GDP (figures depend on source)

Mind you our current accout deficit means that national debt figure is increasing.

As far as I am aware , the pound isn't a petro currency (presumably we have to by dollars to purchase oil like anyone else?- we are holding something like $160 billion of them!).

I would of thought the pound would be weakening by now...

john.rico · Post by **john.rico** » 25 Feb 2006, 11:42

Another interesting article

http://www.energybulletin.net/12463.html

grinu · Post by **grinu** » 26 Feb 2006, 12:54

I presume we would have to buy dollars to buy oil - but maybe we have been getitng a substantial amount of our oil needs from the north sea until fairly recently?

Totally_Baffled · Post by **Totally_Baffled** » 26 Feb 2006, 16:44

grinu wrote:I presume we would have to buy dollars to buy oil - but maybe we have been getitng a substantial amount of our oil needs from the north sea until fairly recently?

Ahhh yes, but even with the oil from the north sea, we are running a massive trade deficit.

In the case of the US, this massive deficit is prevented from collapsing the dollar via world oil trade being in dollars.

The UK does not have such a luxury and yet the pound is still fairly strong.

So how do we square this circle? It doesn't make sense.

EmptyBee · Post by **EmptyBee** » 26 Feb 2006, 18:17

Totally_Baffled wrote: Ahhh yes, but even with the oil from the north sea, we are running a massive trade deficit.

In the case of the US, this massive deficit is prevented from collapsing the dollar via world oil trade being in dollars.

The UK does not have such a luxury and yet the pound is still fairly strong.

So how do we square this circle? It doesn't make sense.

I'm no expert on these matters however, but even I've picked up on frequent concerns that Sterling is overvalued in the financial press:

Having boosted rates throughout 2004 to crack down on rampant house price inflation, Governor Mervyn King and his committee will be watching the recent surge in prices and mortgage approvals with a wary eye.

What's more, some economists argue that a downward move in sterling is long overdue, and that may boost exports and reduce the pressure for a rate cut.

Rising borrowing costs in the US and possibly in the euro zone could make the returns on British bonds look less attractive by comparison, pushing the pound down.

'Sterling looks among the most overvalued of the major currencies,' said Ross Walker, an economist at the Royal Bank of Scotland. 'It would be a helpful development to see a weaker exchange rate.'

http://www.thisismoney.co.uk/news/artic ... _page_id=2