The Iranian Euro Bourse

[Blue Peter]

I believe that Iran is planning on setting up a bourse to sell oil denominated in Euros, rather than the US dollars currently used.

If this happens, and there is a big uptake, there are fears that it could harm the US dollar, because you wouldn't need dollars to buy oil, and judging by its trade deficit, the US doesn't make anything else which people want to buy.

Thus the US dollar price of oil would rise (because the dolalr falls). Given that the US consumes 25% of oil (is this figure correct?), then would this be a bad thing for the rest of the world? It would presumably cut US oil usage and so give us longer to prepare.


Peter.

P.S. Of course, I know that the US might not take this lying down.

[MacG]

I believe that Iran is planning on setting up a bourse to sell oil denominated in Euros, rather than the US dollars currently used....

Well, we mere mortals are not told about everything which is going on everywhere, and diplomats and government representatives are notorious liers, so it can be expected to be a lot of action under various blankets here.

Personally, I fear the worst. The current US government behave as a bunch of armed addicts, and it is not certain that they will behave in a completely logical way when a pusher start to jump around and require payment in a new form.

[grinu]

Prior to 2001, a number of OPEC states toyed with the idea of selling oil by the Euro (it would improve their profits massively apparently, but not sure how it all works) instead of the dollar. After US pressure they all backed down apart from Iraq.

[Blue Peter]

What I don?t understand about the Iran situation.

The Iranians are considering a Euro oil Bourse. If this takes off, it could seriously damage the US dollar, and given the amount of debt the US has, it could seriously damage the US (and anyone with major dollar holdings).

If we assume that Iran would quite like to hurt the US, then this would seem a good move for them, in addition to anything that they might gain from running a successful oil bourse.

So, why are they antagonising everyone with the nuclear stuff, which might give the US a pretext for an attack and so scupper the above? The only things which I can think of are:

1. They really do want/need nuclear power (or weapons), and they can?t wait until next year;
2. It?s a sort of stalking horse. Everyone foams at the mouth about it. So at the appropriate moment, Iran caves in. Everyone then says, ?Oh, can?t attack them now,? and the Bourse can go ahead without getting a smart bomb as the first visitor at reception.


Peter.

[DamianB]

Please stay on topic - the proposed Iranian bourse and euro-denominated oil

[fishertrop]

Please stay on topic - the proposed Iranian bourse and euro-denominated oil

LOL

yes sir, right away sir

I'll repost this exchange in one of the other threads...... but which one.... hmmmm....

[Totally_Baffled]

This issue seems to be lose lose for the US and therefore the world economy!

If the bourse opens, and oil can be purchased in Euros, then the US is toast.

The US has a $600 billion trade deficit , half of which is energy imports and thus will only get worse. This could easily jump upto $1 Trillion.

Interest rates would shoot up to support the collapse of the dollar as the massive reserves in Asia are partly traded in for Euros(in effect a big surplus of dollars is created)

Interest rates shatter the US housing bubble sending the world in a massive recession(is this in anyones interest? )

If the bourse doesn't open , then this is because the US has bombed the feck out of the place OR invaded.

This would cause the oil price to go into three figures which would also trigger a recession. Without growth the US cannot service its twin deficits and the dollar collapses.

Interest rates rise etc so on and so forth.

I cannot see a way out. Any ideas?

Would an economic collapse suit Iran??

If the US Economy goes down , so does China & India. There goes Irans best Energy customer /investor!

What a mess!

TB

[isenhand]

In the past having a good war helps get the econ going (US in WWII) and when things are going badly at home it?s a good way to distract the people and boost popularity for the government (if it goes well) (China?s war with Vietnam). Perhaps what you are seeing here is such a scenario being set up with Iran?

[Blue Peter]

One silver lining....


...oil consumption would fall, putting off any peak (unless everything really goes). It might give us time to start addressing some issues with a bit of cheap oil still in the tank to make changes,


Peter.

[fishertrop]

Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil Bourse
by William Clark

http://www.energybulletin.net/7707.html

[fishertrop]

I cannot see a way out. Any ideas?

It sure is bleak in the short term.

Maybe iran's motive is a long term shift in the balance of power ?

While everything stays as it is, everything more or less keeps working (just about) but many people have to live with imbalances that they see as (at best) barely tolerable.

I would imagine to many people disafected with the current status-quo that short-term economic pain is worth it for a long term shift in the balance of power.

And, as you say, a move to even part-trading of oil in euro's is vvv bad for the US - this is one direct and fundamental way that Iran can attempt a shift in the balance.

Also, in countries with non-accountable leaders (does that inc the UK....?) it's easier for them to take decisions that will cause at least short/medium term pain to their people.

[Totally_Baffled]

BTW I think the UK is the third or fourth largest holder of dollar reserves ($160 billion)

Also the US is one of the few countries we have a positive trade balance (because of financial services)

So it will be a complete nightmare for the UK if the US goes down.

I have had a crafty thought though, if the Iranian Bourse is set up, THEN WE COULD JOIN THE EURO AND FREE RIDE OFF THE PETROEURO!!!

The good times here we come!!!

TB

[Blue Peter]

I cannot see a way out. Any ideas?

While everything stays as it is, everything more or less keeps working (just about) but many people have to live with imbalances that they see as (at best) barely tolerable.

I would imagine to many people disafected with the current status-quo that short-term economic pain is worth it for a long term shift in the balance of power.

I'm no economist, but I don't think that structural imbalances can exist indefinitely. Every boom is followed by a bust, so whatever happens, to take an example from TBs post, the US (and the UK and just about everywhere else's) housing bubble will pop. So, it's going to happen. Help!

This article is quite relevant:

http://www.moneyweek.com/article/1324/i ... -when.html


Peter.

[GD]

I have had a crafty thought though, if the Iranian Bourse is set up, THEN WE COULD JOIN THE EURO AND FREE RIDE OFF THE PETROEURO!!!

The good times here we come!!!

TB

Oh no we can?t!

we could have back in 2001, but opted out.
Now the chance may have gone forever, as we don?t meet the Maastricht criteria, and probably never will.

(As you may have suspected, the UKIP really is totally irrelevant )


GD

[DamianB]

Spoiling tactics from.....whom?

The Russian government announced that it authorized trading of Russian oil at the New York and Budapest Stock Exchanges, Russian Finance Minister Alexei Kudrin told his US colleague at the G20 meeting at the weekend, daily Magyar H?rlap reported. The heads of Budapest Stock Exchange (B?T) and New York Exchange agreed on closer cooperation in April. Since then a joint team, including commodity exchange people, has been working on oil bourse, the main issue of the cooperation. It is the first time standardized trade of Ural type crude oil will be pursued. The Russian Finance Ministry reckons that it will take 3-5 months to launch actual trading, an official told daily Magyar H?rlap. The project is coordinated by the American bourse, with no direct link between the Russian and Hungarian parties. The Ural crude will be traded in dollar.

Budapest Business Journal