The Iranian Euro Bourse

Joe · Post by **Joe** » 30 Dec 2005, 21:56

Chomsky's "Fateful Triangle" is probably as good an introduction to US/Israeli relations as any.

DamianB · Post by **DamianB** » 17 Jan 2006, 11:24

After a brief history lesson on US$ hegemony, the article postulates on the consequences of such a bourse.

If so, then it is likely that almost everyone will eagerly adopt this euro oil system:

? The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the Americans.

? The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros, thus protecting themselves against the depreciation of the dollar. One portion of their dollars they will still want to hold onto; a second portion of their dollar holdings they may decide to dump outright; a third portion of their dollars they will decide to use up for future payments without replenishing those dollar holdings, but building up instead their euro reserves.

? The Russians have inherent economic interest in adopting the Euro ? the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. Adoption of the Euro will immediately take care of the first two blocs, and will over time facilitate trade with China and Japan. Also, the Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism, and if embracing the Euro will stab the Americans, they will gladly do it and smugly watch the Americans bleed.

? The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy.

Only the British will find themselves between a rock and a hard place. They have had a strategic partnership with the U.S. forever, but have also had their natural pull from Europe. So far, they have had many reasons to stick with the winner. However, when they see their century-old partner falling, will they firmly stand behind him or will they deliver the coup de grace? Still, we should not forget that currently the two leading oil exchanges are the New York?s NYMEX and the London?s International Petroleum Exchange (IPE), even though both of them are effectively owned by the Americans. It seems more likely that the British will have to go down with the sinking ship, for otherwise they will be shooting themselves in the foot by hurting their own London IPE interests. It is here noteworthy that for all the rhetoric about the reasons for the surviving British Pound, the British most likely did not adopt the Euro namely because the Americans must have pressured them not to: otherwise the London IPE would have had to switch to Euros, thus mortally wounding the dollar and their strategic partner.

http://www.energybulletin.net/12125.html

All very well argued imo.

Blue Peter · Post by **Blue Peter** » 17 Jan 2006, 11:30

DamianB wrote:After a brief history lesson on US$ hegemony, the article postulates on the consequnces of such a bourse.

If so, then it is likely that almost everyone will eagerly adopt this euro oil system:

--cut--

the British most likely did not adopt the Euro namely because the Americans must have pressured them not to: otherwise the London IPE would have had to switch to Euros, thus mortally wounding the dollar and their strategic partner.
http://www.energybulletin.net/12125.html

All very well argued imo.

I don't get this last bit. London IPE trades in dollars, not pounds, so why would the demise of the pound mean that it would nhave to trade in Euros?

Peter.

Totally_Baffled · Post by **Totally_Baffled** » 17 Jan 2006, 11:53

Good Article Damien.

However, there is still a catch 22.

A switch to a petroEuro will cause a massive recession in the US (for the reasons discussed many times here on the forum)

The US is 25% of the worlds economy and 25% of the worlds oil demand.

If you screw the US with a switch to the Petro Euro you also risk collapsing the price of oil and manafacturing export demand for Chindia.

Im not sure OPEC and Chinidia would risk it?

peaky · Post by **peaky** » 17 Jan 2006, 13:23

Totally_Baffled wrote:Chinidia

fishertrop · Post by **fishertrop** » 17 Jan 2006, 15:01

Totally_Baffled wrote: A switch to a petroEuro will cause a massive recession in the US (for the reasons discussed many times here on the forum)

The US is 25% of the worlds economy and 25% of the worlds oil demand.

If you screw the US with a switch to the Petro Euro you also risk collapsing the price of oil and manafacturing export demand for Chindia.

Im not sure OPEC and Chinidia would risk it?

It's a fair point.

The question is tho - "how happy are the other players with the status quo?" and also "do they have alternative trading partners?".

I'm not sure everyone is all that happy, collectively, with the way things work currently.

It's 100% certain that some firms indivudally and whole nations to a lesser degree would suffer from some form of US "crash", but that might be a price worth paying in some world leaders eyes.

And, many nations peoples are not that happy with the way things work now either and this would (esp with some spin...) allow them to tolerate some discomforts.

Also, nations might get swept along in a furver of "change" before they really realise what they are getting themsleves into...

DamianB · Post by **DamianB** » 17 Jan 2006, 18:36

Blue Peter wrote:I don't get this last bit. London IPE trades in dollars, not pounds, so why would the demise of the pound mean that it would nhave to trade in Euros?

You're right. Also it's owned by a US company I believe. BTW - now called ICE - Int'l Commodities Exchange?

Totally_Baffled wrote:A switch to a petroEuro will cause a massive recession in the US (for the reasons discussed many times here on the forum)

It would in time (5+ years?) , but take-up of the new contract is likely to build slowly because the Chindias et al, won't want to rock the boat too much. What'll happen sooner is a recession caused by the collapse of the housing bubble.

acrowe · Post by **acrowe** » 17 Jan 2006, 21:17

In response to Totally_Baffled's comment about it damaging the world economy. I would argue its already too late to avoid a massive economic rebalancing and you would need to be very optimistic to not know that deep down.

I think Ameirca knows this hence the M3 money supply data being withdrawn, and massive injections of liquidity into the system are taking place.

Will the IOB come online? I really dont know, if America can find a way to stop it without shooting its self in the foot it will.

But i would put money on China, Russia and a large part of the EU (minus the UK) looking at this as a positive move long term.

Better they gain something from the collapse of the US Dollar than wait for things to get even worse and then for it to collapse and still have to buy dollars to get their oil fix.

Totally_Baffled · Post by **Totally_Baffled** » 18 Jan 2006, 08:35

acrowe wrote:In response to Totally_Baffled's comment about it damaging the world economy. I would argue its already too late to avoid a massive economic rebalancing and you would need to be very optimistic to not know that deep down.

I think Ameirca knows this hence the M3 money supply data being withdrawn, and massive injections of liquidity into the system are taking place.

Will the IOB come online? I really dont know, if America can find a way to stop it without shooting its self in the foot it will.

But i would put money on China, Russia and a large part of the EU (minus the UK) looking at this as a positive move long term.

Better they gain something from the collapse of the US Dollar than wait for things to get even worse and then for it to collapse and still have to buy dollars to get their oil fix.

Fair and good points.

It could be seen as a damage limitation excercise.

Bozzio · Post by **Bozzio** » 19 Jan 2006, 17:40

Time is running out for Bush and the US on this issue. He must act quickly and/or create a diversionary tactic.

Well what do you know, Bin Laden has returned to save the day.

http://news.bbc.co.uk/1/hi/world/middle ... 628738.stm

Just an audio tape this time. Not surprising really since Bin Laden is dead and we've seen all the remaining tapes of him before.

Come on guys, give us a break. Just try and be a bit more open about what this really means to the US and indeed us all and stop this terrorism bulls**t! We might achieve something positive then. Who knows.

snow hope · Post by **snow hope** » 20 Jan 2006, 23:10

It really does show what a precarious position we are in economically. The whole show is a deck of cards on a bed of sand.

Bozzio, I am starting to think more and more along the lines you spell out.

DamianB · Post by **DamianB** » 20 Jan 2006, 23:22

It is therefore with wry amusement that I have seen a myth being widely propagated on the Internet that the genesis of this "Iran bourse" project is a wish to subvert the US dollar by denominating oil pricing in euros.

The realpolitik is of course that those in power in the US and Iran have the reason they give - and the real reason - for what they do: and for the US, the real reason is and has been for many years energy security above any other consideration.

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

Bozzio · Post by **Bozzio** » 21 Jan 2006, 15:22

DamianB wrote:Quote:
It is therefore with wry amusement that I have seen a myth being widely propagated on the Internet that the genesis of this "Iran bourse" project is a wish to subvert the US dollar by denominating oil pricing in euros.

Quote:
The realpolitik is of course that those in power in the US and Iran have the reason they give - and the real reason - for what they do: and for the US, the real reason is and has been for many years energy security above any other consideration.

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

The author of this article, Chris Cook, appears to be confused. He is suggesting, as quoted above, that the Iranian oil bourse was not created to wreak US economic havoc.

Well that maybe so, but whatever the intentions of Mr Cook (the architect of this new bourse) and the Iranian government, the fact is this new system will challenge the petro-dollar and it cannot be allowed to happen by America. The US would not have gone to all the trouble to set up the dollar trading system in the first place if it weren't so precious to them.

I agree with Cook that the real reason is energy, although economics is going to come a very close second.

I think Cook is just trying to cover his back since he has been instrumental in creating a monster. He might smile at all the talk about this bourse on the internet but really he should be a little concerned that his arrogance has lead to a potentially deadly wargame.

I have to question his motives for writing to the Iranian Central Bank in the first place. What was he trying to achieve. The man's a fool.

fishertrop · Post by **fishertrop** » 21 Jan 2006, 17:21

Strange ideas about the Iranian oil bourse
Econbrowser
January 20, 2006

http://www.econbrowser.com/archives/200 ... eas_a.html

The internet can be a good source of information about issues that aren't adequately covered by the mainstream media. It can also be a font of considerable kookiness.

Tyler Cowen as well as several Econbrowser readers have called attention to Iranian intentions of creating an exchange in which oil would be traded for euros rather than dollars.

Bozzio · Post by **Bozzio** » 21 Jan 2006, 18:39

fischertrop wrote:Strange ideas about the Iranian oil bourse
Econbrowser
January 20, 2006

http://www.econbrowser.com/archives/200 ... eas_a.html

Someone explain to the author of this article what it means to trade in dollars please. He might understand the situation then.

He can trade all he likes in Euros and the US won't care a jot. If China were to start trading in Euros on the other hand then the dollar might just lose its status as top reserve currency and that will be something the US will fight for.

There's aways someone who compares arguments like this with conspiracy theories. God they're boring.