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

By John Daly | Mon, 18 July 2011 13:32 | 22

The 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.

By. John C.K. Daly of OilPrice.com

About the author

Contributor
John Daly
Company: U.S.-Central Asia Biofuels Ltd
Position: CEO

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  • Anonymous on July 18 2011 said:
    I'd like the last word in this issue please. If one of my finance students had told me that an exchange in Iran would be a problem for New York and London, he would have received a failing grade on the spot.Draw your own conclusions!
  • Anonymous on July 18 2011 said:
    This article is right on the target. so many US politicians and their so called experts have no clue of iran. remember ranting republicans/democrates and AIPAC supporters about iran being crumbeld under gasoline sanction? the result was widespread economic reform that turned iran into gasloine exporter. Kish exchange also soon becomeing an important player and will chunck away part of bussiness from London and NewYork that relates to the oil trade in region or at least it becomes a bench mark for iraninan oil.
  • Anonymous on July 18 2011 said:
    Well with petrodollar recycling in trouble and US debt becoming the largest in human history, the change is inevitable. Iran just like some other nations is positioning itself to benefit from that change. Some reality check: Iran is one of the least indebted countries in the world sitting on top of 12% of the world's oil and gas. Combine that with the fact that Iran has the world's fastest growth rate in science and technology and a very young population, the future looks bright for future Iranians. Compare this with US. A country which has accumulated over 14 trillion dollars of debt in the form of trade imbalance and over 100 trillion dollars if we count all US government obligations in eg. medicare, old age benefits, promised payments etc.This debt with interest, an aging population of retirees, rapidly losing share in world's science production and massive industrial shut downs eg steel etc mean a dark and stark for US economy and future Americans. End of empire is nearing
  • Anonymous on July 19 2011 said:
    I believe that the reader’s comments by “Fred Banks” deserve some reply given their ad hominem nature., especially, “If one of my finance students had told me that an exchange in Iran would be a problem for New York and London, he would have received a failing grade on the spot.”The article states, “… 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… and London's Intercontinental Exchange….”. I would give “Fred Banks” a failing grade for his failure to carefully read the above article and note the caveats from the article enumerated above.(Dr..) John C.K. Daly
  • Anonymous on July 19 2011 said:
    [quote name="Fred Banks"]I'd like the last word in this issue please. If one of my finance students had told me that an exchange in Iran would be a problem for New York and London, he would have received a failing grade on the spot.Draw your own conclusions![/quote]I conclude your'e a pompous moron.
  • Anonymous on July 19 2011 said:
    I guess this is just one more urgent reason for the USA- English-Israeli "axis of evil" to attack Iran very soon now.Holding these bringers of "freedom and democracy" back are Russian, China and Pakistan, as well as Iran itself.
  • Anonymous on July 20 2011 said:
    The US is trying to flex its muscle at one of the weakest moments in its history.
  • Anonymous on July 20 2011 said:
    Iran is doomed. The NY and London mafia are not going to take this.
  • Anonymous on July 20 2011 said:
    [quote name="Fred Banks"]I'd like the last word in this issue please. If one of my finance students had told me that an exchange in Iran would be a problem for New York and London, he would have received a failing grade on the spot.Draw your own conclusions![/quote]Your comment has received minus 33 votes from other users ....Draw your own conclusions.
  • Anonymous on July 20 2011 said:
    [quote name="Pauly"]Iran is doomed. The NY and London mafia are not going to take this.[/quote]Oh they may make a mess, but just as Iraq and Afghanistan are still there, so too Iran still will be long after the real axis of evil in New York, London and Tel Aviv are history.
  • Anonymous on July 20 2011 said:
    If we examine the corollary of Fred Banks statement about failing his finance student for saying the Iranian exchange would be a problem for New York and London, can we infer that he would pass a student who said it wasn't a problem, and presumably a good thing, for New York and London? Perhaps the reason might be that it would be good competition - something which New York and London always say is a good thing - and so the race to the bottom can continue... And is this, therefore, the thrust of the article Dr Daly? Or, is a more likely scenario that Kish will be just bombed like every other thorn in America's bum?
  • Anonymous on July 21 2011 said:
    [quote name="Fred Banks"]I'd like the last word in this issue please. If one of my finance students had told me that an exchange in Iran would be a problem for New York and London, he would have received a failing grade on the spot.Draw your own conclusions![/quote]Of course you would fail a student that is smarter then you. Thats how one remains a teacher in a Zionist controlled educational system.
  • Anonymous on July 21 2011 said:
    Yawn... Here's a conclusion for you Fred Banks.. America is sinking quicker than lead in the ocean, and it's about time!! The world has been manipulated for years and years by America! The America dollar is not worth the paper it is printed on!! The sooner the world wakes up and changes the way things are done the better... AMERICA AND EUROPE are about to piss the worlds finnances down the drain!! The corruption and manipulation of the markets through America must stop if we are to ever move forward as a planet! Enough is enough, Put your floaties on America.. The water will soon be well above your head and your wearing cemment boots! When you are on the bottom, don't expect anyone.. I MEAN ANYONE to help you get back to the surface! You have burnt your bridges... NOW DEAL WITH THE PAIN THAT YOU HAVE INFLICTED ON ALL OF US...(I'm in Australia too...)Question for you Fred? Do you recieve any money for anyone on Wall Street? Are you another pawn of corruption?
  • Anonymous on July 21 2011 said:
    I'd like the last word in this issue please. If one of my finance students had told me that an exchange in Iran would be a problem for New York and London, he would have received a failing grade on the spot.Draw your own conclusions!Iran is now a nuclear power sitting on top of world's second and third largest oil and gas reserves, while the US is $15 TRILLION in debt, lost 2 wars in the region and technically bankrupt, so please do draw your own conclusions. BTW, your students give you an F minus for complete IGNORANCE and ARROGANCE. Sad conclusion indeed.
  • Anonymous on July 21 2011 said:
    Fred, I think you got a little 'clobbered' on this one...!
  • Anonymous on July 21 2011 said:
    The article could be improved by mentioning that Iraq tried the same scheme prior to the gulf war and Libya were planning to sell all their oil in gold prior to the war there. Open your eyes.....
  • Anonymous on July 23 2011 said:
    If America goes down, so does everybody else, the domino effect if you will. If we sink to the bottom like Daniel from Australia says, there goes all aid (billions in dollars) to the countries we help. I've said for many years, let the rest of the world fend for themselves for awhile. Can you imagine what the world would do if we did nothing to help? Just like after a tragic shooting, everybody calls to God to help, but before, they want to erase every trace of God existing. How sad.
  • Anonymous on July 24 2011 said:
    Maybe this explains these stories:CIA veteran: Israel to attack Iran in fallJuly 18th, 2011 | Author: PatriotCIA veteran: Israel to attack Iran in fallThe Israeli security establishment is increasingly worried by Netanyahu’s bellicose stance towards Iran.http://english.aljazeera.net/indepth/opinion/2011/07/201171775828434786.htmlIsrael to attack Iran by September?http://tinyurl.com/IsraeltoattackIraninSeptemberTarget Iran (by Philip Giraldi): http://america-hijacked.com/2011/06/09/target-iran/
  • Anonymous on July 25 2011 said:
    If America goes down, so does everybody else... there goes all aid (billions in dollars) to the countries we help...What hubristic bullshit, 'h', don't you mean, all the countries America helps herself to?
  • Anonymous on August 14 2011 said:
    This article tells me what was rumored before... (I.E. Iran needs more cash) Iran wants the best value for their oil... Having a bourse (bag, market etc...) will maybe get more the Chinese into the mix... The US dollar is worth less and less due to giving in to Politicians demand for more money for ??? black projects...I don't know if it will cause problems with cities but folks have to become self dependent...
  • Anonymous on October 22 2011 said:
    If we sink to the bottom like Daniel from Australia says, there goes all aid (billions in dollars) to the countries we help.You not noticed China in Africa then??
  • Anonymous on February 06 2013 said:
    the weaker the dollar the less u.s adventurism and less war mongering, the iranians have it all figured out.... and just incase, they have beefed up their air & sea ballistic missile production.... huh... and if you're thinking "war"... well that ain't gonna be a cake walk folks, so it is best if the smart people in washington kept their war drums in their closet, they can't even fish the rag tag taliban. please click on this link and watch. http://www.youtube.com/watch?v=J46Mi108Vjw

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