IRAN OIL BOURSE LAUNCHED
Islamic Republic News Agency
February 17, 2008
Text of report by Iranian official government news agency IRNA
KISH, Iran -- The first transaction on a petrochemical consignment of downstream light polyethylene, weighing 2,000 tons, was registered on Sunday [17 February] at Kish [a free trade zone island in the Persian Gulf] Oil Bourse Hall.
The first purchase of the petrochemical product has been carried out at Kish Bourse Hall in the presence of 21 brokers.
The inauguration ceremony of Kish Oil Bourse was carried out in the presence of the director-general of Kish Free Zone and the executive administrators and the first transaction was carried out at 0930 [0600gmt] at the bourse hall.
Simultaneously, the minister of economy and finance, [Davud Danesh Ja'fari] and the minister of oil, [Gholamhoseyn Nowzari] issued the permit for the first petrochemical deal at Kish Bourse Hall.
Twenty-one brokers have been trained for working at the bourse hall and will carry out the oil, gas, and petrochemical transactions by computer or in person.
Originally published by Islamic Republic News Agency, Tehran, in Persian 0657 17 Feb 08.
IRAN OPENS ITS 1st OIL PRODUCTS BOURSE
February 17, 2008
TEHRAN -- Iran established its first oil products bourse Sunday in a free trade zone on the Persian Gulf Island of Kish, the country's oil ministry said.
A statement posted on the ministry's Web site said 100 tons of polyethylene consignment was traded at the market's opening on the island, which houses the offices of about 100 Iranian and foreign oil companies.
Oil and petrochemical products will be traded in Iranian Rials, as well as all other hard currencies, the statement quoted Iranian Oil Minister Gholam Hossein Nozari as saying. About 20 brokers are already active in the market, it said.
"The bourse provides an economic opportunity for Iranians, other countries and foreign customers," Nozari was quoted as saying.
Iran produces more than 20 million tons of petrochemical products per year.
Iran has already registered for another oil bourse, in which it has said it hopes to trade oil in Euros instead of dollars, to reduce any American influence over the Islamic Republic's economy.
A bourse official, Mahdi Karbasian, told the IRNA official news agency that such an oil market would begin operating within the next year.
While most oil markets are traded in U.S. dollars, Iran first floated the idea of trading oil in euros in the early 2000s during the tenure of reformist president Mohammad Khatami. It gained new life after the nationalist Mahmoud Ahmadinejad was elected in 2005.
As the fourth-largest oil producer in the world, Iran has a measure of influence over international oil markets. The country ranks second for output among OPEC countries, and controls about 5 per cent of the global oil supply.
Tehran also partially controls the Persian Gulf's Strait of Hormuz, through which much of the world's oil supply must pass.
Iran has sought to wield its oil resources as a bargaining tool in its ongoing standoff with the West over its nuclear program.
The U.N. Security Council is considering imposing a third set of sanctions on Iran for defying a request to halt uranium enrichment. But Tehran has expressed doubt that the world body would impose sanctions on the country's oil sector, because such a move would likely drive global oil prices higher.
IRAN ESTABLISHES NON-USD OIL & GAS TRADING
February 18, 2008
The Iranian Oil Bourse, a non-U.S. dollar forum established for the trade of oil, gas and petrochemicals, is set to open for business on Kish Island on Feb. 17, according to EIN News and Iranian television.
The Bourse had been set to open during the week commemorating the anniversary of the Islamic Revolution, said Iran's Foreign Minister Davoud Danesh-Jafari, but the Internet communication breakdown delayed the launch.
The primary trade currency used by the Bourse will be the euro. The Iranian Bourse would establish a euro-based oil marker if successful.
The Iranian Bourse will be located on the Persian Gulf Island of Kish, a location Iran claims to be a free-trade zone.
The idea of the Iranian Oil Bourse first surfaced in 2005. At that time, the Bourse was due to open in March 2006, but the election of Iranian President Mahmoud Ahmadinejad delayed the opening of the trading forum because the president and parliament could not agree on the appointment of an oil minister.
IRAN OPENS FIRST OIL PRODUCTS BOURSE
February 17, 2008
TEHRAN -- Iran, OPEC's number two crude oil producer, on Sunday inaugurated its first bourse for oil products and petrochemicals, in a bid to become a major player in the global downstream industry.
Iran hopes that its oil goods bourse can lead the way for a domestic downstream industry to match its upstream crude oil production, the country's main foreign currency revenue winner.
"We have been a good seller (of crude oil) and now we have a higher objective to have a share in the oil trade," Oil Minister Gholam Hossein Nozari told reporters.
Iran claims to rank second in the region after Saudi Arabia in terms of production of petrochemicals at 22 million tons a year.
But it has failed to gain a significant share in the world export market because of state control of its petrochemical industry and state subsidies.
"The objective is to make transactions (of oil products) transparent, create competition, and motives for investment," the oil minister added.
"And so that we can reach out to international markets as a big oil producer as well as an oil trader," he added.
Iran plans to open a market for trading crude oil as part of the second phase of the nascent bourse at an unspecified future date.
"The first phase should operate for a while and we should find out its strong and weak points in order to open the second phase. Because the second phase is more complicated," Nozari said.
The idea of establishing a market for oil and its by-products was first mooted a decade ago, and practical steps to prepare its creation were first taken in 2001.
But its opening has lagged over administrative procedures and long-delayed moves to liberalize the price of petrochemicals which have been under the government's control.
The opening ceremony was held in Tehran via a video conference to the southern island of Kish where the new bourse is based.
The Roving Eye
SLOUCHING TOWARD PETROEUROSTAN
By Pepe Escobar
Asia Times Online
February 21, 2008
It was a discreet, almost hush-hush affair, but after almost three years of stalling and endless delays it finally happened. Now more than ever, it may also signal a geoeconomic earthquake, a potentially shattering blow to U.S. dollar hegemony.
The Iranian oil bourse -- the first oil, gas, and petrochemical exchange in the Islamic Republic, and the first within the Organization of Petroleum Exporting Countries (OPEC) -- was launched on Sunday by Iran’s Oil Minister Gholam-Hossein Nozari, flanked by Minister of Economy and Financial Affairs Davoud Danesh Ja’fari, the man who will head the exchange.
Officially called the Iranian International Petroleum Exchange (IIPE), it is widely known in Iran and the Persian Gulf as the Kish bourse, named after Kish island, a free zone (declared by the shah) in an ideal laissez-faire setting: lots of condos and duty-free malls, no Khomeini mega-portraits and hordes of young honeymooners shopping for made-in-Europe home appliances.
Transactions at this early stage will be in Iran’s currency, the rial, according to Nozari, ending worldwide speculation that the bourse would start trading in euros. The Iranian ambassador to Russia, Gholam-Reza Ansari, has said that "in the future, we'll be able to use the ruble, Russia’s national currency, in our operations." He added that "Russia and Iran, two major producers of the world’s energy, should encourage oil and gas transactions in various non-dollar currencies, releasing the world from being a slave of the dollar."
Russia’s First Deputy Prime Minister Dmitry Medvedev said last week that "the ruble will de facto become one of the regional reserve currencies."
The opening of the exchange is just what the Iranians are calling the first phase. Ultimately, it is intended that it will compete directly against London’s International Petroleum Exchange (IPE) and the New York Mercantile Exchange (NYMEX), both owned by U.S. corporations (since 2001, NYMEX has been owned by a consortium that includes BP, Goldman Sachs, and Morgan Stanley). What Iran plans to do in the long run is quite daring: to confront head-on Anglo-American energy/corporate banking domination of the international oil trade.
A lot is already required to assure the success of the bourse in this first phase. Other OPEC members, and especially Iran’s neighbors, the Persian Gulf petro-monarchies, must be supportive, or at least "catch the drift."
It makes sense for OPEC members to support an alternative to both NYMEX and the IPE, which exercise a de facto monopoly of the oil and gas market. Their interests do not always align with those of producer countries. Numerous contracts related to Iranian or Saudi oil, for instance, are still indexed to the price of the U.K.’s North Sea Brent oil, the production of which is in terminal declining.
The proposed direction of the bourse was indicated by Mohammad Javed Asemipour, then the executive in charge of establishing the Kish bourse, in 2005. The outline that Asemipour stressed remains unchanged: the exchange would start dealing with petrochemical products, and then with what everybody really craves -- light-sulfur Caspian Sea crude. This was not going to be an Iranian-style exchange, but "an international exchange, fully integrated in the world economy." The ultimate goal was very ambitious: the creation of a Persian Gulf benchmark oil price.
Today, Minister Nozari concedes that Iran’s share of the global oil trade is still very low. Enter the bourse, which is the solution to eliminate the middlemen. Everyone in the oil business knows that high oil prices are not really due to OPEC -- which supplies 40% of the world’s crude -- or "al-Qaeda threats." The main profiteers are middlemen -- "traders" to put it nicely, "speculators" to put it bluntly.
The Petroleum Ministry’s immediate priorities are to attract much-needed foreign investment to Iran's energy sector and to expand its address book of oil buyers. Iran -- like so many developing countries -- does not want to depend on Western oil trading firms such as Philip Brothers (owned by Citicorp), Cargill, or Taurus. Enron -- until its debacle -- used to be one of the most profitable. Some oil companies -- such as Total and Exxon -- trade under their own names.
THE EMPIRE WILL STRIKE BACK
The opening of the Iran oil bourse comes at a time when the future of the U.S. dollar as the world's dominant currency is in doubt as seldom before.
At the World Economic Forum in Davos last month, mega-speculator George Soros stressed that the world was at the end of the dollar era and a "systemic failure" may be upon us. On February 8 in Dubai, OPEC Secretary-General Abdullah al-Badri told the London-based Middle East Economic Digest that OPEC may switch to the euro within a decade. Iran and Venezuela -- supported by Ecuador -- are campaigning inside OPEC for oil to be priced at least in a basket of currencies and according to OPEC’s current president, Chakib Khelil, the organization's finance ministers will soon meet to discuss the possibility in depth. A committee will "submit to OPEC its recommendation on a basket of currencies that OPEC members will deal with," according to Iraqi Oil Minister Hussein al-Shahristani.
To be sure, there’s no evidence yet that ultra-cautious U.S. ally Saudi Arabia would incur Washington’s wrath by supporting such a move. But as for Iran, OPEC's second-largest exporter, it no longer trades a single barrel of oil in dollars. That is no small amount of non-dollars. The country's oil revenue will reach US$63 billion by the end of the current Iranian year on March 20, according to Nozari.
Iran converted all its oil export payments to other currencies in December 2007. It now sells oil to Japan in yen -- the Far East country, the world's second biggest economy, is the top importer of Iranian oil and Iran is Japan’s third-largest supplier. Worryingly for the dollar, other oil producers are preparing to follow Iran's lead. Qatari Prime Minister Sheikh Hamad bin Jassim al-Thani has already announced that the tiny oil-rich emirate would abandon the dollar for the Qatari riyal before summer. There’s a strong possibility the United Arab Emirates may also switch to its own currency.
As the Kish bourse picks up momentum, increasing amounts of oil and gas trading will happen in a basket of currencies -- and increasingly the U.S. dollar will lose its paramount status. Some Middle East analysts expect the Persian Gulf petro-monarchies to end their dollar currency peg sooner rather than later -- some say as early as next summer, as their black gold will increasingly not be traded in dollars. Iranian economist Hamid Varzi stresses that the "psychological effect" of Iran’s move away from the U.S. dollar is "encouraging others to follow suit."
Iranian officials have always maintained that Washington has threatened to disrupt the country's oil exchange -- via an online virus, attempted regime change, or even through a unilateral pre-emptive nuclear strike. Certainly some analysts argue that the strength of the U.S. dollar, like the strength of the British pound before that, is a reflection of, and is maintained by, those countries' military strength (see "Why Iran's Oil Bourse Can't Break the Buck," Asia Times Online, March 10, 2006).
On the other hand, the possible success of the exchange may be crucial to signal the U.S.’s waning power in a world evolving towards multipolarity. The Saudis and the Persian Gulf petro-monarchies have already decided to reduce their U.S. dollar holdings. Washington, sooner or later, may have to pay for its oil and gas imports in euros.
No wonder Venezuelan President Hugo Chavez is so demonized by Washington as he repeats that the empire of the dollar is falling. Saudi Foreign Minister Prince Saud al-Faisal conceded during the latest OPEC summit in Riyadh that the dollar would collapse if OPEC decided to switch to euros or a basket of currencies. During a closed meeting -- with the microphones on, by mistake -- Prince Saud said: "My feeling is that the mere mention that OPEC countries are studying the issue of the dollar is itself going to have an impact that endangers the interests of the countries. There will be journalists who will seize on this point and we don't want the dollar to collapse instead of doing something good for OPEC."
The trillion-dollar question is if, and when, most European and Asian oil importers may stampede towards the Iranian oil bourse. OPEC members as well as oil producers from the Caspian may be inevitably seduced by the advantages of selling at Kish -- with no dreaded middlemen. Europeans, Chinese, and Japanese will also see benefits if they can buy oil with euros, yen, or even yuan -- they won’t need U.S. dollars -- and the same applies to their central banks.
It would take only a few major oil exporters to switch from the dollar to the euro -- or the yen -- to fatally bomb the petrodollar mothership. Venezuela, Norway, and Russia are all ready to say goodbye to the petrodollar. France officially supports a stronger role for the euro in international oil trade.
It may be a long way away, but ultimately the emergence of a new oil marker in euros in Kish will lead the way to the petroeuro global oil trade. The European Union imports much more oil from OPEC than the U.S., and 45% of Middle East imports also come from the E.U.
The symbolism of the Iranian oil bourse is stark; it shows that the flight from the U.S. dollar is irreversible -- and so, sooner rather than later, is diminution of Washington's capacity to launch wars on credit. But at this early stage in the game, only one thing is certain: the empire will strike back.