Saturday, October 27, 2007


Eli was thinking about the recent sanctions imposed by the US on Iranian banks. It occurred to him that it would be risky for Iran to take payments for its oil in dollars. It appears to have occurred to someone else.

Although opening an oil bourse has so far been unsuccessful, Iran has had success in asking its petroleum customers to pay in non-dollar currencies. As of October 3, 2007, Iran currently receives non-dollar currencies for 85% of its oil exports with euros composing 65% and yen 20%. Iran is currently planning on moving the remaining 15% of dollar denominated oil exports to other currencies such as the United Arab Emirates dirham.[2]
and not so long ago
July 13 (Bloomberg) -- Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it is reducing holdings of the U.S. dollar. 

Iran wants yen-based transactions ``for any/all of your forthcoming Iranian crude oil liftings,'' according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments ``effective immediately,'' according to the letter, dated July 10 and obtained by Bloomberg News.
Eli offers this as necessary but not otherwise much noted information needed to figure out what will happen in the near future.


Anonymous said...

The question is why the Gulf States have stuck with the buck. The most plausible answer is that they don't want to start the avalanche that will bring the whole system - and oil prices - down. The Euro is overvalued now, the Yen is sticking to the dollar like glue, and so, of course is the Yuan. If the Ys are allowed to rise, they might be good choices.


Bunty said...

They've stuck with the $ because they made an agreement with US under Nixon to do so.,-Petroeuros-and-the-Iranian-Oil-Bourse&id=400023

Gives an overview, although I would disagree with his conclusion that it is a good reason to go to war.

Anonymous said...

It's not just the possibility of war.

Some fear the dollar may collapse

The Iranians are no dummies, even though Bush and Co may think they are.

Unfortunately, the people leading other countries are much smarter than the ones leading our own.

Bunty said...

The dollar NEEDS to collapse, to bring it in line with American production, rather than being a gold card founded on oil.

I hope it can do so gracefully, to allow the American people to adjust and rediscover their entrepreneurial spirit without going through a major 1930's style depression or worse.

But even that would be better than the alternative, keeping the dollar in its (continually) forced position of primacy.

I wouldn't bet on the Iranian leadership not being dummies, they are just dummies in an Iranian way.

Their decisions (delusions) are putting the Iranian peoples' lives on the line, just at the American leaders' decisions put American peoples' lives on the line. Seems pretty dumb all round to me.

Michael Tobis said...

Have a look at this interesting graphic.

It indicates to me that the world is as addicted to American excess as America is. As a consequence, the dollar will continue to fall relatively gently. While the prognosis for post-Bush America is grim, I am inclined to expect a long slow decline rather than a collapse.

CapitalistImperialistPig said...

Right now, the dollar is in slow motion collapse vs some currencies - the Euro, Pound, Canadian and Aussie dollars. The major saver-lenders (Gulf, China, Japan) are keeping their currencies even with the dollar at considerable cost in their purchasing power. The thing about the downhill slide is that last one off gets hurt the worst - a strong incentive to jumping off the speeding bus as soon as possible.

Anonymous said...

It is economically illiterate to think that it matters what currencies the price is listed in.

What matters is what currencies the sellers choose to hold their reserves in.

Price it in whatever you want, the currency markets give instant conversions at minimal cost. All you are doing is asking the buyer to do the conversion for you. Makes no difference who does it. What matters to the price is supply and demand for oil, what matters to the dollar is supply and demand for dollars.

Put it another way: price it in dollars. The price will fluctuate with supply/demand, and also with the value of the dollar. Price it in euros, and the exact same thing will happen.

On the other hand, liquidate your dollar holdings, regardless of how you price your oil...and then we have a crash.

Prediction: do it, and see how you like them apples!

Anonymous said...

What matters is what currencies the sellers choose to hold their reserves in."

..which is what the quote abiove referred to.

"Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it is reducing holdings of the U.S. dollar."

El Gato con Bolas said...

Peak oil and global warming.

Interesting times as chinese would say.