For a minute there I thought I had to get off my couch, when all the while the fact is we don't have to do anything much but keep things afloat for just a few decades more! In fact, we'd best shut up about PO, because if our offspring finds out we knew about it all along, they'll turn and wring our necks come 2036!
Posted: Thu Mar 09, 2006 9:49 am Post subject: Re: The Proposed Iranian Oil Bourse
seahorse2 wrote:
Mr. Bill,
. "De-bunking" is a small price to pay for freedom of thought and expression. After all, how would any of us in the USA have the benefit of your opinion analysis without this site? You're too easily frustrated.
Of course, you're right. Sorry. Next time I will count til ten before replying. Cheers ; - ) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Thu Mar 09, 2006 3:39 pm Post subject: Re: The Proposed Iranian Oil Bourse
Daryl wrote:
And I thought you were going to use this platform today to beat your chest about the Canadian baseball team.
Since our Canadian men lost to the Russians in the quarter finals in hockey, I have been keeping a low profile. Wondering if perhaps I might compete for the Cypriots in either curling or bobsled? _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Fri Mar 10, 2006 3:35 pm Post subject: Re: The Proposed Iranian Oil Bourse
seahorse2,
One individual has stated for months that the IOB is not opening (period), but I have yet to see any facts to support that assertion. I have read a lot of propaganda lately from unsourced individuals, but it is better to read the foreign media regarding these topics.
Might the IOB be delayed? That is certainly possible. If their were a delay, would it be due to politics, logistics or staff/resources? Not sure, but based on my research it may be the latter, but I wonder about the political aspects. Will the opening of the bourse "crash" the dollar over night? Of course not, but some would have you think that is the case. (remember, the US did not immediately invade Iraq in January 2001 ...even though that is percisely what Bush wanted to do according to former administation insiders. It takes time to prepare the public...Iran is no different in that regard)
The impact of the propsoed IOB will likely be small at first, but let's look at the macro picture Iran has stated that the "ceiling" for oil trades via the IOB is 25 m/d/b. That is about 29-30% of the entire global oil production..but that is a long-term goal, and it will not happen this year or next.
Anyhow, if you dig deep and take the time to read the Iranian news, you begin to notice a fact pattern that warrants close examination, For example, let's look at the Dec 2005 to Feb 2006 news article for the Kish Free Zone Organization (Btw, Kish is the name of a small, touristy/liberal island off the coast of Iran. The official name of the IOB is "Kish International Oil, Gas and Petrochemical Bourse," and it is apparantly to be located in a 13-story building called the Kish Financial Center).
...first we have China and Iran holding an energy cooperation summit on Kish Island a few weeks ago...
Cooperation between Iran and China in Oil Industry discussed on Kish Island (Press release: Feb 20, 2006)
Iran and china relationship in light of new global changes, the role of the two countries in renewable energies, the opportunities of both countries in oil and gas markets, the strategic role of Iran in provision of China's energy needs and the experiences of both countries in Free Trade Zones were of the most important topics discussed in this gathering and were subject to exchange of views.
In the opening ceremony Eng. Madjid Shayesteh, the Chairman and Managing Director of K.F.Z.O. by pointing out the special attention of both countries to Free Zones and Special Economic Zones said: In order to develop and strengthen the economical cooperation between Iran and China, it is necessary to strengthen the relations between Kish & Qeshm Free Trade Zones in southern Iran and Shenzhen and Zhuhai Special Economic Zones in southern China, particularly in the fields of Science, advance Information Technology and transfer of oil and gas.
...and here we have European banks suddenly setting up branches on Kish Island, and presumably they are to participate in the oil bourse once it starts...
Quote:
"Chairman & Managing Director of Kish Free Zone Org.:" Kish can turn into the Trade Hub of the Region (Press release: January 13, 2006)
Chairman & Managing Director of Kish Free Zone Organization said: Considering the prerequisite infrastructure and enjoying the free zone facilities, Kish Island is able to be turned into the trade hub of the region.
According to Public Relations & Int'l Affairs of Kish Free Zone Organization, Eng. Majeed Shayesteh stating the above matter in the opening ceremony of the 4th International Free & Special Economic Zones Exhibition, added: The establishment of European Banks and Stock Exchange operation in Kish, the activities done to turn Kish into an electronic city, design for establishment of trade centers for other commodities and oil bourse start-up in the future are among measures that can turn this Free Zone into the trade hub of the Persian Gulf region.
....and here we have various European oil and gas companies set up near the upcoming oil bourse: Total (France), Shell (Anglo-Dutch) and Agip ( Italy). Add that to a firm on Kish called "Iran-China Kish Energy Industries" and is appears that a lot of commercial activity in the oil & gas and banking sectors are happening in proximity to the Kish Financail Center...
Quote:
Vice-president of Kish Free Zone Organization Declared: Emphasis on Launching Oil Bourse in Kish Public Relations & Int'l Affairs Kish Free Zone Organization (K.F.Z.O.) (Press release: December 25, 2005)
Vice-president of Kish Free Zone Organization with an emphasis on launching Kish Oil Bourse stated that the execution of this plan would be very effective in order to create stronger connections between our country with the global economy.
According to Public Relations and International Affairs of Kish Free Zone Organization, Eng. AbdoRahman Nadimi Boushehri said: Kish Island enjoying the capability to do premium economic, tourism and services activities can be considered as an appropriate link for interacting domestic and international economies. Therefore; construction of infrastructures and expansion of financial activities in the field of capital market are among the chapter headings of programs set by this organization and the required grounds for their execution have been prepared.
He added: After establishment of Kish Stock Exchange and start-up activities of branches of foreign banks in Kish, establishment of Kish International Oil, Gas and Petrochemical Bourse is of major importance and its start-up will lead to vast transitions in the national economy arena and its stronger linkage to the global economy.
Boushehri added establishment of this Bourse in Kish will change Iran from a merely oil-producing country to a superior one in the international oil transactions arena. Bousheri reiterated that Kish Free Zone Organization because of its strategic location in the Persian Gulf which contains over 60 percent of the world energy reserves can be considered as a major base for active companies in the field of energy sector.
He added: Presently, most of the major international oil companies in order to utilize the facilities of this Zone and its proximity to the exploration and exploitation fields of gas and oil have moved their offices to Kish Island and already a considerable portion of logistic services for their activities in South Pars (Assaluyeh) fields are taking place on Kish Island. Vice-president of Kish Free Zone Organization expressed hope that in the near future through establishment of Oil, Gas and Petrochemical Bourse on Kish Island, this Zone would become one of the major centers of oil related products exchange.
Mr. Boushehri by mentioning the establishment of branches of international banks on Kish Island stated: Now by start-up activities of eihbank and Standard Chartered Branches, Kish Free Zone possesses proper financing infrastructure to perform international deals. He added: Undoubtedly with development of banking services, we shall witness an increase of investment in this Zone. Establishment of branch offices of companies such as Total, Shell, Agip and hundreds of other foreign and domestic firms pictures a bright future for Kish Free Zone.
Vice-president of Kish Free Zone Organization said: With provisions of these conditions now instead of witnessing the exit of our national wealth, we see a major capital repatriation into our own economic cycles.
Synopsis: It seems that millions have been spent and are continuing to be spent to develop the Kish Free Zone into a viable economic trading area, with oil, gas and petrochemicals as the prime goal. Delay or no delay this month, the fact pattern suggests a lot of activity re the IOB...despite what the small but vocal minority of naysayers repeat ad nauseum on this forum...
So, what is the intermediate term threat to dollar supremacy and the unsustianable US twin deficits? Simple, if 10 or 20% of global oil sales are eventually traded on the IOB in euros, it will become very difficult to impossible to support the current account deficit. BTW, I quoted a very astute global economist is my book (Paul Donovan), and his quote in a recent Business Week is worth noting...
Quote:
The New Middle East Oil Boom - Business Week, March 13, 2006, by Stanley Reed (p. 36)
(Exerpt)
"Arab states are now major buyers of goods from Japan, China, and the rest of Asia, where they sell the bulk of their oil. So these petrodollars get recycled as Japanese yen or Chinese yuan - which the Japanese and Chinese governments convert into U.S. Treasuries. Indirectly, then, oil money is bankrolling U.S. deficit spending. Paul Donovan, a global economist for UBS Investment Bank in London, estimates that petrodollars, mostly channeled through Asia and Europe, are funding up to 45% of the U.S. current account deficit."
...so OPEC petrodollar flows are financing 45% of the US current account, and China is funding about 28%. That makes the Iranian situtation very complicated. The risk of error by Washington or Tehran is quite high.
Last edited by Petrodollar on Tue Mar 21, 2006 10:24 am; edited 2 times in total
Joined: Oct 23, 2004 Posts: 5487 Location: New Jersey
Posted: Fri Mar 10, 2006 6:26 pm Post subject: Re: The Proposed Iranian Oil Bourse
It appears that the bourse is still scheduled to start (based on the story below).
Meanwhile, whether or not the Iranian Bourse goes ahead this month, the US trade and current account deficits continue to get worse and worse. The flip side of the huge surge in US energy imports to offset the devastation of three hurricanes is the fact the US must go deeper into foreign debt - and rely more and more on OPEC petrodollar recycling. In fact, during 2006 so far, it appears the pace of petrodollar recycling has accelerated even faster than ever (as Petrodollar implies above). I am not entirely sure why this has occurred - perhaps OPEC is secretly satisfied with high oil prices and wants to reward the US for being a good customer. A customer that has not reach the credit limit on its foreign debt credit card - yet.
But that good credit is at the whim of the sheiks of OPEC, and one wonders if they will decide to be paid instead with real money - such as Euros, gold, etc..
Quote:
3/1/06 World News Connection (Newswire) 20:08:47
Copyright 2006 Inquiries regarding use may be directed to NTIS, US Dept. of Commerce.
March 1, 2006
Iran: Article Says New Euro-Based Oil Bourse Means End of U.S. Market Control
Article by Mohsen Mehdian: "The End of the Dollar's Hegemony"
Yesterday a news report was published quoting Ron Paul, the Republican representative to the U.S. Congress, entitled "US Paper Money and Iran's Oil Bourse." This report, which was well received by many Western sites and news agencies, revealed the sinister intentions of the United States in the nuclear dispute with Iran. Paul is the only Austrian School free market economist and the representative of Texas in the U.S. Congress who frankly and in a loud voice has announced that the war with Iran is over "petrodollars," because Iran's oil stock market is effectively "the end of dollar hegemony." The importance of this issue is related to the strategic approach of the Iranian government officials in the nuclear dispute and the strategy of weakening "the imperialism of the dollar." To clarify this issue, we need to mention a brief history of the coming to power of the "U.S. dollar."
Under the conditions that "hidden colonialism" is the most important secret for the survival of the capitalist countries, the plunder of the world is facilitated with rhetoric such as "global economy." In connection with the same policy, the United States in order to become "the imperialism of capital," from the middle of World War II amassed as much gold as possible and saturated its bag with precious metals. After the United States presented gold as the backing for the dollar, it announced that the dollar deposits of the countries could be exchanged for gold. On this basis, the majority of the countries of the world chose the dollar for deposit; hence the dollar gained power. With the start of the 1970s, many of the countries that were somewhat developed decided to exchange their U.S. dollars for gold, which confronted the United States with a great crisis in 1971.
The United States, which saw its foundations as gone with the wind, decided in order to maintain the artificial strength of the dollar to force the countries to store dollars. On this basis, it signed a contract with Saudi Arabia that Saudi Arabian oil would be transacted only with dollars in return for U.S. protection of that country. By resorting to this weapon, "oil transactions" became the backing for the U.S. money (the dollar). Since energy is considered the most important need of countries, gradually the dollar became the instrument for trade in those countries for buying oil. Accordingly, the Bretton Woods system that places gold as the backing for the dollar changed and the second period of U.S. dominance began with the system of "petrodollars." Afterward, every country and nation that opposed the "dollar hegemony" was eradicated from the world. A clear example of the "war for petrodollars" was when Saddam tried to get rid of the U.S. restrictions and decided in 2000 to sell his oil in euros. In the same way, one year later, when the Venezuelan ambassador in Russia spoke about the use of the euro for all oil sales, a coup d'état was formed against Chavez with the direct support of the CIA.
Today, the U.S. interests are threatened by the formation of the Iranian oil bourse. This is a threat aimed at the entire United States. In the Iranian oil bourse, the pricing and the sale of oil will be in euros; hence, if this bourse advances, the world market will be freed from the monopoly of the dollar. At the present time, nearly $6 million worth of oil is purchased on the world markets, all of which is calculated in dollars. Of this amount of oil transactions, one-third concerns the members of OPEC. Moreover, the major volume of OPEC trade is with Europe, and with the euro becoming stronger vis-à-vis the dollar and changing the money for oil to this foreign currency, the member countries of OPEC will reap great profits. For this reason, the establishment of the Iranian oil bourse will be welcomed by the member countries of OPEC. Moreover, the creation of this bourse can also increase the power of the Third World and developing countries against the United States. The Iranian oil bourse can support them through mutual trade with countries that have a shortage of foreign currency reserves in dollars. Hence, the Iranian oil and natural gas bourse will be the focus of attention and will be welcomed by these countries.
For the United States, more important than "oil security" is "the security of the petrodollars,"; this can be a strategic instrument for the political and economic officials of the "government of justice." "The death of the imperialist economy" is the same as the end of "gangster capitalism."
God willing
[Description of Source: Tehran Keyhan (Internet Version-WWW) in Persian -- conservative Tehran evening daily. Published by the Keyhan Institute and edited by Hoseyn Shari'atmadari, Leader Khamene'i's representative at the institute]
Joined: Oct 17, 2005 Posts: 139 Location: Shoreline, Washington
Posted: Sat Mar 11, 2006 12:02 am Post subject: Re: The Proposed Iranian Oil Bourse
The markers are all in dollars so it is more convenient. This might seem like it isn't a big deal, but the value of euros vs. dollars floats several cents per day, and clearing transactions in a predictable number of euros without a euro marker would be sort of a nightmare.
That's the idea as I understand it, at least. Interested to see what kind of holes can be poked in that. _________________ The passing of abundant oil is not shaping up to be a soft landing for those with the fattest asses. - Jan Lundberg
Posted: Sat Mar 11, 2006 11:27 am Post subject: Re: The Proposed Iranian Oil Bourse
perplexd wrote:
The markers are all in dollars so it is more convenient. This might seem like it isn't a big deal, but the value of euros vs. dollars floats several cents per day, and clearing transactions in a predictable number of euros without a euro marker would be sort of a nightmare.
That's the idea as I understand it, at least. Interested to see what kind of holes can be poked in that.
oh, I do hate to go ad naseum, how impolite.
poor argument stated above. the volatility of crude prices, especially the products, is much greater than the volatiliy of the euro against the dollar which has remained very stable. it has been a long time since we saw 5-10% moves in the dollar per month, whereas we see these moves in the crude on a monthly basis as supply meets demand and geopolitical concerns prevail.
therefore, I would put forward that geopolitical concerns are trumping currency concerns at the moment. never the less, the US will likely have a $1 trillion currrent account deficit in 2006, which is reason enough to be worried about the health of the dollar. if you do not think that is significant, you are not paying attention.
Monday, is March 13th. One week until the fabled IOB opening on March 20th. I do not expect Copernicus et al. to change their minds. 2007? 2008? Proof? It is when Iran opens an oil bourse in euro, and it makes one bit of difference to anything! I will be the first to congratulate you on finally being right about something. Ad naseum indeed. ; - ) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
How can I prove something will not happen? Other than it does not happen when its propents say it will happen?
I have raised legitimate problems with an IOB opening on March 20th, which my detractors have not addressed other than to post yet again more questionable quotes from questionable sources. I stack their headlines against my experience and in one week, I will be vindicated, and they will go on in denial. My objections may not be headline grabbers, but I assure you they are more real.
You may be tired of this, so am I, but you have the opportunity to tune out, meanwhile I am getting personal emails asking 'whether I should finish university because after March 20th (IOB) the US economy is going to collapse anyway, so what is the use?'.
Disinformation is not harmless information. Ignorant people are part of the problem, not part of the solution. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Sat Mar 11, 2006 12:46 pm Post subject: Re: The Proposed Iranian Oil Bourse
You overestimate my intellectual capabilities if you think this was an attempt to undermine your logical argument, I was simply trying to correct the misspelling of "Ad nauseam" (and yes, I am an anal retentive...)
As for the debate itself your contrarian point of view (which is mainstream in "the real world") and insight into market mechanisms is very much appreciated, please keep on hammering, it's healthy to prevent group think.
Personally I think the importance of the Petrodollar for the US and the world economy can hardly be overrated, as well as the slightest threat to it.
But let's not get our knickers in a twist about this, because it should be obvious fairly soon (over the course of the next year I guess) if there is anything to it, so let's relax and enjoy the show - or the dud. _________________ "Democracy means the opportunity to be everyone's slave."
Karl Kraus
Posted: Sun Mar 12, 2006 1:32 am Post subject: Re: The Proposed Iranian Oil Bourse
Free wrote:
You overestimate my intellectual capabilities if you think this was an attempt to undermine your logical argument, I was simply trying to correct the misspelling of "Ad nauseam" (and yes, I am an anal retentive...)
As for the debate itself your contrarian point of view (which is mainstream in "the real world") and insight into market mechanisms is very much appreciated, please keep on hammering, it's healthy to prevent group think.
Personally I think the importance of the Petrodollar for the US and the world economy can hardly be overrated, as well as the slightest threat to it.
But let's not get our knickers in a twist about this, because it should be obvious fairly soon (over the course of the next year I guess) if there is anything to it, so let's relax and enjoy the show - or the dud.
If I may, I believe the real issue has less to do with oil despite its obvious importance and more to do with humdrum economic issues such as:
Debtor vs. creditor nations. Japan and China have the reserves and the US needs to fund a $1 trillion dollar current account in 2006 (all liabilities taken into account).
And competitive advantage. As the cost of commodities and energy continue to climb Asian manufacturers are being cost squeezed as the price they receive for their finished goods is declining in real terms.
So they are loathe to either allow their local currencies to appreciate (much) in real terms against one another or against the dollar in general.
And the US as Consumer of Last Resort is a credit risk, but they are also a key customer, so Asian manufacturers keep lending them money, so that the US keeps on running their trade deficit.
Yes, Asians can sell to one another, and they can change the emphasis from export orientated to domestic demand, but they have been reluctant to do this on their own up to now. It does not mean they cannot, it means there is a period of adjustment.
China is seeing the limitations of their ultra easy monetary domestic policies, where interest rates are kept lower than in the dollar zone and are causing domestic over investment in dometic capacity, which is leading to a red hot property market in some areas, and to over capacity in some sectors such as steel and concrete.
Also, China is seeing the limitations of continually acquiring foreign exchange reserves, as this money is unproductive, and if they do not sterilize their foreign exchange earnings this can lead to inflation in China and an over appreciatiion of the yuan that would hurt their export competitiveness as well. Their policy is to create jobs, not profits.
Everyone is caught between a rock & a hard place, which is why there are no easy answers.
No one wants to keep lending to the US, but they are worried about the economic, not military consequences, of not funding the US' current account deficit, while everyone realizes it is not sustainable.
A weaker dollar would also feed into higher commodity prices in nominal terms, which again would hurt Asian manufacturers, unless they accept those depreciated dollars in payment. If commodity prices rise in nominal terms in dollars, and the dollar weakens against the euro, yen and yuan, then their export competitiveness will be hurt, although longer term, a strong currency, like in Switzerland, leads manufacturers to make changes that make them more not less efficient. But there is always a transition period to purge the system of Dutch disease.
That is not proof of anything, just a few facts about the way things work. And they will not change in the next week either. But over the next year(s) the US has to find a way to reduce their reliance on imported capital to fund their budget deficits and trade deficits, which make up their $1 trillion current account deficit, and Asians need to find new customers to buy their goods and diversify away from a customer who has very shaky credit.
Make no mistake, the value of the dollar and global interest rates do affect the price of oil, as does the health of the global economy affect the demand for oil, and therefore its price as well, but do not confuse cause & effect with auto correlation or causality.
Here is a quote....
Quote:
Fed officials continue to be puzzled by the current market environment of low world interest rates, low risk premiums and large global imbalances.
Timothy Geithner, Federal Reserve Bank of New York
And, another....
Quote:
China's purchases of U.S. dollar assets could spur inflation by putting downward pressure on U.S. interest rates and producing more expansionary financial conditions than fundamentals warrant.
Fed officials continue to be puzzled by the current market environment of low world interest rates, low risk premiums and large global imbalances.
Timothy Geithner, Federal Reserve Bank of New York
The Fed must respond to these inflationary forces, Geithner said.
"And if all else were equal ... monetary policy in the affected countries would have to adjust in response: Policy would have to act to offset these effects in order to achieve the same impact on the future path of demand and inflation," Geithner told a Japan Society luncheon.
"To do otherwise would run the risk that monetary policy would be too accommodative, pulling resources from the future in a way that would alter the trajectory for the growth of the capital stock, perhaps amplifying the imbalances, and compromising the price stability," Geithner said.
Fed officials continue to be puzzled by the current market environment of low world interest rates, low risk premiums and large global imbalances, Geithner said.
This economic picture was labeled a "conundrum" by former Fed chief Alan Greenspan.
Most of the factors that created these conditions are outside the control of Fed policy, and Fed officials don't fully understand their implications, Geithner said.
In January, China released figures showing its foreign-exchange reserves hit a record $818.9 billion last year, an increase of 34% from a year earlier.
About 70% of these reserves are thought to be invested in dollar-denominated assets.
You can accuse me of poor spelling and grammar, but I do not wish to be accused of not being able to cut & paste other people's quotes to support my own opinions! Although I do not see quoting others as a substitute for doing my own critical thinking? ; - ) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Sun Mar 12, 2006 9:50 am Post subject: Re: The Proposed Iranian Oil Bourse
Daryl wrote:
Thank you for the well reasoned overview, Mr. Bill. So much for the view from 30,000 feet. Where do oil futures open in Sydney tonight?
Coverd in Trader's Corner. $6085 in Brent and $5990 in WTi after a very weak close in heating oil, unleaded and natural gas, unless I missed something in the news today while I was up in the hills surrounding Limassol. Up there, life revolves more around village life, wine, home made food, local music, and less about what is happening in the big, wide world. It is nice to know that peak oil, we will still have good local wines ; - ) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
You cannot post new topics in this forum You cannot reply to topics in this forum You cannot edit your posts in this forum You cannot delete your posts in this forum You cannot vote in polls in this forum
News
Discussions
Resources
Members
Forum FAQ
Search
Usergroups
Profile
Log in to check your private messages
Log in
