On Monday IranDaily published a story, dryly headlined "Ending $ Monopoly," that confirms my earlier thoughts that the IOB will become a danger to the predominance of the greenback in international trade.
The Oilbourse Blog carries an interview with Mohammad Javad Assemipour, the Iranian official responsible for the launch who discloses that the IOB will conduct trade in petrochemical products but not in crude oil itself.
Once the much-publicized Oil Bourse is established - many say in April - the long-sought objective of replacing the US dollar with the euro in OPEC transactions will come one major step closer to reality.Sounds like a declaration of war on the currency front to me.
For over 30 years now, the issue of replacing the greenback in oil deals has been discussed. However, the heated debates have not yet produced any concrete results.
Nevertheless, the old proposal remains as a weapon at the hands of the Arab member-states of the Organization of Petroleum Exporting Countries to regulate their relations with the United States.
They raise the issue at one point, and then reject it to prove their loyalty to the superpower.
The Oil, Gas and Petrochemical Bourse, which will be established as envisaged in the Fourth Five-Year Plan (2005-2010), has received support from both the Parliament and the government. It will also enable oil-rich Iran to regulate prices at home without having to follow other countries' dollar-based trading system.
Iran's Oil Bourse can help the world oil market get rid of the present dollar monopoly - what many observers think will put the global status of the major currency at risk.
World oil prices are set in London and New York today where OPEC member-states do not have a decisive role.
Experts believe that once the Caspian Sea oil producing countries also join Iran's Oil Bourse, world oil market is likely to experience a revolution.
Proponents of the Oil Bourse believe that oil producing countries need to take such an important initiative notwithstanding the risks and barriers.
They believe that OPEC member-states have lost 72 percent of their nominal revenues on the fall in the value of the dollar and their declining purchasing power.
One thing to remember is that OPEC countries receive dollars for their oil exports and will have to spend the same dollars in trade transactions with countries whose currencies are rivaling the greenback all the time.
Kamal Daneshyar, a senior parliamentarian, contended that the Oil Bourse will help promote Iran's petroleum business as it will attract customers from around the world.
Iranian authorities are optimistic that the Oil Bourse will provide many countries with an opportunity to trade oil with currencies other than the US dollar.
This optimism also applies to the European Union, which is one of the largest energy consumers in the world and whose currency the euro is the proposed alternative to the dollar.
From the interview at Oilbourse Blog:
Q: Some lawmakers have reacted to the planned petroleum commodity market saying they would oppose it if it sets the stage for rent-seeking. What is your answer?A most interesting piece of economic history in the making, I would say.
A: They have not said anything illogical. The stock market will start work once it goes through its legal channels. We established a consortium of the Tehran Stock Exchange, Informatics Company, IPE and Nymex to study the project. We have localized it and we will establish in the Kish Financial Building.
Q: What will this market exchange?
A: Oil, gas and petrochemical products will be offered on this market but we will not market crude oil because of its specific nature. Of course, the swap-based 200,000 barrels of Caspian crude can be subject to marketing. We are purchasing necessary software to integrate our data. We will provide online information to dealers and we will not allow any misuse of funds.
Iran's planned petroleum commodity market will be recognized at the international level. We can attract foreign investment if we can design the structure of this market appropriately. The oil stock market will be a decision-making element.
Q: Don't you think that the tense Middle East conditions will keep the market from growing?
A: We should take advantage of the vast Middle East region and transform the threats into opportunities. Iran could not be eliminated from the Middle East. We are also joining the World Trade Organization and we have to modify our currency system. We should welcome globalization.
Q: Which organizations are tasked with providing the necessary capital?
A: The Pension Fund of the Ministry of Petroleum holds 70 percent of the stakes. The fund represents the National Iranian Oil Company, National Petrochemical Company and National Iranian Oil Products Distribution and Refining Company. The remaining 30 percent goes equally to Kish Stock Market, the Mostazafan and Janbazan Foundation and the Tehran Stock Exchange.