Launch of Iranian Oil Trading Hits Wall

Oil exchange unlikely to begin till at least midyear

JOHN PARTRIDGE / Globe and Mail (Toronto) 14mar2006

As the nuclear standoff pitting Iran against the West continues, some conspiracy theorists are more focused on another plan that the Middle Eastern nation is pursuing.

But they are jumping the gun if they still figure Iran is within days of launching a new international oil exchange that would sell its own and other Middle Eastern oil producers' black gold in euros rather than U.S. dollars — and which, the theory goes, could ultimately torpedo the greenback and the U.S. economy.

Despite repeated reports over the past 18 months or so that the planned bourse would finally open for business on March 20, 2006 — and go head to head with the New York Mercantile Exchange and the ICE Futures Exchange in London — the start date has been postponed by at least several months and maybe more than a year.

"In the middle of 2006, we are able to start the bourse," Mohammad Asemipur, special adviser on the project to Iran's Oil Minister, said when reached in Tehran. The plan is to trade petrochemical products first, with a crude oil contract coming last, a rollout that likely will take three years, he said.

"Oh, crikey, it's at a much earlier stage than people would think," said British consultant Chris Cook, who claims credit for coming up with the idea for the exchange in the first place and is a member of the consortium headed by the Tehran Stock Exchange that is charged with bringing the project to life.

"You can rest assured, there will not be a crude oil contract, Gulf-based, in my opinion, within a year — and that would be really pushing it," Mr. Cook, a former director of ICE's predecessor, the International Petroleum Exchange, said when reached in Scotland.

The electronic exchange is to be located on Kish Island in the Persian Gulf, an Iranian duty- and tax-free zone.

There has been far less talk about the planned bourse in the mainstream media than on the Internet, particularly on websites aimed at gold bugs and other economic conspiracy theorists.

The theory is that all trades through the new bourse would be made in euros, not the U.S. dollar, which for decades has been the world's primary reserve currency, as well as the one in which oil and most other commodities have been priced. As a result, European nations and other countries, especially Middle East oil producers, tired of having to buy billions of now weakening greenbacks to pay for their energy purchases, would no longer have to do so.

This, the conspiracy theorists contend, would knock the stuffing out of the U.S. currency and hasten the decline and fall of the American Empire, all the while allowing Iran to stick it to the Great Satan.

But, the theory continues, Washington will pre-empt all this by using Iran's nuclear ambitions as a pretext for attacking the country.

Kamal Daneshyar, chairman of Iran's Majlis [parliamentary] Energy Commission reportedly told the Iranian Students News Agency in December that the exchange would at first operate in both dollars and euros, but gradually move to the European currency exclusively. He was also quoted as saying that this would enable Iran to get even with the U.S. for the economic damages it has inflicted on the Islamic republic.

Dr. Asemipur, meanwhile, was noncommittal on the currency question, saying market participants, not the Iranian government, would make the decision. He also denied the planned bourse could harm the U.S. economy.

Mr. Cook dismissed the idea that Iran's goal is to use the bourse to sabotage the greenback. "I have a technical term for that," he said. "Bollocks!"

As for trading oil in euros, he said the Iranians likely would find it very difficult, at least in the next several years. "Basically, there aren't enough euros in circulation, and nor are there likely to be," he said.

Mr. Cook cited a recent article on Hong Kong-based Asia Times Online by William Engdahl, who specializes in the geopolitics of oil.

"For the euro to begin to challenge the reserve role of the U.S. dollar, a virtual revolution in policy would have to take place in Euroland," Mr. Engdahl wrote. "First the European Central Bank . . . would have to surrender power to elected legislators. It would then have to turn on the printing presses and print euros like there was no tomorrow."

A full challenge to the U.S. dollar as the world central bank reserve currency, Mr. Engdahl added later, would entail a "de facto declaration of war on the 'full-spectrum dominance' of the United States today," and that is something no country or group of countries is yet willing to launch.

source: http://www.theglobeandmail.com/servlet/story/LAC.20060314.RIRAN14/TPStory/Business 17mar2006

Iran Oil Customers Hang Tight For Now

Financial Express (India) 17mar2006

Tokyo, Beijing, March 16 — Nippon Oil Corp.’s decision to ease out some Iranian crude due to rising political risks has rattled customers of the world’s fourth-biggest oil producer, but is unlikely to be followed by a wave of defections.

Several small Japanese buyers said they were under corporate pressure to scale back imports as Iran’s rating as a stable supplier is called into question amid the ongoing dispute with the West over its nuclear aims. But refiners across the region said they were not contemplating similar action.

The move highlights the difficulties Iran may face in finding new markets as Tehran lags other producers in investing in overseas refineries, locking in future demand.

Japan’s top refiner Nippon Oil said on Wednesday it would trim Iranian crude imports by 15 % this year due to growing country risks. It said it would buy less from Japanese trading houses, not reduce its own direct contract supplies.

The 22,000 barrel-per-day cut (bpd) is just half a % of Japan’s total imports. However, the ramifications would be huge if other oil firms also turn their back to Iran, which many traders fear could cut off supplies if faced with sanctions by the U.N. Security Council over its atomic programme.

With oil supplies expected to remain tight until new oilfields come onstream over the next few years, however, few customers appear ready to risk upsetting Tehran by cutting imports now, particularly with few alternatives at hand.“Overall Asia’s choices are limited, they have to face the consequences if there is an interruption,” says Kang Wu of the East-West Center, an energy think tank in Hawaii. “Its very hard for Asia to find any other source for its oil.”

National Iranian Oil Company (NIOC) officials said no other companies had reduced volumes due to the nuclear issue.Asia takes about two-thirds of Iran’s 2.4 million-bpd of exports, the rest flowing to Europe, Africa or Latin America.

Fears of the nuclear dispute spilling into the oil trade have lifted the risk barometer to its highest since the Iranian Revolution in the late 1970s — the last time Iranian crude flowed into U.S. refineries — or the Iran-Iraq war of the 1980s.

Surprisingly, Nippon Oil said it was hoping to boost crude imports from Iraq — long considered the least secure in the region — to limit dependence on Iran.

If enough customers gave up on Iranian crude, Tehran could resort to selling cargoes on a short-term basis, as Iraq did briefly after the U.S. invasion in 2003. While few see that happening yet, the shift in perception has been stark.“They may become a supplier of last resort,” said an industry source with a major oil company.

Other major Japanese refiners contacted by Reuters said they would maintain their imports from Iran, which is Japan’s third-largest oil supplier, at a steady pace this year. About a quarter of Iran’s exports go to Japan. But sources with two Japanese trading companies, who often act as intermediaries for refiners, said this could change.

—Reuters

source: http://www.financialexpress.com/fe_full_story.php?content_id=120618 17mar2006

Japan's Nippon Oil cuts oil imports from Iran

AFX / Forbes 15mar2006

TOKYO — Nippon Oil Corp said it will slash its imports from Iran by 15 pct, in part because of the international confrontation over Iran's nuclear program.

However, Nippon Oil said it is not planning a drastic change in policy towards Iran, which is Japan's third biggest source of oil.

Nippon Oil's imports from Iran will decrease by 15 pct this year as a result of a change in brokers, a company spokesman said.

'One major reason was there was trouble with the previous broker, but the risk of Iran's nuclear program was also considered when changing the broker,' the spokesman said.

In spite of its confrontation with the West over its nuclear program, Iran has stressed that it plans to remain a stable producer of oil.

Nippon Oil president Fumiaki Watari visited the Middle East last week and assessed that Iran would not stop oil exports, the spokesman said.

'Trade between Iran and our company will never decrease. It could increase in the future,' Watari was quoted as saying by the spokesman.

Nippon Oil said it would buy more oil from Arab countries, particularly Saudi Arabia and Kuwait.

Japan is Iran's biggest oil customer, buying one-quarter of its output.

kh/sct/agr/bmm/jm

source: http://www.forbes.com/home/feeds/afx/2006/03/15/afx2598386.html 17mar2006

Japan Has Declared It Will Cut Oil Imports From Iran

Itar-Tass (Russia) 16mar2006

PARIS — Japan, the biggest world oil importer from Iran, has declared it will cut oil imports from Iran.

Fumiaki Watari, President of the leading oil processing company Nippon Oil, said in a statement circulated on Thursday that the imports of the Iranian oil would be cut by fifteen percent. The Japanese company said its decision was a result of growing risks connected with Iran. The reduction of the Iranian imports will be recompensed by broader oil purchase elsewhere, including in Russia, Nippon Oil said.

The Japanese resolution has considerably shattered the situation on world oil markets on Thursday. Thus, an expert of the Deutsche Bank said, commenting on the Nippon Oil’ s decision, that it actually means "economic sanctions".

It was not immediately known whether other world biggest importers of the Iranian oil - South Korea, Italy, Spain and France, would cut oil imports from Iran. At present, Iran accounts for 14 percent of Japan’s overall oil imports. After Thursday’s statement made by Nippon Oil the Iranian share in the overall oil imports will drop by four percent.

However, Japan’s resolution will obviously not entail serious economic consequences for Iran. According to the Bloomberg Agency, China - one of the biggest importers of the Iranian oil, intends to buy more oil in Teheran in addition to its present imports.

source: http://www.tass.ru/eng/level2.html?NewsID=4657849&PageNum=017mar2006