Guest Post: Iran Opens Oil Bourse - Harbinger Of Trouble For New York And London?

Tyler Durden's picture

Submitted by John Daly of

Iran Opens Oil Bourse - Harbinger of Trouble for New York and London?

The last three years of global recession have dealt a major blow to American capitalist ideas trumpeted throughout the world on the value of “free markets.” Wall St has been revealed as a form of casino economy, with the bankster insiders gambling with other people’s, and eventually, the government’s money in the form of bailouts. As the Republicans in Congress, scenting victory in the 2012 presidential elections, hold a gun to the Obama administration’s head and rating agencies consider downgrading U.S. government bonds in light of Washington’s possible defaulting, many ideas around the world that previously seemed implausible because of the dominance of the U.S. economy are garnering renewed interest.
Not surprisingly, many of these concepts originate in countries not enamored with Washington’s influence, perhaps none so more than “Axis of Evil” charter member Iran, which has seen its economy hammered by more than three decades of U.S.-led sanctions. Now Iran is working a program, that, if it succeeds, could help undermine the dollar’s preeminence as the world’s reserve currency more effectively than a Republican filibuster.
Iran’s sly weapon against the Great Satan’s currency? An oil bourse on Kish Island in the Persian Gulf, which has now begun selling high-grade Iranian crude oil.
Mohsen Qamsari, deputy director for international affairs of the Iranian National Oil Company was modest about the exchange’s initial capabilities, saying, "The commodity stock exchange has been pursuing a mechanism for offering crude oil on the stock exchange for a long time, and it has taken the preliminary steps, to the extent possible. Considering the existing banking problems, foreign customers are not expected to be taking part in the first phase of offering crude oil on the stock exchange, and this will be done on a trial basis. Today Bahregan heavy, high quality, low sulfur crude oil with less sourness will be offered on the stock exchange for the first time. In the first phase, a 600,000 barrel shipment will be offered."
Given that the world currently consumes roughly 83 million barrels of crude oil each day, the initial oil offerings at the Iranian stock exchange are hardly going to make or break the market, but they do represent an attempt by a significant oil producer to divert revenue streams from New York Mercantile Exchange, the world's largest physical commodity futures exchange, which handles West Texas Intermediate benchmark futures, and London's Intercontinental Exchange, which deals in North Sea Brent. All trades are in dollars, effectively giving the U.S. currency a monopoly.
The Kish Exchange dates back to February 2008, when instead of Tehran, Kish was chosen because it had designated as a free trade zone. The Exchange was set up to trade contracts in euros, Iranian rials and a basket of other currencies other than dollars. The previous year, Iran had requested that its petroleum customers pay in non-dollar currencies. But the Exchange initially traded contracts only for oil-derived products, such as those used as feedstocks for plastics and pharmaceuticals.  Now the institution has taken the next step.
Even as Congress remains tone-deaf to the recession’s effect on American jobs and the economy, others have taken careful note. On 17 June 2008, addressing the 29th meeting of the Council of Ministers of the OPEC Fund for International Development in the Iranian city of Isfahan, Iranian President Mahmoud Ahmadinejad told those in attendance, "The fall in the value of the dollar is one of the biggest problems facing the world today. The damage caused by this has already affected the global economy, particularly those of the energy-exporting countries. ... Therefore, I repeat my earlier suggestion, that a combination of the world's valid currencies should become a basis for oil transactions, or (OPEC) member countries should determine a new currency for oil transactions."
What it would take for Iran’s new exchange to survive and flourish are some heavy-duty customers that Washington would be wary of picking a fight with, and Tehran already has one – China.
China, the world's largest buyer of Iranian crude oil, has renewed its annual import pacts for 2011. In 2010 Iran supplied about 12 percent of China's total crude imports. According to the latest report of the China Customs Organization, Iran's total oil exports to China stood at 8.549 million tons between January and April 2011, up 32 percent compared with the same period last year. Iran is currently China's third largest supplier of crude oil, providing China with nearly one million barrels per day.

China simply ignores Washington’s squeals about sanctions, but it is concerned about the bottom line, and unless Iran makes its oil prices more attractive versus competing supplies from the rest of the Middle East or South American exporters, it may be hard for the OPEC member to boost its share in the rapidly expanding Chinese market.
Enter the Kish Exchange.
China's Ambassador to Tehran Yu Hung Yang, addressing the Iran-China trade conference in Tehran on Monday, said that the value of the two countries' trade exchanges surged 55 percent during the first four months of 2011 over the same period a year ago to $13.28 billion and further predicted that the figure would surpass $40 billion by the end of the year.
So much for sanctions, eh?
So, while Washington prepares to commit political hara-kiri, Iran is preparing to take away a little of the capitalist glow from New York and London. If the Chinese decide to start paying for their Iranian purchases strictly in yuan, expect the trickle away from the dollar in energy pricing to become a stampede. That ought to give Washington politicos an issue to think about besides gay marriage.

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The Count's picture

Iran Opens Oil Bourse - ?

The bombers are being prepped. We do not let anybody mess with our ponzi schemes.

Waffen's picture

This is no joke. We go to war about this kind of thing, much more so then terrorism.

Rick64's picture

This is terrorism they hate our reserve currency status, I mean freedom.

Cheesy Bastard's picture

The bourse is the source, for force, of course.

Strider52's picture

Cheesy, now that's damn funny.

Problem Is's picture

Not when the DC corrupt, worthless, moronic politicos ARE the rear end of Mr. Ed...

MobBarley's picture

True true. North Korea, Iran, Venezuela, Cuba. What do these countries have in common?

Rejection of the COUGHRothchildCOUGH* banking establishment.

They're an AXIS OF EVIL I tells yah.



Infinite QE's picture

Don't forget dear old Libya, where the `rebels', after a hard days fighting, still had the energy to gather at night to form, from scratch of course, a new central bank. Wonder who owns that!

eureka's picture

Yeah -uncle pedophile Sam has his dirty olde hands everwhere they don't belong - never the less, his self-righteous sanctions are smanctions, his PentaGun's on the run and his bankster scum is fucking dum - like uncle himself, pants down below his knee for all to see.

Popo's picture

Saddam tried this in 2000.    (I can't believe that hasn't deleted this story by now!)





speedy's picture

Why should they delete the story?

It's still there so you can link to it as support for your assertion that Saddam tried it in 2000.

speedy's picture

deleted. (double post)

StychoKiller's picture

One for the left, one for the right (ooh yeah!)

malikai's picture

Yea, and that worked out so well for him. One has to wonder if the Iranians learned anything from Saddam. False flag and invasion imminent.

Infinite QE's picture

But they don't use the currency that we endorse...

Cheesy Bastard's picture

Then I saw a rider on a pale horse...

Manthong's picture

Boom! They're all damn dead.

Alpha Monkey's picture

They hate our reserve currency status and the way we utilize it to manipulate the global economy.

ThoughtCriminal's picture

me thinks The Count is not joking

dark pools of soros's picture

it's the ONLY thing we go to war about.  Oil and how it is bought.  Go back and look at the timeline when Bush said mission accomplished and when Iraq was forced to go back to selling ol for dollars and hold $$ instead euros

CrazyCooter's picture

Yup, but the historical timeline is much longer than Iraq (at least I think). I have a very low volume blog for family and such, but I occasionally bang the drum for those that listen and are willing to learn/adjust. Anyone that doesn't understand how this means WWIII is welcome to read my take on the event.

I would love constructive counter opinions and such. I am here on ZH to learn and keep up and I certainly don't know everything. However, I do think I got this one more or less nailed down.

Best of luck to all, be safe, snag those PMs, and have a plan when things get ugly because I think it will be before too long.



Urban Redneck's picture

The settlement currency of the oil trade was not the reason for the invasion of Iraq or Libya.  In the larger scheme of things and outside the myopic view of US policy- the medium of exchange for pricing and trade settlement is irrelevant, the trade could be settled in donkey dicks instead of dollars.  The issue of what the medium of exchange is then exchanged into is far more important (see OPEC demographics, Greenspan ZIRP, and the nixing of the DPW deal by the Bush administration for key turning points since the gold window closed). 

The people who have wealth (outside of bankers) and the people who have oil don't measure their wealth in any fiat medium of exchange that a pencil dick bureaucrat can create out thin air.  They never have and never will.  Even bankers, once they reach a certain level- diversify into measures of wealth that cannot be conjured at will: land, art, yachts, jets, horses, etc.  Access to a supply of oil, however, has been key to foreign policy development since the beginning of the twentieth century and greatly accelerating with the conclusion of the first World War.

The dates you highlighted in you blog '33, '64, and '71 have a different significance in the oil industry.  The original Aramco concession was signed in '33, denominated and settled in gold (which US oil companies had to source from the UK to circumvent FDR), '64 was the peak in worldwide discoveries (including the North Sea which would have a great impact on UK foreign policy priorities) and the nationalization of the 24% US controlled IPC (Iraqi Petroleum Company), and '71 was the British withdrawal from the Persian Gulf and OPEC nationalizing many concessions held by western oil companies, later to also be also identified as the peak of domestic US production.

The ties between oil and gold are long and deep.  At the turn of the century much of international trade was settled in physical gold.  Following the conclusion of WWI and the collapse of the Ottoman Empire, long before the UK developed its fetish for drawing perverse lines on maps with unintended long term consequences, Gulbenkien was drawing his famous Red Line (Mr. 5% and one of the true PTBs of the twentieth century, who is also ironically linked to the two predominate understandings of the Golden Rule).  

There is a fairly rudimentary timeline at the link below, that combines events from the oil industry and US monetary and foreign policy.  The perspective is narrow, biased, and US based, it's woefully incomplete, and it draws several erroneous conclusions, but its better than nothing and much easier to digest then a handful of thousand page tomes.

zapdude's picture

I read your Blogger post.  Excellent history & analysis here, please keep up the good work, Cooter! 

One related story -- or a red herring -- to the Iranian oil bourse in 2008 was the multiple underwater fiber optic lines that were cut around the middle east.  These cuts were allegedly 'accidental' due to a ship's anchor dragging along on the ocean floor, but the timing and proximity to Kish island is very uncanny... 

Rick64's picture

 Time for some western style democracy and freedom whether they want it or not.

Zero Govt's picture

Yep Defo' a kick-off for war... anyone mentions selling Oil in anything but USD and along come the International Goon Squad (US Military)... nothing like dropping 200lbs of high explosive per square meter on a country to show your expertise at foreign policy negotiating skills... very advanced nation the US  ...and what a 'winner' that is around the globe

Jack Burton's picture

Indeed! This means war. Perhaps not straight off, but if ever Israel needed US backing to attack Irans nuclear program, this Iranian move has opened the door to 100% US support for Israel starting a conflict over the nuclear program and giving the US excuse and cause to step in and end Iran as an oil exporter and regional power.

At the present state of things, the US is very badly placed to take on a new Iranian war, BUT, and this is a big but, this Iranian oil market is a threat to US dollar reserve currency status and this status is most important to continued US great power status.

Time will tell, but any honest person can see the forces of war gathering and this news simply adds to the possibility that Israel gets a green light to hit Iran and the US will join in with a massive air campaign to defend Israel and eliminate Iran's troublemaking in the oil markets.

Plus a real war would distract Americans from austerity and unemployment and unleash pent up patriotism that has died down since the heady days of the Afghanistan and Iraq conquests. Marc Faber predicted this and he probably was correct. After massiv emoney printing fails, they will take the US to war.

WonderDawg's picture

As you say, it's the perfect set-up for a US-supported Israeli attack on Iran. It's almost like a script has been written. We need a war and Iran is saying, "I'm your Huckleberry".

DrunkenMonkey's picture

Indeed, a bit too convenient ..

Non Passaran's picture

How is this a threat to US dollar reserve currency status?
Dream on...

Dugald's picture

Use a bunch of unemployed to make uniforms etc and another bunch to fill them, huge reduction in the unemployed, and a good increase in canon fodder...Wave the flag, Yankee doodle an all that jazz.......and your problem is?

onthesquare's picture

if you guys (the USA) are going to war for some semi-sweet crude then we (Canada, Britain, France, etc.) would like to participate; in a humanitarian way of course.

We could make sandwiches, or buy bombs just to make sure that when the spoils are divided we would get a piece of the pie. Who knows eventually Russia may even see the evil in Iran and jump in for humane reasons. Oil is, of course just the consolations prize.

Rupert could cover the progress of this humane rescue and all the sheeple would be happy.

Popo's picture

Israel will almost certainly attack now.   But I don't believe that it is "Israel that needs backing".   It is Israel that is instead, doing the direct bidding of America.  

All wars are now proxy wars.   Israel will do our bidding, and Israel will take the heat from the international community.  In exchange,  we will supply Israel with money and weapons to insure her regional hegemony.

It should also be said that the Saudis will be fully behind this war.   The last thing they want is Iran on the ascendancy.  

In exchange for supporting the US/Israel invasion of Iran, the Saudis will get a similar deal to the Israelis:  Weapons to insure that the House of Saud can control its population which is boiling over with rage.  

And if anyone has any doubts of what will happen next,  take a look at this CNN article from 2000:


Enough said.

malikai's picture

Just one problem.. What will the Saudi, Iraqi, Bahrani, Pakistani, and Afghani plebians think of the Jews' attack against their 'brothers' in Iran? I understand there to be quite a few Shiites in Saudi as well as Bahrain. That will not go down easy with them, let alone the rest of the muslims who will see any attack by Israel on a muslim country as outright jihad.

I put the odds on an unprovoked Israeli attack against Iran at 1 in 1000.

OTOH, I put the odds of a false flag and "coalition of the kleptocrats" invation at 1 in 2.

snowball777's picture

I don't believe NuttyYahoo needed much "bidding"'s more like the US has decided to let its little barking Rottweiler off the chain.


Quinvarius's picture

In other news, Israel updates it's ballistic missile targets.

Zero Govt's picture

do we get to input? votes the Isaeli Parliament building

freethinker4now's picture

Wonder if this is why the Navy have been moving nearer to Iran?

Steaming_Wookie_Doo's picture

Without a doubt in my mind. I'm sure it's pissed off the Empire that Iran hasn't flat out died despite sending Saddam after them for 8 yrs, 30+ yrs of sanctions, etc. Now they are challenging the petro-dollar hegemony. They may pay a heavy price for this, but have some big friends standing behind them. No ordinary chess game here.

mayhem_korner's picture

Insightful, Wook.  Exactly who is hiding in the bushes and how far "they" will source the cold war eminating from Tehran is big.  And it is interesting how the attack has been incessantly at the soft (economic) underbelly of the U.S.

Manthong's picture

They are Persians and likely the Arabs would rather we run the show in their sandbox than Iran.

It is fortunate though, that the Iranians are providing a nuclear justification for some intervention there.

If we could only get some country over there to be a proxy for getting the party rolling.

Hmmm.. I wonder who might be up to the task.....

Dugald's picture

Who is hiding in the bushes does not matter, its the size of their logistics that does.....

SoNH80's picture

Iran, Turkey, Israel, Pakistan, India, China, Russia, Saudi Arabia, and the U.S. and A., circling each other with pistols drawn.  The Iranians have thrown down the gauntlet with this move.  It's like flicking a spitball onto the big jock dickhead wanker in the cafeteria, sure to lead to some kind of action.

candyman's picture

I thought wars were supposed to help the economy, and with three already churning, why the stagnation and high unemployment? I think the book is being rewritten.

CrazyCooter's picture




P.S. I abhor caps, but it is a cut-and-paste from Wiki, and I am too lazy to retype it. Well, except for the FIAT IS MONEY part, that was mine. But I couldn't be asymmetrical on ZH. Some pedantic troll would bust me.

speedy's picture

Junked because the explanation for your post was longer than the post it'self.

Copying stuff from Wiki is hardley presenting original thought.

snowball777's picture

Highly dependent on being the last country standing with a functioning economy..."to the victor..." and all that jazz.