Follow up to the most-read post of this blog. The Iranian Oil Bourse (IOB) began trading today, according to media reports, most of them Arab sources. This is almost a year later than originally planned.
The first day of trading saw turnover of 100 tons polyethylene. Iran produces 22 million tons petrochemicals annually and claims to be the #2 producer behind Saudi Arabia.
Oil Minister Gholam Hossein Nozari said that trading in crude oil will come at a later stage with no specific date set yet.
"The first phase should operate for a while and we should find out its strong and weak points in order to open the second phase. Because the second phase is more complicated," Nozari said.
The IOB accepts Iranian Rials and a host of other currencies including Russian roubles, but no Federal Reserve Notes (FRN's.) Iran has shifted all its assets out of FRN obligations in order to avoid an arbitrary confiscation by the USA.
Iran's first domestic toehold in oil trading is another blow to the ailing unbacked dollar. As more oil gets traded in other currencies, the demand for FRN's will further reduce.
The USA anxiously follows these developments that could easily spread to other commodities as well, again reducing the demand for dollars as a hitherto unchallenged currency of choice in commodities markets.
There is no sound reason why Euro countries will not prefer to settle their oil bills in their own currency, eliminating forex costs too.
OPEC has declared earlier that it too is looking into other options. OPEC mulls to replace FRN's with a basket of currencies.
The Iranian initiative opens up other scary perspectives. What if Russia and Iran team up and demand Roubles and Rial only for their energy deliveries to the West?
The Rouble has quietly become a hard currency. Russia’s gold and foreign currency reserves stood at a record $481 billion as of last week. That is about half of Japan's forex reserves.
Find more background on the Iranian Oil Bourse here, here, and here. The first post has been read more than 50,000 times here and been reposted on more than 130 websites.