Iranian Oil Bourse - Why it won't work

[AngryAmish]

The big commodity markets exist and thrive because of several factors: liquidity and certainty of payment among the most important. US markets and London have mature legal systems to resolve disputes and make sure payment is certain. I think it is fair to say the Iranian legal system lacks safeguards that most modern nations have.

Iran does have a commercial arbitration law. So far, this Bourse (which we have been told will open any day now - same as we heard for years) has not published it's rules. Even assuming they allow foreign arbitration (like WTO arbitrations) this is the Iranian law on foreign judgments

"Iranian law does not contain any provisions on the enforcement of foreign arbitral
awards. Awards rendered outside Iran must therefore be enforced in Iran as foreign
judgments pursuant to Article 169 of the Civil Judgments Act of 1977, which provides:
The civil judgement rendered by foreign courts are, subject to the following
conditions, enforceable in Iran unless a different arrangement is made in respect
thereon by a law:
(a) The judgement is issued by (the courts of a country where, in accordance with the laws,
t r e a t i e s and agreements of such countries, judgments issued by Iranian courts are
enforceable or- where reciprocal enforcement of judgments is granted;
(b) Its substance is not contrary to the laws of Iran relating to public policy and good
morals;
(c) The enforcement of such foreign judgement is not in violation of any international
treaty to which Iran is a party or any specific laws of Iran;
(d) Such foreign judgement is final and enforceable in the country where issued;
(e) No judgement has been issued by the courts of Iran which is contrary to the judgement
sought to be enforced;
(f) Adjudication of the case in accordance with the laws of Iran is not within the
exclusive jurisdiction of the Iranian courts:
(g) The judgement is not rendered with respect to immovable property situated in Iran and
rights connected therewith; and
(h) The enforcement order of such judgement is issued by the competent authorities of the
country where such judgement has been issued"


All this is legalese for "go ahead and get your judgment, now try and enforce it here".

If you can't enforce a judgment then contracts mean nothing.

There may be a big non-dollar denominated oil exchange created somewhere, it just won't be done in Iran.

[northzax]

1. shh

you're making sense again. Seriously people, would YOU buy in Iran? a country where the rule of law is, shall we say, flexible at times?

[ixion]

2. what, like it's not flexible here?

people seem to forget that Iran gets along pretty good with Russia and China, both of whom happen to be setting better financially that we are at the moment.

[AngryAmish]

4. By what standard do you think Russia and China are setting better than us?

Per capita GNP?

Per capita income?

Size of middle class?

Life expectancy?

There are some very rich people in China. There are also millions living in caves.

[ixion]

7. we're not talking about people who live in caves... we're talking about an oil bourse

and in terms of monetary power, China, given that they own us for the most part, is in a position of power in that regard.

[A HERETIC I AM]

9. Kindly explain how the hell China owns us "for the most part"

Bullshit.

If you are going to use the argument that they hold a lot of Treasury Bonds, so the fuck what?

Those are BONDS. They need the US to settle on those bonds at maturity. The Treasury ALREADY HAS THE MONEY.

Now....who owns who again?

This same line of nonsense - that some foreign power owns us, was laid out in the 80's regarding Japan. We have seen how successful all of THAT worked out for them. Don't underestimate the economic power your fellow Americans have. Not for a second.

[ixion]

13. If you have to borrow 2 billion a day from someone merely to cover the interest payments

on the money you owe them, they effectively own you. Don't be a fool.

[A HERETIC I AM]

14. If you think that "someone" is China and ONLY China..

Then it is you who are the fool.

[ixion]

15. It's not ONLY China, but that doesn't make it any better

we're still borrowing money to cover debt service, not to mention the money we borrow otherwise.

[Angela Shelley]

16. Please send a link of "millions of people in China"

lving in caves.

[AngryAmish]

18. Here you go

[Angela Shelley]

20. Must be tight in there, 698 caves for a million people, WOW!

[AngryAmish]

21. Where do you get that?

In the article (which I can't cut and paste) the 698 caves are one development. The article states about 40 million folks in China live in caves.

I don't understand why you think I am making this up. I don't make them live in caves and I have nothing to gain by having them live in caves. China is still a very poor country on average. Shanghai and Hong Kong is not all of China. There are a billion souls there.

[nightrider767]

27. Hmmmmm,, no response to that!?!

I'll tell you one thing I did note from News reports about the CHinese freeze. With millions of people "and please, don't ask for a link" stranded all over the country, trying to get home for the holiday.

Anyways, from some of the people they interviewed, I got a real chill. Not scientific, not something I'm trying to sell in any way. But a number of people interviewed talked about why it was such an emergency situation for them. It turns out many of them are shipped out to different regions of the country to work in plants. They only get to come home for the holidays.

What a living nightmare.

I salute you my Chinese brothers. Good luck in all things you do.

As for China and the money bomb. Yes, they hold a huge amount of US dollars and have a huge sway on things. Now that being said, so do many other countries, but like Japan in the 80's, 90's once they own dollars and US property, they now part of our equation. Things go bad for us, things go bad for them. But it's a rotten situation. Make no mistake about it.

How many years have we fought communism? ANd now, we've made them more rich and powerful that they ever dreamed possible.

[nightrider767]

26. I don't know about Russia

But China has a huge upside. Their economy is in a position to continue growth at a huge rate. As the dollar falls in value they are working on sales in Europe and other parts of the world. And as their middle class grows, they have a big opportunity to increase sales to their domestic market.

Now that being said, China is a nightmare. I'd hate to live there.

[tuckessee]

19. At least Iran doesn't invade countries

when business deals go bad.

[melody]

22. No, they just stone 12 year olds to death for being raped n/t

[tuckessee]

23. WTF does that have to do with an Iranian Oil Bourse? n/t

[melody]

24. I'm funny that way -- I think social issues impact economic ones n/t

[tuckessee]

25. If you're an American.....

....you have plenty of social issues of your own making to deal with at home & abroad (a million dead Iraqis is kind of a "social issue").

[nightrider767]

28. Great Point!

Let's not point the finger.

[melody]

29. Did I say we didn't? I merely am saying Iran is not a peaceable kingdom

This isn't about Iranians as a people, but clearly your remark was about Americans as a people,
so I'm afraid that's taking us out of the category of government social aggression impacting
the economy and into the realm of prejudice, so I'll opt out.

[nightrider767]

3. Maybe, Maybe not

If Iran is serious about this, they will be smart enough to know that their reputation means everything. Kind of like Swiss bankers. Plus, they'll be dealing in a commodity that they have some experience in, not building Disneyland's around the world. SO it shouldn't be that hard.

You bring up some very good points, and this entire venture may well fall on it's face. But at the same time, if done correctly, if people find this to be a reliable and safe way to buy oil, they will certainly keep them in business.

Add to that, they do have a couple pluses going for them. For one, many countries in this world, believe it or not, hate the United States. So if this turns into a legitimate enterprise, people will jump on the opportunity to "stick it" to the good ole US of A. The other factor is that many people really would like to avoid being vested/trading in dollars. The dollar's been very volatile with a shaky future. I'd think there are many many nations would like to avoid it if at all possible.

My 2 cents worth. You do bring up some excellent points that can't be dismissed. So thanks for your post. Interesting discussion.

Cheers.

[AngryAmish]

5. The people that want to stick it to the USA can do business in London

They can get their contracts fulfilled there.

In order to do this correctly Iran would have to cease it's outlaw ways and join the world's integrated economy. Since it is run by religious nutballs, it won't happen.

[nightrider767]

6. We'll soon find out.

I personally could care less either way. AMerican oil companies and the petro-dollar are not my friend. These are the same guys who are more than willing to tear this country apart. Yes, yes, I know, if they fall then I fall. But let the rotten system fall so that perhaps something good might be created for my daughter.


Can you imagine the impact we might have had on terrorism and world economics if instead of investing in war, we spent that trillion dollars on a million and one ways not to use petroleum products and, or power cars with an alternate fuel source?

Take care.

[Angela Shelley]

17. According to your post, Iran and the USA are soooo common,

I´m referring to the religious nutballs.

[phantom power]

8. Soon enough it may be the Saudis

DUBAI -The relentless decline of dollar over the past few months and Federal Reserve's interest rate cuts will force Gulf countries to revalue their currencies within months to stem spiralling inflation, currency analysts and experts said.

Speculation about a Gulf-wide revaluation is rising before a meeting between Saudi Arabia's advisory council, the Shura, and the finance ministry and central bank on February 17, according to Steve Barrow, currency strategist at Bear Stearns Co.

(...)

Calling the Gulf states to “loosen their ties to the dollar,”a leading analyst said nowhere are the dilemmas more acute than in the Gulf, where virtually all the oil-rich states peg their currencies to the greenback. The combination of soaring oil prices and the tumbling dollar is distorting their economies and fuelling inflation,” he said.

“The argument for linking to the greenback was to provide an anchor for the region’s economies, many of which are small, open and financially immature," the analyst said.

"In effect, the Gulf states import America’s monetary policy. The trouble is that a fixed currency makes it hard for oil exporters to adjust to swings in the price of oil. And monetary policy in the world’s largest oil-importer is not always right for those who sell the stuff."

http://www.khaleejtimes.com/DisplayArticleNew.asp?xfile=data/business/2008/February/business_February172.xml§ion=business&col=

[AngryAmish]

10. This does not mean the Saudis are going to be using the Iranian Bourse

IIRC, the Saudis try to keep the value of their currency at a ratio to the dollar. THey may stop this because it does not make sense now that the dollar is worth less in relation to other currencies.

So does this mean that the Saudis are going to use the Iranian Bourse? No way. Iran and Saudi Arabia have historic enmity that will not be going away for a long, long time. This enmity is thousands of years old.

My point: Iranian Oil Bourse will never be a big player even if it gets started, which in and of itself is unlikely. The Saudis loosening the dollar peg of their currency has nothing to do with the Bourse.

[phantom power]

11. I agree, I was just pointing out that it doesn't require Iran to end the petrodollar.

[AngryAmish]

12. Ah, my friend, I misunderstood

I stand corrected.