$this->bbcode_second_pass_quote('manu', 'O').K. I will accept defeat from Mr.Bill and Darren if you can answer these questions. Why did Russia change to accepting only Rubles for their oil?
Why did the U.S. put pressure on the U.N. to put sanctions on Iran as soon as they decided to take Jap. yen?
PeakOil is You
What does it matter if oil is traded in US$ or other?
Re: What does it matter if oil is traded in US$ or other?
by MrBill » Wed 15 Aug 2007, 05:16:05
Russia currently quotes Ural blend crude on the RTS in both USD and RUB. The price is identical. Only the settlement currency is different. You can pay in either. So it is just a function of the USD/RUB exchange rate and nothing more.
Furthermore, the amounts are really tiny. Especially compared to the ICE, NYMEX or DBX. It has been such a flop in reality that Mr. Putin has suggested opening another exchange in St. Petersberg.
Basically, it is not a physically settled contract. It is a cash settled one. It is based on the price of Urals grade crude delivered to Amsterdam, Rotterdam, Antwerp (ARA). It is a higher sulfur grade crude than Brent. More like Buzzard. But I am not a physical trader, so that is about all I know about the grade.
The other problems with an oil boerse in Russia are that a) the market is dominated by just a few firms, so inside trading could be rampant as well as market manipulation by large producers, and b) there is a monopoly on both the oil pipeline and the railway for oil export. Again a potential source of market manipulation.
Russia can start another boerse if they want, but I truly doubt in light of past developments that the Kremlin is going to release their grip on oil exports. So it is not a open, free, transparent market.
Also, the CBR is trying to hold down the relative appreciation of the ruble through sterlization of Russia's export earnings into its own foreign exchange reserves, and to The Oil Stabilization Fund. Repatriating oil & gas exports into rubles would accelerate the appreciation of the ruble. Not only are Russian capital markets not able to absorb those inflows, but it would make Russia's other exports less competitive. Sterilization is one reason why Russia's money supply growth is close to 50% this year feeding into high domestic inflation and asset price appreciation.
It would make more sense for Russia to accept euros for its oil and natural gas exports because the EU is Russia's largest trading partner and it takes in more imports in euros than US dollars.
As for UN sanctions against Iran those are supported by everyone on the Security Council including Russia and China. Iran is quite pissed at Japan due to Japan's own trade sanctions against Iran over its nuclear program, so the issue of yen for oil is decidely delicious retaliation.
The Iranians know that the yen is grossly undervalued, so that makes imports in yen very expensive and inflationary. Also, the BOJ is trying to keep yen interest rates low in relative terms to keep the domestic economy expanding after almost 15-years in the doldrums. Much of the recent growth in Japan's economy has been in exports because the yen is close to 40% undervalued against the euro, for example, but also against the US dollar and the yuan as well. That export growth is exchange rate dependent.
If Japan needs to sell US dollars from its exports, in order to buy yen to pay for oil in yen then this starts a chain reaction.
If Iran starts keeping a portion of their oil sales in yen denominated assets then it puts upward pressure on the yen. This can cause yen carry trades to also unwind strengthening the yen further. This and the fact that Japan's trade partners, especially the parts of the EU that use the euro, have been complaining about a weak yen undermining their own exports. So Iran really extracts its revenge for those sanctions by threatening to hurt Japan's competitiveness just as it is starting to recover.
In the same vein Europeans cannot be too happy about Iranian oil sales in euros either if these export receipts end up in euro-denominated assets as the euro is already strong and imports from China and the rest of Asia at record levels that threatens the competitiveness of Italian and French luxury goods as well as textiles. You will note that Mr. Sarkozy has already taken a number of swipes at the independence of the ECB and tried to convince EU finance ministers that the euro is over-valued. Petrol-euro demand will only exacerbate that.
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Re: What does it matter if oil is traded in US$ or other?
by manu » Wed 15 Aug 2007, 05:32:31
Why doesnt Iran just sell in $, and buy yen or Euros then?
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Re: What does it matter if oil is traded in US$ or other?
by MrBill » Wed 15 Aug 2007, 06:12:27
$this->bbcode_second_pass_quote('manu', 'W')hy doesnt Iran just sell in $, and buy yen or Euros then?
They can. The problem is that eventually ALL US dollars flow through a US bank. Even if you use BNP Paribas or the Bank of Tokyo, if you use a US dollar bank account, that foreign bank will have a sub-account at a US bank, who in turn will have an account with the Fed.
This effectively gives the US government oversight over all USD transactions regardless of where in the world they are made. If they are so inclined to churn through millions of individual transactions daily.
The scandal of the US government examining banking transactions through SWIFT was the issue of data protection, who could use this data and for what purposes.
So if Iran is under sanctions then they might like to use BNP Paribas or the Bank of Tokyo for euros or yen, so those transactions do not benefit Great Satan and his evil banks.
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Re: What does it matter if oil is traded in US$ or other?
by manu » Wed 15 Aug 2007, 10:15:13
So it does matter. If the oil was sold in other currencies the U.S. may not have as good an idea of who bought what for how much. Sort of like what Saddam was doing under U.N. sanctions. Also the U.S. can then control the oil markets, being as the U.S. is still the biggest importer of oil. Thank you for all the info. Enlightening from an economic point of view.
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Re: What does it matter if oil is traded in US$ or other?
by manu » Wed 15 Aug 2007, 10:33:33
I just read on yahoo news that the U.S. is going to put the Iranian Guard on their terrorist list. Just what you are talking about.
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Re: What does it matter if oil is traded in US$ or other?
by MrBill » Wed 15 Aug 2007, 11:21:55
$this->bbcode_second_pass_quote('manu', 'I') just read on yahoo news that the U.S. is going to put the Iranian Guard on their terrorist list. Just what you are talking about.
Yes, it was that in the Washinton Post as well. It means the US can then delve into their financials dealings under The Patriot Act or whatever other guise they choose if they are classified as a terrorist organization. Pretty sad really. It is not constructive in the least.
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Re: What does it matter if oil is traded in US$ or other?
by manu » Tue 21 Aug 2007, 03:05:47
petrodollarwarfare.com/PDFs/Hysteria_Over_Iran_and_a_New_Cold_War_with_Russia.pdf
Please read if you would like the truth.
Darren, Cube, I.E.Monkey Looks like the nuts, dumbed down, Joe Six Packs know more than you. Esp. pages 7-17.
Looks like two plus two = four (only if the two's are really two's and not something else.)
Please read if you would like the truth.
Darren, Cube, I.E.Monkey Looks like the nuts, dumbed down, Joe Six Packs know more than you. Esp. pages 7-17.
Looks like two plus two = four (only if the two's are really two's and not something else.)
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Re: What does it matter if oil is traded in US$ or other?
by manu » Tue 21 Aug 2007, 03:16:53
www.petrodollarwarfare.com/PDFs/Hysteri ... Russia.pdf
Please read if you want the truth. Esp. pages 7-17 and 20-27.
As for Cube, I.E.Mondey, and Darren. It looks like the dumbed down and the Joe Six Packs win the arguement after all.
Please read if you want the truth. Esp. pages 7-17 and 20-27.
As for Cube, I.E.Mondey, and Darren. It looks like the dumbed down and the Joe Six Packs win the arguement after all.
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Re: What does it matter if oil is traded in US$ or other?
by Scactha » Tue 21 Aug 2007, 04:19:15
$this->bbcode_second_pass_quote('MrBill', '')$this->bbcode_second_pass_quote('manu', 'I') just read on yahoo news that the U.S. is going to put the Iranian Guard on their terrorist list. Just what you are talking about.
Yes, it was that in the Washinton Post as well. It means the US can then delve into their financials dealings under The Patriot Act or whatever other guise they choose if they are classified as a terrorist organization. Pretty sad really. It is not constructive in the least.
Indeed not. The neocons just doesn´t follow with the times.
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