Iran starts oil exchange in Tehran

Iran, holder of the world's second-largest oil and gas reserves, opened an exchange for crude and petrochemicals as the government encourages private investment in the energy sector. Trading began today [17 Feb 2008] in petroleum products such as light polyethylene, a plastic used for packaging. The Tehran-based Iran Mercantile Exchange is using "spot" rather than futures trading, requiring immediate payment and delivery of the physical product.

Crude oil contracts will be added after a review, Iran's Oil Minister Gholamhossein Nozari said. Iran had been expected to start its own oil-trading market in 2005. Since then, Dubai has launched the Persian Gulf's first bourse to trade sour crude oil futures, which best reflects the type of oil produced in most of the region.

The Iranian rial will be used for all transactions in the first phase and "can be converted in real time into any currency," Nozari said. Traders are based in the Kish Island free-zone, offering investors easy transfer of money and tax exemptions. The exchange may also use the Russian ruble "to free the world of dollar slavery," Iran's ambassador to Moscow, Gholamreza Ansari, said Feb. 15 [2008].

- Iran's much-talked about "nuclear weapon" against the US Dollar looks to be no more than an unguided Scud missile. They are starting small, and under certain restrictions which seem more political than technical. I'm pretty sure that they are quite capable of conducting transactions in all forms of oil and petrochemical products versus just polyethylene, in Euros instead of Iranian Rial, and supporting both futures and spot instead of just spot trading. But that would then be a real threat to the NYMEX and the USD and might provoke an immediate armed response from the US. So the Iranians are at least smart enough to start slowly instead of taking the big bang approach.

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