Monday, March 06, 2006

Is the Time Appropriate for Oil Bourse?

The Iranian government intends to open a euro-based Oil Bourse in 1385 (March 2006-2007). Under the bourse’s trading mechanism oil payments will be in euro instead of the traditional U.S. dollar. The system will allow anyone willing either to buy or sell oil for euro to transact on the exchange, thus circumventing altogether the U.S. dollar. Oil has traditionally and historically been exclusively traded in U.S. dollar.

The Executive branch and the Majlis seem to be fully behind this idea and believe it will demonstrate Iran’s power and independence. Moreover, the Islamic Republic thinks the Oil Bourse will open new doors, markets and customers for Iranian oil instead of the limited market the country transacts with now.

The Oil Bourse will be based in Iran’s main Free Trade Zone Kish Island, specifically Kish’s famous financial bazaar. The main shareholders of the bourse will be Iran’s largest state-owned foundation (MJF) as well as a subsidiary of the National Iranian Oil Company.

Analysts are skeptical about the prospects for success of the Oil Bourse. They remind that in the post-revolutionary years, Iran tried its hand in a number of such endeavors but the efforts were fruitless. Examples include the Kish Air Show that was supposed to serve as a regional market for aircraft and airplane parts. However, in reality, the idea was a bust and wasn’t enthusiastically received by the region’s aviation industry.

The idea to create a market in Iran to serve as a regional hub for the sale and purchase of oil industry equipment also failed to attract sufficient international and regional attention.

It takes two to tango and it isn’t enough for Iran to be determined to establish an Oil Bourse. If the international community shows little interest in such an idea the chances of such a bourse achieving its objectives are nil.

Furthermore, pundits add the reason some of our Persian Gulf neighbors such as Dubai have registered some successes in becoming a regional economic hub is because the international community is cooperating fully with the United Arab Emirates in turning Dubai into a success story.

If the international community was as interested in investing in Iran, our FTZs - particularly Kish - would have been as developed as Dubai by now.

For heaven’s sake, foreign banks aren’t even allowed to open a branch in Iran yet. How does the government expect Iran’s Oil Bourse to succeed if our banking, economic, commercial and investment rules, regulations and statutes are inadequate and unattractive to the rest of the world?

Is this really an appropriate time for opening an Oil Bourse when the Western powers are pushing to isolate Iran and impose economic and other types of sanctions on us?

Political and economic watchers think that under the prevailing circumstances opening an Oil Bourse will be fraught with problems and obstacles. After all, the government has already had to postpone the inauguration of the bourse by more than one year. Therefore, before the officials in charge pursue grandiose and lofty ideas such as an Oil Bourse, they should get to work in reforming Iran’s laws, relaxing investment restrictions, solving Iran’s various problems with the global community, etc.


Post a Comment

<< Home