Gold Forecaster
- Global Watch
Gold positive: Iran wants
Yen from Japan not the U.S.$ for oil - Who and what next?
Julian D.W.
Phillips
Gold Forecaster snippet
Jul 27, 2007
- Below is a snippet from the
latest weekly issue from www.GoldForecaster.com
At the heart of the global
monetary system lies the use of the U.S.$ as the currency used
to pay for the globe's oil. Any change in that role has a disproportionate
impact on the importance of the $ as well as its value relative
to the globe's other currencies. If the oil producing nations
of the world decided to use other currencies for oil payments
then the global monetary system itself is undermined, making
gold more attractive and long-term a safer place to hold one's
savings.
So when we heard that Iran
asked the Japanese refiners to switch to the Yen to pay for all
crude oil purchases, after Iran's central bank said it is reducing
its holdings of the U.S.$, we realized that this is an undermining
blow to the $ and will also contribute to the current fall of
the $ in exchange rate values, despite any short-term rally.
Iran wants Yen-based transactions "for any/all of your forthcoming
Iranian crude oil liftings," according to a letter sent
to Japanese refiners that was signed by Ali A. Arshi, general
manager of crude oil marketing and exports in Tehran at the National
Iranian Oil Co. The request is for all shipments "effective
immediately," according to the letter, dated July 10.
Japan's annual oil imports
from Iran costs 1.24 trillion yen ($10.1 billion) against the
entire world's demand for oil of around $2.354 trillion a year.
This is not a huge amount of Yen let alone U.S.', but it is significant
in that it is a breakaway from the $ and it is possible to break
away.
Now add this to the new policy
of the Central bankers of Venezuela, Indonesia, and the United
Arab Emirates, which have said they will invest less of their
reserves in $ assets because of its weakening prospects. At what
point will they permit the switch to other currencies in payment
of oil?
Iran isn't alone in wanting
to drop the $ as the oil currency. Russia has been favoring the
Ruble payment for the Urals oil export blend in rubles to curb
currency risks. The nation plans to open the Energy Stock Exchange
in St. Petersburg in the first half of next year to trade oil
in rubles, U.B.S. AG reported June 14. Russia's ambitions as
the major supplier of Europe will have considerably more impact
on the $ as well as bring the Ruble into the mainstream of global
currencies.
Iran asked the refiners to
use the Yen exchange rate quoted at the Bank of Tokyo Mitsubishi
on the date oil cargoes are loaded. The use of yen-based letters
of credit for oil "has finally been approved" by the
Iranian central bank and the NIOC, according to the letter, titled
"New payment mechanism for Iranian Crude Oil Cargoes."
Japan imported 1.59 million
kiloliters of Iranian crude oil in May, the least since June
2006, according to government data. Only Saudi Arabia and the
United Arab Emirates are larger oil suppliers to Japan than Iran.
In addition, but not of nearly
so much significance, is the policy of Iran in cutting its U.S.$
reserves to less than 20% of total foreign currency holdings.
Consequently it will buy more Euros and Yen as tensions with
the U.S. increase, Central Bank Governor Ebrahim Sheibany said
on March 27 2007. It is important to realize that the content
of reserves is not nearly as significant as the daily use of
the $ in paying for oil, unless it is in the hands of a nation
like China with its [so far] $1.3 trillion, sitting statically
in U.S. Treasuries and other $ denominated assets.
If one, for example cut the
use of the $ in global transactions in oil by half $1.177 trillion,
where will these dollars go? They will be surplus to global requirements.
As we all know this amount of unutilized $s is sufficient to
swamp the foreign exchanges looking for a place to go. Their
eventual path will be to absorb it back into Treasuries, a burden
that will hit both the Treasury yields as well as the $ exchange
rate, heavily. This is why the paths we have described that lie
ahead will be so pernicious to the U.S.$. We have ignored the
effect on all other $ users, which if brought in more than justify
short, medium and long-term investments in gold.
We have just been informed
that China is now quoting in the € on export contracts.
Has the change begun to spread significantly? If this is common
practice in China the $ will come under heavy long-term pressure.
We will continue to keep you informed of such $-impacting events.
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for the entire report.
Jul 27, 2007
-Julian
D.W. Phillips
email: gold-authenticmoney@iafrica.com
321gold Ltd
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