Emerging Markets: EEMEA

Emerging Markets: EEMEA

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  • Nelly LiebrechtNelly Liebrecht is a contact of your contacts
    Nelly Liebrecht    Premium Member   Group moderator
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    19 Aug 2010, 11:22 am
    Worry About the Iran Oil Sanctions or Benefit From It?

    Good morning!

    any reason to worry about sanction on Iran aimed at Iran's energy sector? Well, some oil-producing countries could profit from changes in oil-global market and how its going to effect the currency rate.

    Based on a report from MoneyMorning following implications could take place:

    * Iran needs to import about 125,000 barrels of gasoline a day. And the sanctions will make that much more difficult. Most oil traders in the world are pulling out of deals with Tehran for fear of reprisals from the global powers that created the sanctions. China and Venezuela are still sending gasoline, but both have pressures at home against doing that for very long. China - thanks to the growth in its driving population - has its own rapidly accelerating need for gasoline to deal with. And Venezuela has the lowest domestic prices in the world - about 6 cents a gallon. That makes for a very inefficient refining structure and insatiable demand.

    * The second impact is more important and provides the key to understanding the pop in crude oil prices coming and the investment profits that will result. The Iran oil sanctions will prevent Tehran from doing oil sales in dollars or euros. Since virtually all oil contracts worldwide are in dollars - with euros being a distant second - that puts the country in a difficult position. Iranian banks cannot acquire either currency anymore. They will need to move to others in a very inefficient attempt to continue doing business. The Iranian banks already have signaled a move to the yuan (the currency of China, currently Iran's primary oil trading partner) and the dirham (of the United Arab Emirates). The banks are doing that to gain access to Dubai banks, Abu Dhabi oil swaps, and a "back door" into dollars and euros, although at a premium price.

    Source: http://moneymorning.com/2010/08/05/iran-oil-sanctions/


    All of this will significantly cut into Tehran's revenue from oil sales, because the rest of the world still denominates oil exchanges in the U.S. dollar and European euro currencies that Iran can no longer use.

    As the Iran-oil-sanction situation unfolds, it is certain to add jitters to the market, reflected in crude-oil contracts denominated in both dollars and euros. It will also increase the "crisis premium" on setting prices in futures contracts.

    Because Tehran will not be giving up its nuclear ambitions any time soon, it means the pressure on hard currency pricing for oil will increase.

    Which means other neighboring oil-producing countries such as Saudi and the UAE would probably benefit from higher oil prices?
    Best,
    Nelly
  • Victoria Grey
    Victoria Grey
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    19 Aug 2010, 11:50 am
    Re: Worry About the Iran Oil Sanctions or Benefit From It?
    Yes, sure some countries can benefit from it, but do not forget that Iran is a significant UAE trading partner, with trade volume estimated at about 10 billion dollars a year, mostly imports from the Islamic republic. I would imagine that such sanction will have a negative impact for the whole region. Rgds, Vicki
  • Hadi Talebzade
    Hadi Talebzade    Premium Member   Group moderator   Ambassador
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    19 Aug 2010, 2:52 pm
    Re^2: Worry About the Iran Oil Sanctions or Benefit From It?
    As an Iranian I already feel the pressure of these sanction but what I have noticed so far is that some countries just get adapt themselves to the new condition. for example we have changed many of of raw material sources from Germany to Italy just because they have welcomed the new condition.

    for sure UAE would also be benefited a lot from this condition but it seems that they are not willing to do that this time ... we should see what happens ..

    with regards from Tehran,
    Hadi
  • Nelly LiebrechtNelly Liebrecht is a contact of your contacts
    Nelly Liebrecht    Premium Member   Group moderator
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    20 Aug 2010, 08:31 am
    Re^3: Worry About the Iran Oil Sanctions or Benefit From It?
    Hi Vicki, yes, the negagitve impact on Iran neighbouring countries is yet to be observed.... The stock market moved higher last week though....

    Hadi, great to know business people in Iran are looking for alternative ways to do business on given circunstances.... please keep us posted
    regards from Hamburg,
    Nelly