Published: Sept. 10, 2007 at 6:07 PM
By DEREK SANDS
UPI Correspondent
WASHINGTON, Sept. 10 (UPI) -- Faced with U.S. economic sanctions and a weak dollar, Tehran is demanding foreign energy companies do business in yen and euros, despite increasingly desperate need for investment.
In a deal announced last week, Japan’s Nippon Oil agreed to buy oil from Iran using yen instead of the traditional U.S. dollars. The agreement comes after years of Iranian efforts to shift its petroleum exports away from dollars and toward yen and euros.
With refineries in need of investment and vast natural gas deposits in need of foreign companies for development, Iran is trying every avenue to extricate itself from U.S. sanctions.
“In general, a key motivation is the U.S. informal sanctions pressure that the Treasury, and Undersecretary Levey in particular, put on banks not to do financial transactions with Iran. And increasingly designating banks with ties to certain Iranian entities as unable to perform the U-turn transactions for dollar-denominated transactions,” according to David Kirsch, the manager for market intelligence at the international energy consultancy PFC Energy.
U.S. Treasury Undersecretary for Terrorism and Financial Intelligence Stuart Levey has been in charge of coordinating U.S. sanctions against Iran since 2004. In recent months the U.S. Treasury has increased pressure on foreign banks not to deal with Iran, including so-called U-turn transactions, which “allow U.S. banks to process payments involving Iran that begin and end with a non-Iranian foreign bank,” according to the U.S. Treasury.
Shifting to euros and yen allows Iran some relief.
“Overall it does lower some of their exposure to this successful yet informal pressure from the U.S.,” Kirsch said.
Iran has the world’s second-largest reserves of crude oil, is the world’s fourth-largest exporter of oil, at 2.5 million barrels per day, and depends on export revenue for almost half of its government revenue, estimated at about $46.9 billion in 2006. Japan is Iran’s largest customer for oil.
Iran’s turn to the yen or euro may help in some ways, but U.S. sanctions are still a danger.
“For them, I think it will make it easier, simply because the banks that it deals with won’t be under the threat of the U.S. prohibiting turn-around transactions. They may still be under threats. Of course, the U.S. has successfully put some pressure on some European-based banks to stop transactions with Iran. That still remains a threat,” Kirsch said.
The United States began sanctions against Iran after U.S. diplomats were held hostage during the 1979 revolution and has ratcheted up sanctions in recent years due to Tehran’s alleged support of terrorism, as well as its efforts to enrich uranium -- efforts that the United States sees as a covert attempt to develop nuclear weapons.
Under U.S. sanctions, American gas and oil companies are severely limited in how much they can invest in Iran, and most other companies are banned from doing business in Iran. However, the United States has little control over foreign companies, and until very recently the U.S. government has chosen not to sanction foreign companies that deal with Iran.
But this has changed. The U.S. Treasury has stepped up pressure on European banks and the State Department has taken a harder line, warning foreign companies that operate in the United States to avoid business with Iran.
The economic consequences of sanctions are not Iran’s only motivation. The declining value of the dollar has also made the euro and yen attractive, if not for sales, than at least for saving.
“There is also another key issue that you are seeing, not just in Iran, but in other oil producers, especially Gulf oil producers, is given the depreciation of the dollar, it is better to hold their reserves at least in euros, it is a better store of wealth. Some of the other Gulf producers will accept payment in euros. They won’t price their oil in euros or yen, and even if they are receiving payments in dollars, most likely they are converting a substantial share of that every month into other currency,” Kirsch said.
Holding cash reserves in euros and yen may be a trend for the region, according to Kirsch, but a large-scale market conversion away from dollars in unlikely.
“I think the producing states are becoming increasingly sophisticated in how they hold their foreign currency. But in terms of whether, is oil formally going to be priced in yen, renminbi, or the euro, I don’t think that is going to happen. Simply because you would have to establish a whole new contract and an exchange for that, and that can be quite costly. It is also, you have to find a contract that the investment community is willing to embrace, and until you need to do that, I think they will be satisfied sticking with the contracts from the NYMEX and the International Petroleum Exchange,” Kirsch said.
Much of the world’s oil is sold through the New York Mercantile Exchange, NYMEX, or the International Petroleum Exchange in London, both of which trade in U.S. dollars. Tehran has for years planned an oil exchange that would operate in euros but has yet to realize the scheme.
A strengthened European economy has impacted trade in other Persian Gulf countries as well.
“Throughout the Gulf, they are also seeing an increasing amount of their trade conducted with the European Union, so with increasing amounts of their imports coming from the euro zone, why not hold larger stakes in their reserves in that currency,” Kirsch said.
Whether Iran’s oil is sold in euros, yen or dollars, the United States will likely not be affected by Tehran’s decision.
“I think it is going to have minimal impact on the dollar and minimal impact on the U.S. energy situation,” Kirsch said.
http://www.upi.com/International_Sec...90/print_view/
............................................benny
Maybe now we will understand what all the fuss from the Syrians was about. They were hollaring so loud and long that it seemed like more than just a flyover violation.
'IAF attacked Iranian targets in Syria'
By JPOST.COM STAFF
Sep 11, 2007
http://www.jpost.com/servlet/Satelli...cle%2FShowFull
Israel's alleged incursion into Syrian skies last week included a strike on what was likely to have been Iranian arms transferred to the country, CNN reported on Tuesday afternoon. According to the news network, a ground operation was also part of the overall foray. Neither Jerusalem nor Damascus has confirmed the report.
CNN claimed that the operation, largely aerial but also had comprised of ground components, left "a great hole in the desert." Although CNN did not cite a specific source, the network gave credence to "US government officials." The report said the IAF targets were likely to be weaponry delivered by Syria which was intended for the use of Hizbullah.
Further, the report said the US was pleased with the alleged sortie, which it said, sent a "clear message" to the region.
Earlier Tuesday, a planned visit by Syrian Foreign Minister Walid al Moallem to Saudi Arabia has been cancelled, Israel Radio reported.
Syrian sources told the Hizbullah owned TV station Al Manar that "a visit was never planned, and therefore its cancellation makes no sense."
Reportedly, the Syrian foreign minister was expected to give King Abdullah in Jeddah a missive from the Syrian president.
It was unclear whether Moallem was invited by Saudi Arabia and the invitation was withdrawn, or whether Syria initiated a meeting with the Persian Gulf state.
On Sunday, Moallem visited Turkey where he presented "evidence" of the alleged IAF foray; the planned visit to Riyadh - flatly denied by Damascus - could have been planned for a similar purpose.
Saudi Arabian-Syrian relations cooled off since the Second Lebanon War, when the Saudis condemned Hizbullah, backed by Syria, for hijacking IDF soldiers - the event that led Israel to retaliate.
..................................................benny
Israel targeted Iranian weapons in Syria - report
CNN says incident in which Israeli planes reportedly invaded Syrian airspace was actually an attack on Iranian weapons transferred to Syria; operation apparently included ground forces, report says
Ynet Published
09.11.07
Israel News
http://www.ynetnews.com/articles/0,7...448687,00.html
CNN news network reported Tuesday that the incident in which Israeli planes reportedly invaded Syrian airspace was actually an attack on Iranian weapons transferred to Syria.
According to the report, the incident involved an aerial operation that also included ground forces that were meant to mark targets or inspect the damage caused by the attack.
Ominous Autumn
Israel tried to attack ground targets in Syria, says Bishara / Roee Nahmias
Former MK says IAF's infiltration of Syrian airspace was meant to take out anti-aircraft missile facilities, ground targets. 'This was a full blown aerial operation and we are treading on dangerous ground,' he says
It was also reported that the operation left "a great hole in the ground" in the Syrian desert. The report was based mainly on sources in the American government and CNN said that Israel was satisfied with the operation's results.
The report said Israel apparently targeted a type of weapon transferred through Syria to Hizbullah from Iran.
Sources told CNN reporter Christiana Amanpour that weapons have been transferred in this way for the past three or four years uninterruptedly.
Hours before CNN report was broadcast, Syria appealed to UN Secretary General Ban Ki-moon and the Security Council, and warned Israel of "the consequences of this outrageous aggression."
In the message sent to the United Nations, Syria said that "the continuing silence of the international community vis-à-vis Israel's illegal act will place the region as well as the peace and security of both countries in the face of uncontrollable tragedies".
The Syrian letter to the UN argued that Israel "is determined to choose aggression instead of peace and by doing so it reveals its true intentions that it tries to hide using fake claims of seeking peace in the region".
On Monday, Turkish Foreign Minister Ali Babacan demanded Israel explain the discovery of unmarked fuel tanks near Turkey's border with Syria.
"This is an unacceptable development," Babacan said in a joint news conference with his Syrian counterpart Walid al-Moallem, who was visiting Turkey.
"All countries in the region must show respect to all countries' sovereignty and carefully avoid acts that lead to tensions," Babacan said. "Otherwise, tensions would be fueled and peace and stability in the region might be harmed."
..............................................benny