Iran Asks Japan to Pay Yen for Oil, Start Immediately

[TexasLawyer]

Source: Bloomberg

Iran Asks Japan to Pay Yen for Oil, Start Immediately (Update1)

By Megumi Yamanaka

July 13 (Bloomberg) -- Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it's cutting holdings of the U.S. dollar.

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 and obtained by Bloomberg News.

The yen rose on expectations for an increase in demand for the currency to buy shipments from Iran, Japan's third-largest oil supplier. Central bankers in Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets because of the weakening currency, while the United Nations Security Council is preparing for another round of sanctions against Iran because of the nation's nuclear research.

``What else can Japan do but to accept the request, once the oil producer sent its wish?'' said Hirofumi Kawachi, an analyst at Mizuho Investors Securities Co. in Tokyo. ``The tensions between the U.S. and Iran are escalating, and it's Iran's measure to hedge risk.'' A spokesman for Iran's oil ministry in Tehran said he could neither confirm nor deny that the letter had been sent. Most Japanese oil refiners have until now used U.S. dollars to pay Iran for oil, said the spokesman, who declined to be identified by name because of government policy.

<snip>



Read more: http://www.bloomberg.com/apps/news?pid=20670001&refer=worldwide&sid=aLaColVYu5LA

[Kagemusha]

1. That's interesting. Because I can't see Japan saying yes.

Someone in the Bush admin will get on the phone and bark at them to not even consider it, and they won't, because the current administration in Japan just is not interested in ticking Bush off.... even at the cost of weakening oil imports. I would think.

[enid602]

3. sign

This might be a sign that the US'/Bush's ability to call the shots may be weakening.

[Tempest]

4. Japan will agree

They have no choice.

Japan's oil market is vertical. They import oil not only for domestic use, but for exporting refined gasoline. Saying no would be a double whammy against their economy.

Also consider how other oil producing countries are doing the same thing as Iran. Do you expect Japan to cut off imports from those countries as well?



From the article:

Iran isn't alone in wanting to drop the dollar for pricing oil. Russia has been examining plans to price the Urals oil export blend in rubles to curb currency risks.

Payments from Japanese refiners to Iran rose 12 percent last year to 1.24 trillion yen ($10.1 billion), according to the finance ministry in Tokyo. Japan imported 1.59 million kiloliters of Iranian crude oil in May, the least since June 2006, according to government data.

[Kagemusha]

6. I think they would treat Iran as an isolated case because the US will insist.

Now, mind you, I think that such a move would be stupid and not in Japan's interests, but um.. that hasn't stopped them before, Japanese governments, I mean. We'll see. I just know from past experience that betting on the cynical option works a lot.

Though I must say I am quite amused to see Russia treat rubles as more stable than the US Dollar. My how things change.

[Tempest]

7. As another poster pointed out

Bush's ability to influence other countries is practically non-existent.

I highly doubt Japan is going to listen to a president who has a 25% approval rating and is an 18-month lame duck. Especially since it is not in their best interest.

[Kagemusha]

9. They recently extended their non-combat deployment to Iraq by 2 years.

If Bush can influence any country, it's Japan. Practically non-existent would still leave Japan. Not saying I think it's a good thing at all, but that's how I see it.

[Tempest]

12. Japan is in Iraq for the money, nothing more

Japan's current involvement is in the reconstruction and development programs, which are making money hand over fist.

They're not going to walk away from all that free money.


Japan's decision to stay had nothing to do with pressure from Bush.

[atreides1]

13. Is this the extension you're referring to

June 20, 2007

TOKYO -- Japanese lawmakers on Wednesday approved a two-year extension of the country's air force transport mission in Iraq, despite criticism of Tokyo's involvement in the increasingly unpopular war.


It only extended it's air force mission, which has a complement of 200 personnel who are stationed in Kuwait.

Not a very big influence!

[Kagemusha]

15. Yes, that's what I meant, and the size isn't the point.

The point is that extending any presence in Iraq by 2 years when even the British are going to remove their forces well before then is borderline insanity.

The other poster seems to think Japan's making money off this somehow. I have no idea how that could be, but whatever. As I said, we'll see what Japan actually does. I am cynically speculating cooperation with the US, but someone might surprise me.

[Art_from_Ark]

27. Kind of interesting that Japan's prime minister also has an approval rating

of about 25%. And he's already considered by many in Japan to be a lame duck, just a few months after taking office.

[Dover]

28. They don't look at Bush and see an American president. They see all the corporate puppeteers

whom they depend on and cater to for more reasons then can be counted. Hard to break free
of that group unless you can join with others and redirect trade, security, etc. from other major players.

[melody]

2. Yet one more Bush blow against us

He has economically crippled us to such a degree, this is the beginning of a depression.
And they've managed to engineer hatred of Americans, so everyone will cheer the result.
This is going to get ugly.

[soothsayer]

10. yes, since we have an oil backed dollar.

will we nuke japan again?

[melody]

22. No, imo, the people who are doing this intend for this to happen

Bush is part of it. He's not going to object.

[TexasLawyer]

5. Dollar-euro? It's the yen, stupid--

Dollar-euro? It's the yen, stupid

The greenback may be hitting record lows versus the euro
but the more worrisome problem - a big drop against the yen.

By Grace Wong, CNNMoney.com staff writer
July 13 2007: 12:37 PM EDT


LONDON (CNNMoney.com) -- The dollar hit a record low against the euro this week, but the bigger story for many currency watchers was the greenback's slip against the yen.

That's because a sharp rise in the yen could have nasty consequences for millions of investors around the world. The dollar slid to a one-month low of ¥120.96 yen on Wednesday, raising concerns that a strengthening of the Japanese currency could put billions of dollars worth of low-cost yen loans in peril.

<snip>

For years, investors have been borrowing at Japan's super-low interest rates and selling yen to buy investments in higher-yielding currencies - a trading bet known on Wall Street as the "yen carry trade."

A big, sustained rebound in the yen could jeopardize those trades, Laidi said. "The yen is a funding currency. When it rallies, it makes the repayment of those yen loans more expensive, even though interest rates are low," he said. Traders attributed the yen's jump against the dollar this week to problems in the subprime mortgage market in the United States, which caused some investors to seek safer places for their assets - and exit the yen carry trade.

<snip>

http://money.cnn.com/2007/07/13/markets/dollar_yen_carry/

[Vincardog]

8. Does it look like everyones house of cards is getting ready to fall? YES

[dipsydoodle]

17. "You might think that -

I couldn't possibly comment"

aka YES !

[DBoon]

23. I think that was the intent

I think their agenda is to drive the USA's standard of living down to the global average, to cheapen US labor and create a political climate where they can operate unhindered.

Devaluing the dollar is one step to turning us into a plantation economy.

[Tempest]

11. This is no different than the hedge market

And like the hedge market, it's going to go boom in a big way when it catches up with them.

[Lone_Star_Dem]

21. I was saw this thread and was going to post this same article in it.

Yes sir, times they are a changing.

[roamer65]

14. Japan will have no choice. They'll send yen for oil.

Otherwise, no oil.

[AntiFascist]

16. There goes the dollar, start investing in yen n/t

[kineneb]

18. dollar tanking, Iran wants to be paid in other currencies

and if I were running their oil ministry, I would do exactly the same thing. The dollar is in trouble, no matter how much the MSM and the economist-shills say otherwise. Most of the ME oil producers will be looking to get out of dollars. The dollar's day as fiat currency is nearly over. Iran doesn't want to be stuck with dollars that are losing value.

[trashcanistanista]

19. Yes,

This is a sound economic move for Iran. Japan will comply.

[TexasLawyer]

20. some additional context

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2070938.ece

<snip>

Iran has been deliberately moving its exposure to the dollar and dollar-based assets, faced with the threat that the US could freeze its US-based dollar accounts in response to its nuclear plans.

Three big oil producing nations — Iran, Venezuela and Russia — have all been moving much of their foreign currency reserves from dollars to euros in recent months.

The latest move can only add to the long term pressure on the dollar, already hit by worries about the US economy based on the crisis in the sub-prime mortgage market.

<snip>

[Art_from_Ark]

29. Wow-- Iran, Venezuela and Russia

"have all been moving much of their foreign currency reserves from dollars to euros in recent months". And we don't have particularly cozy relations with any of these countries.

[calimary]

31. Wasn't there a concern, several years ago, that Saddam Hussein was

moving toward switching from the dollar to the euro for oil trading? I remember reading about that, that it was an additional, and unmentioned, motivation for bush to invade Iraq.

[Kip Humphrey]

24. Without the "gold standard" of petro dollars propping up the US$, how much will it fall?

[entanglement]

25. 66% of global currency reserves are still in $$ - but that's down from a high of 71% in 1999

[fedsron2us]

26. Iran may just have touched the panic button on the world economy.

The Yen carry trade is more or less propping up the western world's economy but it is all dependent on two factors - low interest rates in Japan and the Yen's value remaining stable against the dollar. The Japanese central banks have been artificially depressing the value of their currency for years. Given the strength of the Japanese economy this process has required the pumping of huge amounts of liquidity into the world's financial markets. You can be certain that every hedge fund, Private Equity leveraged buy out or sub prime mortgage lender has at least a couple of fingers in the Yen carry trade pie. If the Iranians want to be paid for their oil in yen rather than dollars that is inevitably going to mean that fewer yen are going to be sold for dollars. The inevitable result would be a rise in the yen against the dollar. It would then really be show time on the worlds financial markets. To counteract this trend the Japanese government and central banks would need to set the Yen printing presses into overdrive. How much longer Japanese savers are going to tolerate being robbed in this manner is anyones guess ?

[Art_from_Ark]

30. Japanese savers have a very high level of tolerance

Low interest rates have been part of the Japanese banking system since the real estate bubble burst in the early 1990s.

[SpiralHawk]

32. Thanks a pantload, Commander AWOL & republicon cronies

You are doing an outstanding job of screwing up everything you come near, a heckuva job.