The Collapse of The Rial - A Warning To The Eurozone

Iran's rial is collapsing, following an "innovation" last week by the Iranian government to supply importers with dollars via an "exchange centre".

Unsurprisingly, people have scrambled to exchange rials for dollars.

Reuters reports that the rial fell by at least 9% today:

"The rial was trading at about 37,500 to the dollar, down from around 34,200 at the close of business on Monday, a foreign exchange trader in Tehran told Reuters. Other Tehran traders said the rial had dropped even further, to 38,000 or 40,000."

The Iranian industry minister, demonstrating a typical politician's lack of understanding of how markets work, said that he hoped security services would root out speculators whom he blamed for the drop.

It would be ironic if the downfall of the Iranian government was brought about, not directly by sanctions or war, but by their lack of understanding of how markets work; ie their own hand.

The bureaucrats of the Eurozone should take note, markets are driven by fear and greed; ill advised attempts to control and manipulate them always end in tears!

The USA's Little List

Standard Chartered (a British bank) finds itself on an ever growing American list of British banks that have been accused of all manner of "dastardly" deeds of alleged money laundering etc, that "in theory" threaten the safety of the USA.

Unsurprisingly, as a result of the public witch hunt and accusations, shares in Standard Chartered have fallen by 24%; as the USA lets loose in the media in a concerted attempt to bring the bank to heal before any evidence has actually been presented in court.

Standard Chartered deny the accusations.

Does anyone else not find it a tad "odd" that the US authorities are not pursuing US banks with such vigour through the courts and the media?

As one unnamed London based director allegedly emailed in 2006:

"You f****** Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”

Greece Oil Shock

In January I warned that the EU embargo on Iranian oil would cause Greece problems:

"There has been much hype and sanctimonious puffing of chests from the EU about its agreement "in principle" to ban imports of oil from Iran.

However, as Paul Stevens economist and emeritus professor at Dundee University in Scotland notes, Greece currently imports 30% of its domestic oil from Iran on favourable terms.

Were Iranian oil imports to be banned, where would Greece get its oil from?

Saudi Arabia?

Maybe, but at an economy busting $150+ per barrel.

As with all EU "plans" this one has not been thought through."

In February I noted that:

"They are currently negotiating for supplies of oil from elsewhere, any admission that their supplies have been cut will negatively impact those negotiations and cause panic buying in Greece."

As predicted, things are not going well; as reported by News.AZ:

"The EU has postponed an April deadline to review the impacts of the bloc’s embargo on oil imports from Iran due to Greece's concerns on finding new oil suppliers."

As ever with all EU "plans", no one has bothered to think through the consequences of them.

Greece's Oil Shock

In February I wrote that Hellenic (Greece's main oil refiner):

"are currently negotiating for supplies of oil from elsewhere, any admission that their supplies have been cut will negatively impact those negotiations and cause panic buying in Greece."

Today Hellenic have announced that it has suspended purchases of Iranian crude in April, as approaching sanctions on Tehran have made banking payments virtually impossible.

This of course means that its negotiations for reasonably priced supplies for Greece from elsewhere have just been torpedoed.  

Hardly good news for the imploding Greek economy!

Emergency Oil Reserves Tapped

The US and UK have agreed (ahead of the US fleet boosting its presence in the Gulf, and SWIFT cutting Iran off from the world's financial system) to release reserves of emergency oil stocks.

UPDATE

The Whitehouse are currently denying the veracity of this report. Meanwhile the "inaccurate" report has had the desired effect of driving oil prices lower.

Funny that!

FURTHER UPDATE

The Prime Minister's official spokesman re Obama Cameron talks has admitted that the issue was discussed:

"The issue of oil supply was discussed but no decisions were made."

You can rest assured that the decision has been been made, and will be implemented on a predetermined date/event.

Oil Shipment To Greece Stopped

"Greece relied on Iran for more than half of its oil imports during some months last year after traders and oil majors pulled the plug on supplies and banks refused to provide financing for fear that Athens
would default on its debt."

Unfortunately, Iran has just stopped a shipment of oil to Greece:

"Oil tankers that had come to transfer 500,000 barrels of Iranian oil to a refinery in Greece had to go back empty-handed after Iran refused to give the shipment,"

However, Hellenic have denied the veracity of this story :

"That has nothing to do with us ... all supplies from Iran have been processed normally,"

Well, they would have to deny this wouldn't they?

They are currently negotiating for supplies of oil from elsewhere, any admission that their supplies have been cut will negatively impact those negotiations and cause panic buying in Greece.

Beware denials and irrational optimism from Greek oil companies!