The yen enjoyed big gains as the National Iranian Oil Co. asked Japanese refiners to make payments in yen instead of U.S. dollars for Iranian crude oil. The Japanese currency traded at 122.10 U.S. dollars at 9:21 a.m. in New York. This level is significantly up from yesterday’s close of 122.42. Against the euro, the yen rose to 168.49 from 168.80. According to Steven Butler, director of foreign-exchange trading at Scotia Capital Inc. in Toronto, this increase in demand for the yen is forcing Japanese companies to sell dollars to raise money for their oil payments.
It is rather clear that the National Iranian Oil Company, under the direction of the Ministry of Petroleum of Iran, has shifted to the yen from U.S. dollars in response to risks imposed by further sanctions that would freeze U.S. dollar transfers. As Japan’s third largest supplier of oil, Iran is taking steps to secure its oil interests amid growing tensions with the U.S. This move should not be entirely unexpected seeing that over a year ago, the Iranian oil colossal already started asking its buyers of crude oil to pay with currencies other than the dollar. In a March 27th statement by Central Bank Governor Sheibany, Iran decided to cut U.S. currency holdings to less than 20% of total foreign currency holdings.
Tension with the U.S. will not subside as Iran continues to reject appeals for cooperation. On July 10th, an Iranian newspaper quoted a senior advisor to Supreme Leader Ayatollah Ali Khamenei claiming that Iran was producing centrifuges for refining uranium domestically. The statement showed that UN sanctions had very limited impact. In response, the U.S. Navy sent a third aircraft carrier to its 5th fleet, which is in close proximity to Iranian waters.
As future conflict looms, the U.S. will have a tough time resolving matters favoring its own interests. As the holder of the world’s second-largest oil and gas reserves, Iran is in an interesting position to heed to multiple foreign interests. Â
Posted: July 13th, 2007 under General.
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