Iran holds the fourth largest oil reserves in the world and the second largest gas reserves. The two main oil trading bourse’s in the world are the New York Mercantile exchange (NYMEX) and the Intercontinental Exchange (ICE) in London. Oil is of course priced in dollars. However, Iran has established an oil exchange, known as the International Oil Bourse (IOB). It is located on Kish Island, just off the coast of Iran, and is designated as a free trade zone by the Iranian government. It was created by cooperation with Iranian ministries, the Iran Mercantile Exchange and other state and private institutions in 2005. The IOB is intended as an oil exchange for petroleum, petrochemicals and gas in various currencies other than the U.S. dollar, primarily the euro and Iranian rial and a basket of other major (non-U.S.) currencies. However, on July 13, 2011, Iran began trading on their new bourse. Ironically, they offered oil cargo in USD, and the price offered was higher than traders were willing to pay, so no trades took place. Not a great start for an exchange, but what is really going on here?…
