On Iranian Petroleum, the UAE Dirham, and a Totally Offshore Economy………
“TEHRAN - Iran is mulling switching to the United Arab Emirates’ dirham from the euro for its oil sales to Europe in a bid to minimise the impact of new sanctions, International Oil Daily reported, citing unidentified sources. National Iranian Oil Co. has been communicating with European customers about the change without making a final decision, the newsletter said. The country currently prices its exports in US dollars, the Oil Daily said. Iran may not be able to persuade European customers to make the switch because of unfamiliarity with the dirham, which is pegged to the US dollar, the publication said. New European Union sanctions that may be approved at the end of the month would add to restrictions against Iranian banks and also the operations of the country’s central bank, the newspaper said…….”
So far, this has been published in one oil report and mostly in some UAE media, quoting the usual “anonymous” official. Nothing in the Iranian media about it. The UAE Dirham is pegged to the US dollars, so it fluctuates along with the dollar.
On the other hand, if the Iranians mean to actually receive payment in Dirham, that is a tall order, highly unrealistic. The UAE is a relatively small economy, and the Dirham is a “small” currency that cannot support the huge size of the Iranian oil transactions, in many billions of dollars. There just aren’t enough UAE “dirhams” to support that, in fact there are not enough to support the full population of that country. It is largely an offshore economy where most of the population of the country (close to 90%) is composed of temporary foreign labor that converts the bulk of its wages into foreign currency to remit home. Use of the domestic currency is much more limited than GDP figures would indicate. End of that story.
Cheers
mhg
Mon Email
Comments