Saturday, January 21, 2006

Iran start to show their power: Money out of Europe, reduce oil production, gas to Turkey "falls" by 70%

Swiss banks: Iran money welcome
Geneva banks say would welcome Iranian assets fleeing possible sanctions
January 20, 2006: 8:08 AM EST

ZURICH (Reuters) - Swiss banks would welcome asset transfers by Iran, which has begun moving financial holdings to shield them from the threat of international sanctions, a leading financial industry representative said on Friday.
"If you're talking in terms of a safe haven proposal, that's where Switzerland is very strong, stronger than Singapore or other places. We are a country that is non-judgmental," said Steve Bernard, director of the Geneva Financial Center, a lobby in Switzerland's second-largest banking city after Zurich.

Separately, a senior Iranian official confirmed on Friday that Iran, which could face sanctions over its atomic program, was transferring its assets from European accounts to other foreign banks.
"Yes, Iran has started withdrawing money from European banks and transferring it to other banks abroad," he told Reuters on condition of anonymity.
Iran's ISNA student news agency quoted central bank governor Ebrahim Sheibani as saying earlier on Friday that Iran had started transferring funds. ISNA specifically asked whether the money was being moved to Asian accounts but Sheibani's answer sidestepped whether the assets would head east.
Switzerland is home to more offshore wealth than any other country, and is a traditional haven for investors who seek the safety of Swiss political neutrality and legal guarantees of banking privacy.
"Because of its non-discriminatory practices, Switzerland has always been an attractive place and would remain an attractive proposal for Iranian authorities looking to shift some of their assets or to diversify the geographical distribution of some of their assets," Bernard said.
Bernard said Swiss banks prided themselves on an open-door policy, offering a high level of service to international clients. Switzerland also has also pursued some of the most rigid standards in the fight against money-laundering, he said.
"We have probably the strictest standards on earth in terms of compliance with anti-money-laundering measures," Bernard said.
Geneva is home to around 143 banks, many United Nations organizations and the Red Cross. Last year, the city hosted four-way nuclear talks between Iran and Germany, France and Britain, which had attempted to dull Iran's nuclear aspirations.
Earlier on Friday, Iran's central bank governor was quoted as saying that the country was moving its foreign assets to an undisclosed destination, apparently to shield them from any U.N. sanctions over its nuclear programme.
Iran, threatened with referral to the Security Council for possible punitive measures, has bitter memories of its U.S. assets being frozen shortly after the 1979 Islamic revolution.
Economists estimate Iran will have earned more than $40 billion in oil revenues by the end of the year to March 2006. Of this, $16 billion goes straight to budgeted government spending.
The rest goes to the Central Bank of Iran which keeps an unknown amount in foreign accounts. The Naftiran Intertrade Company (NICO), the powerful trade and financing arm of the National Iranian Oil Company, is based in Switzerland.
A NICO spokesman was not immediately available for comment

Iran Eurobonds seen insulated from global pressures
Fri Jan 20, 2006 7:33 AM ET

By Daniel Bases

LONDON, Jan 20 (Reuters) - Iran's limited amount of outstanding Eurobonds are unlikely to come under selling pressure if the United Nations Security Council imposes sanctions in response to Tehran's ramped up nuclear programme, analysts said on Friday.
The United States on Thursday demanded the Security Council, which can wield sanctions, promptly confront Iran over its nuclear ambitions. Fellow council members Russia and China are urging caution.
That, along with news on Friday that Iran was transferring its assets from European accounts to other foreign banks, has led many to wonder about the fate of Iranian assets held in global markets.
There are approximately 1 billion euros worth of bonds outstanding, but it is estimated that the vast majority of are held by accounts in the Middle East.
"These bonds trade by appointment. There is no real market for them. I have seen probably less than 5 million euros worth trade in the last month," said James Croft, emerging markets debt trader at Commerzbank in London.
"As most of the bonds are held by friendly accounts in the region it is very hard to see Iran default on it because it would upset its neighbours," said Commerzbank's Croft.
Iran's move to transfer money out of foreign accounts is unlikely to cause any ripple effect in global markets but underscores the rising geo-political risks for investors.
In 1979, money held in the United States was frozen shortly after the start of the Islamic Revolution.
In remarks on Friday to the ISNA news agency, Iran's central bank governor Ebrahim Sheibani sidestepped questioning about where the money was being transferred. Earlier this week he said Iran stood ready to repatriate the money it held abroad should this prove necessary.
If Iran fears money will be frozen in accounts abroad, it signifies concern there will be a coordinated effort by the international community to punish it for restarting its atomic energy programme.
"They would probably try to put the money in bank accounts where the beneficial ownership is hidden. For example, that is what Nigerian dictators used to do. The Suharto family did that with funds they held in Austria and Switzerland," said Richard Segal, chief strategist at Argo fund management group in London.
"That's a possibility. Those banking systems are secret enough and large enough that a large increase could go unnoticed," Segal added.
Commerzbank and BNP Paribas were lead managers in 2002 when the Iranian government issued the debt in the name of the central bank. This was the first time it had offered bonds since the 1979 Islamic Revolution.
"We have seen some sellers in the last week as this nuclear story has caused some retail investors to panic up the bonds," Croft said, adding "They typically trade in the region of 200 to 400 basis points over the Euribor swap curve and right now they are 375 to 325 basis points over.
The 625 million euro 2007 bond carrying a coupon of 8.75 percent was last quoted with a bid price of 104.020, yielding 5.822 percent .
The 375 million euro 2008 bond carrying a coupon of 7.75 percent was last quoted with a bid price of 104.560, yielding 5.513 percent.
Fitch Ratings puts Iran, the fourth biggest oil exporter in the world and the second largest in the Organisation of the Petroleum Exporting Countries, at 'BB-'. That is three notches below investment grade.
The potential negative impact on Iran from sanctions could come outside of the markets.
"They do have a reasonable amount of trade finance, so it could have an impact on their ability to access trade finance in the future. They would have to use more cash," said Argo's Segal.

Iran transfers foreign accounts to South East Asia

TEHRAN, January 20 (RIA Novosti) - Iran has started to transfer its foreign accounts to banks in South East Asia in order to ensure their security, a top banking official said Friday.
"It is true, the transfer of Iran's foreign bank accounts to countries in South East Asia has already started," Ebrahim Sheybani, Governor of Iran's Central Bank, said.
"We are transferring monetary funds to places that we consider secure," he added.
Iran continues to dominate the international agenda in the wake of its announcement last week that it would resume uranium enrichment research.
Members of the European trio of France, Germany and the UK are likely to insist that the matter to be referred to the UN Security Council, which has the power to impose sanctions if Iran is found to be in breach of its international commitments when the governors of the International Atomic Energy Agency meet next month in Vienna.
Iran had however said it was ready to talk to Russia on a Moscow proposal that it uses only uranium enriched in Russia for its planned nuclear power plants, removing the need for its own research, Russian nuclear energy chief Sergei Kiriyenko said Friday.

Tehran seeks 1 million bpd OPEC quota cut

Iran’s Kazempour says current excess of oil supply will lead to excessive stockpile if OPEC continues its current output.

By Siavosh Ghazi - TEHRAN

Iran has asked the Organization of Petroleum Exporting Countries to reduce the cartel's oil production quota by one million barrels per day from April, Tehran's OPEC representative said on Friday.

"OPEC should not postpone the issue of output reduction. Iran has called for carrying out discussions and making decisions for a one million bpd of oil output cut in the second quarter," Hossein Kazempour Ardebili told the semi-official news agency Mehr.

"If OPEC continues its current production, the current excess two million bpd of oil supply will lead to an excessive stockpile. This is not affecting oil prices at the moment because the demand is high."

"But in the second quarter, this heap of oil snow will fall down on the oil price as an avalanche," he added.

He stressed that the oil price would even go higher for now and said: "In January and February, the oil price has appreciated and it would probably grow higher than now. But the prices will drop in the second quarter of the year with decreasing demand."

OPEC's production ceiling currently stands at 28 million bpd. At its last meeting in Kuwait on December 12, the cartel decided not to renew an offer of two million bpd in emergency additional output.

The grouping will next meet on January 31.

Kazempour's comments came amid Iran's escalating nuclear crisis, with Western countries seeking to send the Iranian case to the United Nations Security Council.

Oil prices hit four-month highs Thursday as tensions in Nigeria and Iran, and a purported threat to the United States by Al-Qaeda chief Osama bin Laden, overshadowed news of rising US stockpiles.

In New York, the contract for light sweet crude for February delivery jumped 1.10 dollars to close at 66.83 dollars a barrel, its highest finish since September 19.

On December 28, Oil Minister Kazem Vaziri-Hamaneh told the Shargh newspaper that he wanted to see the grouping decide on a quota cut of one million bpd at the meeting.

Iran is OPEC's number two member, producing 4 million bpd and exporting 2.4 million bpd of oil.

In 2005, Iran's oil income topped 42 billion dollars.

Iran warned on Thursday of a world oil crisis if sanctions are imposed over its nuclear program.

"In case of sanctions, other countries will suffer as well as Iran. One of the consequences will be the unleashing of a crisis in the oil sector and particularly a price hike," Oil Minister Davoud Danesh-Jafari was quoted as saying by the state news agency IRNA.

Talking to CNBC television on Friday, the United States Vice President Dick Cheney said that an oil crisis would be coming as a repercussion of Iran's nuclear standoff and said that such a crisis would not be worse than seeing Iran equipped with atomic weapons.

Iran 'moves assets out of Europe'

Iran could face sanctions if it is brought before the UN
Iran has started moving its foreign exchange reserves out of Europe in a bid to shield the country from the threat of sanctions, reports suggest.
Iran's central bank governor said the country had begun withdrawing assets from European banks, the Iranian Students News Agency reported.

Iran is embroiled in a row with the US and European Union over allegations it is attempting build nuclear weapons.

Separately, Iran called for the Opec oil producing cartel to cut its output.

Oil prices in New York are currently at a four-month high of more than $67 a barrel.

Shifting assets

Iranian central bank governor Ebrahim Sheibani revealed earlier in the week that Iran had begun the process of shifting its assets from Europe, the Iranian Students News Agency said on Friday.

Iran has started withdrawing money from European banks and transferring it to other banks abroad

Iranian official

"We transfer foreign currency reserves related to all sectors including oil foreign exchanges to wherever it is good for us and we have started this transfer," the agency quoted him saying.

"Iran has started withdrawing money from European banks and transferring it to other banks abroad, " a senior Iranian official told the Reuters agency.

It was not immediately clear where the assets were being moved to, although reports have suggested that Iranian funds could be heading out of Europe to Asia.

The UN's atomic watchdog, the International Atomic Energy Authority, will hold an emergency meeting on 2 February to discuss whether to refer Iran to the United Nations Security Council.

Threat of sanctions

The council has the power to impose international trade or diplomatic sanctions against Iran.

Iran denies US and European allegations that it is seeking to build nuclear weapons, claiming it wants the technology for energy purposes alone.

Iran's assets in the US were frozen after the revolution of 1979, which saw the pro-Western Shah toppled and a clerical regime installed in Tehran.

Iran, which is currently the organisation's second-biggest exporter, has also proposed that Opec nations slash crude production by a million barrels a day from April.

Supporters of the proposal argue that world oil markets are already oversupplied, but critics have suggested Tehran is keen to flex its muscles given the country's current tense relations with the West.

Iran moves its foreign currency reserves out of Europe

Associated Press

TEHRAN, Iran — Iran is moving its foreign currency reserves out of European banks as a pre-emptive measure against any possible U.N. sanctions over its nuclear program, the Central Bank Governor said Friday.

Ebrahim Sheibani told reporters that Iran has started transferring the foreign currency reserves from European banks to an undisclosed location, the semiofficial Iranian Students News Agency reported.

"We transfer the foreign exchange reserves to wherever we deem fit," Sheibani was quoted by ISNA as saying. "We have begun transferring. We are doing that."

Sheibani would not say how much money was involved and it was not immediately clear whether Iran's investments in Europe would be affected by the move.

Iran is facing possible referral to the U.N. Security Council for its refusal to give up its uranium enrichment program. The council has the power to impose economic and political sanctions.

European powers have drafted a resolution that calls for referring Iran to the 15-nation council but stops short of asking for punitive measures against Iran. The International Atomic Energy, the U.N. nuclear watchdog, will meet Feb. 2 to discuss the draft.

Iran's assets in the United States were frozen shortly after the 1979 Islamic revolution that toppled the pro-Western Shah Mohammad Reza Pahlavi and installed a clerical regime.

The move suggests Iran has taken the issue of possible U.N. sanctions seriously. However, it has insisted that it won't give up its right under the Nuclear Nonproliferation Treaty to enrich uranium and produce nuclear fuel.

Iran removed some U.N. seals from its main uranium enrichment facility in Natanz, central Iran, on Jan. 10 and resumed research on nuclear fuel — including small-scale enrichment — after a 2 1/2-year freeze.

The shift alarmed Western nations that suspect Iran may be trying to produce nuclear weapons.

Uranium enriched to low levels is used to produce nuclear fuel for use in reactors producing electricity but further enrichment makes it suitable for use in building nuclear bomb.

Iran has rejected U.S. accusations that it was seeking to develop atomic bomb, saying its nuclear program is geared merely toward generating electricity.

Iranian experts say Iran's accounts are protected by the Vienna Convention governing diplomatic relations, arguing that any seizure of the Iranian assets would be against international regulations.

Iran has previously complained that Britain blocked raw uranium it bought before the 1979 Islamic revolution; Germany refused to complete its only nuclear power plant and Paris has refused to release Iran's uranium materials despite having a share at a uranium enrichment plant in France.

Iran's gas flow to Turkey falls by 70 percent due to technical malfunction

The flow of natural gas from Iran to Turkey dropped almost 70 percent due to a technical problem on the Iranian side, a press official from Turkey's Energy Ministry said Friday.

"Since yesterday, while there needs to be 27 million cubic meters (950 million cubic feet) coming in, it has fallen to 8.5 million (300 million cubic feet)," Tumay Berkin said.,7340,L-3203743,00.html

UPDATE: Iran FX Reserve Shift May Involve Up To $50 Billion

(Adds more analyst comments, BIS figures.)

FRANKFURT (AP)--Iran's decision Friday to transfer its foreign currency reserves out of Europe ahead of possible U.N. sanctions could affect as much as $50 billion in deposits, analysts estimated, and helped send oil prices above $ 68 a barrel.

But economists said the impact on the global economy would be muted, with the figure not large in comparison to other countries' reserves and uncertainty about where the money would be moved and whether it would be shifted from dollars and euros to other currencies.

"The banking system in Europe is sufficiently well developed and stable enough that even a wholesale withdrawal of reserves within wide bands of uncertainty wouldn't likely cause severe problems," said Mark Austin, a currency analyst with HSBC in London.

Iran, under increasing international pressure over its nuclear program - and mindful of the freezing of its U.S. assets after the 1979 seizure of the U.S. Embassy in Tehran - said it had begun transferring its reserves from European banks to an undisclosed location.

"We transfer the foreign exchange reserves to wherever we deem fit," Iran Central Bank Governor Ebrahim Sheibani was quoted by the semiofficial Iranian Students News Agency as saying. "We have begun transferring. We are doing that."

Sheibani would not say how much money was involved. Iran, which has insisted its nuclear program is aimed at generating electricity and not weapons, does not publish its foreign currency reserve figures.

Three analysts who did not want to be identified because the delicate nature of the information estimated that the figure was between $40 billion and $50 billion, while a fourth said it was more likely to be between $25 billion to $30 billion.

The range puts Iran's holding on about a par with the $54 billion that Algeria holds, and is far below the holdings of countries such as China, which had $ 818.9 billion at the end of December.

The Bank for International Settlements says data indicates Iran had $23.5 billion in the international bank system at the end of June 2005. That total represented a 10% increase compared to six months earlier, according to the Basel, Switzerland-based BIS.

Steve Barrow, a fixed income strategist at Bear Stearns in London, said the latest IMF data indicated that Iran holds around $35 billion-$40 billion in overseas assets.

"But the problem really for the market is knowing where it might be. Obviously, the authorities have spoken about repatriating and taking money out of Europe, which probably suggests they have always been wary of holding assets in the U.S.," Barrow said.

"But just because you invest with European banks doesn't mean you can't hold U.S. assets. Just as with any other central bank or monetary authority, you don't find out what proportion of foreign currencies they hold."

Several large European banks, including Germany's Deutsche Bank AG (DB) and France's BNP Paribas (13110.FR), declined to comment.

Swiss officials were tightlipped over whether Iran's move might include the country, which is not part of the European Union, or if it meant more Iranian money might be on the way.

Iranian assets in Swiss banks at the end of 2004 totaled CHF1.4 billion, a 25% decrease compared to the year earlier, according to statistics from the Swiss National Bank.

Peter Westin, chief economist for Moscow investment bank MDM Bank, said that Iran's good relations with Moscow made it a possible destination for Iran's foreign currency reserves. "In that sense Russia is a good option," he said.

Spokesmen for the Russian central bank were not available Friday evening and no one answered phones at Vnesheconombank, Russia's state-owned foreign banking arm.

Currency analysts said it was difficult to gauge how the move would affect the European banking sector or if it would lead to a domino effect with other Middle Eastern countries doing the same in a bid to undermine countries deemed hostile to the Middle East.

In the jittery oil market, however, traders pushed the price of light sweet crude for February delivery up $1.32 to $68.15 in New York trading. On the ICE Futures exchange in London, March Brent rose $1.01 to $66.24 a barrel.

Earlier this week, Iranian Economy Minister Davoud Danesh-Jafari warned that any sanctions from the West could, by disturbing Iran's political and economic situation, raise oil prices "beyond levels the West expects," the English- language Tehran Times reported.

Stuart Eizenstat, who helped negotiate sanctions against Iran after the 1979 hostage crisis, said the Iranian currency action could weaken European resolve to ensure that Iran does not acquire nuclear weapons.

"It's one less instrument of leverage," Eizenstat told the AP, adding that Iran's principal area of leverage over the Europeans are the 5.5 million barrels of oil that it produces each day, much of it for export.

"People are afraid of a boycott of oil," Eizenstat said. He added that some in Europe fear they would be "cutting their own throats" if a sanctions regime include a ban on Iranian oil imports.

Iran's decision caused few ripples in currency trading Friday, with most traders saying the news had already been factored into the market.

Barrow said it would be an issue for markets if up to $35 billion to $40 billion in overseas assets was returned quickly to Iran, "but we probably won't know until after we see the markets move."



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