Also, please read the next blog below titled “Indian Economy- At the right place under wrong circumstances” that talked about the accounting fraud much earlier than the Satyam Fiasco.
Also check the blog that i wrote on 27th Dec 2008. http://rajendrasays.blogspot.com/2008/12/economy-in-severe-recession-government.html
———————————————————————————–

Madhav Mehra
President
World Center for Corporate Governance , U.K .
President
Institute of Directors
India.

Dear Madhav,

Wish you a great 2009.

While i was the Hon. Director at IOD , i had clearly cautioned IOD, that the companies that are getting the award for corporate governance from IOD could be the next Enron’s of the world and i had cautioned Gen.Ahluwalia categorically even quoting some of the recipients

Having said this , i must re-iterate that IOD must be careful in giving out the award to companies who really deserve it after proper scrutiny and due diligence .

I had written earlier on my blog ,much before the Satyam fraud came to light. I ,must emphasize again , that more corporate frauds can’t be ruled out. Though, after this Satyam Fiasco , corporates will be more vigilant before they resort to this route.

After leaving Reliance almost two years ago , i had taken a course in Corporate governance from Kellogg Business School ,USA and decided to pursue independent board positions as my full time professions , much before people focussed on this board positions as a full time profession. Earlier , it was considered as a retired Executives parking slot,. While i took on this lead in India , a lot many people were shocked that i gave up a cushy job in Reliance and decided to pursue independent directorships as my profession. Trust me , i have been very strict with my companies for compliance and disclosures . I clearly insist and minute my issues in the board meetings so that compliance and disclosures are not dealt with lightly ( i can show some of the minutes where i have requested the board members to furnish me the quarterly compliance certificate ). If i find that the companies are not willing or are shying away. I move out of the board and mention the same in my resignations. I did that in the MNC – Medicine Shoppe . Today , we see it on the verge of closure and whatever i wrote to the board members while resigning from the board has happened . I could see that the company was not managed well and there were discrepancies in what the management was presenting to the board every quarter . I could foresee a downfall good two years back and wrote to the board and moved on as i believed that board and the management were not driving the company well.. This is despite the fact, that Medicine Shoppe Intl is a part of the fortune 20 , Cardinal Health, it was the fastest growing retail chain in India and a pioneer in pharmacy retail, adding to this ,the the investors were highly regarded PE players in the country .The country not just needs a strong law and strict guidelines to have independent directors but also the independence of directors . Independent directors and independence of directors is equally important This is not as easy as i write , as i have the experience of a dozen companies and i can understand it well from the independent directors standpoint .This has to be done by SEBI and the government without any further delay. Today, most of the independent directors are chosen from the level of comfort of promoters with the individual . In India , corporate governance is as big an issue as in the US . Only difference that , in USA you have punishments and in India you can get away with ‘ Contacts’ and ‘Payouts’.

This is what i wrote in my blog much before Satyam fiasco came to light http://rajendrasays.blogspot.com/2008/12/economy-in-severe-recession-government.html
.

“The government should be vigilant on big business houses for accounting and reporting in case they are listed, or we might see a fraud and failure like Enron or WorldCom. This is a step to avoid ‘financial terrorism’ . Some business houses ‘control’ many politicians and this is an area of big concern. We have created unequal wealth in the form of strong and gigantic business houses who are iconic Any wrong doing in such a big business houses would be like a corporate suicide and will severely impact the market scenario. I don’t rule out ‘accounting manipulations’ or ‘jugglery’ in these ‘tough times’ to keep the image and reputation intact for such big business houses”

You might like the entire blog at https://rajendragupta.wordpress.com/

It is high time that IOD reconsiders the Corporate governance award model to people who just give up the “award fee” , it must have the options of picking up people besides these applicants. Thus people like Satyam would easily get this award and no wonder that these business houses will pay any amount to get these awards and fool the investors. Seeing the current list of recipients of IOD awards. I am scared that more such names may come to light ! There is more pain in the corporate world in these turbulent times – Just wait to watch

Also, please work on the corporate governance day on 3rd Feb to create the awareness amongst people

All the best ,

Rajendra Pratap Gupta

Cell : + 91- 9323109456
+ 91- 9867300045
(USA) +1515-450-6165
Skype: rajendra.india
E-Mail: mail@rajendragupta.org / rajendragupta@aol.in

Indian Economy is in a severe recession: Rajendra Pratap Gupta

Except God, for everything else , i believe in data. Here is what the Honourable PM must consider and restate the fact that actually , India is into a recession

The Tax collections for December quarter dropped by 22 % ( According to the Economic Times dated 27th Dec 2008 )

60 % of the 8000 units into diamond polishing and cutting business went on forced holiday leaving 100,000 people without jobs . Narendra Modi has refused any package for them ( Times of India 27th Dec 2008). There is a 40 % reduction in demand according to Gems and Jewellery Promotion Council ( GJEPC). Exports account for $ 20 billion in the industry

According to ET 01 Jan 2009- Slow down in the leather industry is likely to axe 5 lakh workers in leather units in the next three to four months with worsening market scenario in US and Europe . The industry employs almost 2.5 million people

Jet airways and Jet lite have defaulted in payments of Rs. 32.78 Cr to AAI TOI 29th Dec 08

Hotel occupancy has dropped by 50 % in the holiday season – Sept – Dec 08.

Net profit of India Inc likely to decline by 46 % in the 3rd quarter of this fiscal.

The gross NPA’s of banks will reach 4.7 % of the total loans in FY10 from the current of 2.3 %. Credit card delinquency has gone up to as high as 14 %. Loan defaults would follow shortly and this will be a big blow to the banking / loan system. In the first half of Dec 2008, in Bangalore itself there have been defaults to the tune of Rs.80.23 crore at Corporation Bank . Out of the total home loan portfolio exposure of Rs.1000 cr , 50 % is in the IT sector. Defaults will start increase going forward. We will see the real impact in April 09.

I was recently in Delhi and talked to my cab driver ( he drives for a cab company at Delhi airport ). He informed me that, earlier he would earn between 15 – 22000.00 per month . Now for the last three months , his income has dropped to Rs.6000.00. He is expected to do a minimum of 52 trips a month to get his basic salary , which is getting difficult now . So he was worried.

Approx 90 % of all the commercial vehicles sold in India are via loans. Kotak Mahindra Bank has repossessed about 200 vehicles. Deepak Sachdeva , President of the Delhi Goods Transport association said that between April and December 2008 alone , close to 158000 commercial vehicles were either surrendered or repossessed due to loan defaults. According to The Mint dated Dec 26th 2008. With such an massive loss, just imagine what must be happening to the families of 158000 truck drivers, helpers , cleaners and the people associated with providing services at Dhabas and repairers for these trucks !! It is a solid loss for a small economy like India

All the businesses have cut down the expansion plans and the same will continue for the next year in my view . TATA motors have cut the production for two days a week, Cisco is on long Christmas and a new year holiday, All auto majors including Maruti is slowing or voluntarily suspending production to take care of the ‘standing or piled up’ inventories

ACC cement has already shut the production in one of the plants and slowed the same in others

I visited quite a few malls and talked to employees. At Lifestyle store at Mulund last year around this time , the 2nd floor has five counters. This year they just had one counter. The salesman when quizzed ,did accept that there is a drastic drop in customers and sales

Big Bazaar, has no different story. They were operating with two counters and not long queues which earlier operated eight counters. Big Bazaar has launched shopping schemes that is drawing customers but not much sales. The same scheme in 2007 March could have doubled the turnovers. ‘Marketing Steroids’ are not working well

The news is not good for mall developers. The big retailers who use to easily come as anchor tenants have changed their mind . Now onwards , they will expect the malls to get other tenants before they step in . Earlier, the anchor tenants would come in at a low rental and assure footfalls for the the new tenants. So it was easier to get new tenants . Now the anchor tenants have clearly said no to such anchor tenant proposals thereby putting already troubled mall makers in a spot

The best mall in the country , Inorbit Mall employees had the same views. They were shocked at the drastic drops in customers and sales. Their wide aisles at the Hypercity had few customers.

Aditya Birla retail is likely to shut down around 100 out of 700 stores in the name of rationalization . They are doing a business of Rs. 5 per Sq. Feet and expenses of Rs.200 per Sq. Feet. It is a thumb rule, that such retail formats should not incur more than 120 per sq. Ft.

A month back when i visited the Fame Adlabs at Kharghar to watch the night show for the hit film Fashion, my wife and myself were refused tickets as we were the only two people to watch the movie and the counter girl told us that, she needed at least 5 people to start the show !! Did you expect this in good times !!

Reliance retail is no better, they have changed the strategy for the second time in the last two years and if i remain accurate in my predictions. This time again Reliance will have to redo a lot of things to avoid exiting the retail venture . All these retail majors banked on experienced retail expats . Who themselves wanted to ‘Earn while Learn in India ’ at the cost of these employers. It is learned through credible resources that, Reliance has shut down the Wellness vertical and asked most of its employees to leave . Firing of people is becoming a norm at Reliance

Some organised retailers are not even in a position to recover their expenses , losses are mounting and credit is moving at an escape velocity not imagined in 2007 !! Money is not available, as earlier even the small companies would value themselves on the lines of the listed companies . With stock market following the Wal-Mart model ( everyday low prices, even Wal street is joked and nick named as Wal-Mart street !!! ).Now there are no takers for these companies . Defaults are increasing day by day. We know the outcome.

Industrial production and growth is slowed . I believe that at this time , for most businesses , survival is the main question and not growth or profits !! . Takeovers will happen or closures. In India , bankruptcy is not practised widely. So we will see closures. The government should be vigilant on big business houses for accounting and reporting in case they are listed, or we might see a fraud and failure like Enron or WorldCom. This is a step to avoid ‘financial terrorism’ . Some business houses ‘control’ many politicians and this is an area of big concern. We have created unequal wealth in the form of strong and gigantic business houses who are iconic Any wrong doing in such a big business houses would be like a corporate suicide and will severely impact the market scenario. I don’t rule out ‘accounting manipulations’ or ‘jugglery’ in these ‘tough times’ to keep the image and reputation intact for such big business houses.

Even the TATA’s are not able to raise funds , the rights issue was a case in point . DLF , Unitech were rising stars in 2007 are shooting stars now. Projects are delayed and more news is to come in the times ahead.

The Dec 08 quarter results of companies will be disappointing and that will take the shine off the Indian growth and strong fundamentals story.

I urge our politicians to give up the ‘Academic definition’ of recession and accept that we are into a recession and take steps to correct the path going forward .
Let’s see the countries by their GDP and their share in the World GDP. India may not be more than a rounding error at this point !!

2006 GDP USD GDP as % of the world GDP
1.USA 13,201,819 27.3
2. Japan 4,340,133 8.9
3. Germany 2,906,681 6.0
4. China 2,668,071 5.5
5. UK 2,345,015 4.8
6. France 2,230,721 4.6
7. Italy 1,844,749 3.8
8. Canada 1,251,463 2.6
9. Spain 1,223,988 2.5
10. Brazil 1,067,962 2.2
Top Ten Total 33,080,602 68.6
World 48,244,879 100.0

Chinese Consumer spending is to reach USD 1.3 Trillion this year, France USD 1.4 trillion, US economy is USD 9.9 Trillion , India is just 660 Billion according to the Mint Dec 23 , 2008. So if the world’s biggest economies is de-growing and we are dependent on these countries. How can we say that we are not into a recession ??? Are you talking sense Mr.P.C and Mr. Singh ????. Those who buy clothes and other merchandise from US / Europe know well, that all leading brands outsource their production to India , Bangladesh and Sri Lanka . Now that the sales are down, these countries are under sever loss . USA, Japan and Europe account for 68 % of the world GDP and they are into recession. Do we need more reasons to convince ourselves that we are heading towards a more severe recession. Problem started with US , till it ends in the US the problem the world over will continue. The interest rates in USA and Japan have come close to zero. China will get into recession or pass on the pressures to countries like India via dumping cheaper goods to avoid recession. This is one area where India needs to be watchful. US recession will also pass on pressures to nations dependent on its economy

I believe that congress may take to surgical strikes to play with the public sentiment , to dodge the economic issues to come into power. Forgetting , that the parliament attacker is still alive. All these steps should have been taken when parliament was attacked . If then we did not act then, i see no reason to act except for the fact that the elections are near . The government needs to fight many forms of terrorism . i.e. Economic terrorism, militant terrorism ,healthcare terrorism ( seeing that 6000 children die every day below the age of 5 years due to disease and malnutrition ). Few reasons that India might not attack Pakistan are that , we are working with weapons which are Bofors like and secondly , our economy cannot afford to take on a full-fledged war with Pakistan, thirdly, in case we do surgical strikes , Pakistan will drop a nuclear bomb as it is not a nation that honours any pact ( All likelihood , that it will not honour its pack on this as well and quote anything stupid to justify its act.)

India needs to understand the order of world has changed with history. Earlier , the nation with a stronger military was considered stronger , then the nation which was financially stronger was stronger . Future will be for both technically and financially stronger nations . India needs to be financially and technically independent .

New year is not going to be better than 2008. So i don’t know how to wish you for 2009, but i must send my best wishes for hopeful and a pragmatic 2009 that is full of moderation in growth plans , better financial regulation , increased spending from governments , encourage and increase savings for emergencies and a more peaceful 2009

Best wishes
Rajendra Pratap Gupta
President

Cell : + 91- 9323109456
+ 91- 9867300045
(USA) +1515-450-6165
Skype: rajendra.india
E-Mail: mail@rajendragupta.org / rajendragupta@aol.in
http://www.countryfirst.org

By Rajendra Pratap Gupta.

People do not realize that the real reason for Iraq war and the current war threat against Iran was not the nukes , not terrorism and not the Oil. It is all about protecting and propping up of the greatest con-job in the recent history, the US petro dollar scam

Back in 1971, the USA printed and spent far more paper money than it could cover by gold

• Few years later, French demanded redemption of its paper-dollar holdings in gold. But the USA rejected as it actually didn’t have enough gold for the dollars it had already printed and spent all over the world, thus committing an act of bankruptcy.
• So the USA went to the Saudis and cut a deal – OPEC denominate all sales of oil in US dollars
• From that point, every nation that needed to buy oil had to firstly hold US dollars, which meant that they exchanged their goods and services for dollars, which the Americans just printed.
• The Americans brought their oil literally for free by printing those dollars. The ultimate free lunch for the Americans at the expense of the rest of the world.
• However, the scam began to unravel when Saddam Hussein started selling Iraq’s oil directly for Euro, abrogating the cosy arrangement the Americans had with OPEC. Thus Saddam had to be stopped. How?
• USA concocted up a pretext to wage war (drama of twin tower blast) and invade Iraq and the first thing the Americans did was to revert sales of oil back to dollars. The currency crisis was averted for the moment.
• But Hugo Chavez (Venezuela President) also started selling Venezuelan oil for currencies other than dollars, so there were a number of attempts on his life and “regime change”, traceable right back to the CIA. The petrodollar cat was out of the bag.
• Iran President (Ahmedinejad), watching all of this, decided to kick The Great Satan in the goolies and do the same thing – sell oil for every currency EXCEPT US dollars.
• The shell game is coming to an end for the Americans. As the nations of the world find that they can buy oil for their own currencies instead of holding paper US dollars, more OPEC nations will abandon the dollar.
• The worst thing for the Americans is that eventually, they will also have to buy their oil with Euro or Rubles instead of just printing paper money to get it.
• That will be the end of the American Empire, the end of funding for the US military and the destruction of the US economy.
• The great scam is coming to an end and there’s not a lot that the USA can do about it, except start another world war!!!
• Wait and Watch… Only few years/months ahead.

Iran Oil Bourse……………

It is several years that a plan for establishment of an oil exchange center under the title of “Iran Oil Bourse” (IBO) is under discussion. (1) The most important point about the plan is that it wants to replace dollar with euro for the currency that is used for oil transactions. According to the existing schedule, the IBO will start functioning from March 2006. Some sources have claimed that the US is so sensitive to this move against dollar that it is going to attack Iran before the IOB starts working. These sources claim that the same issue instigated the US attack against Iraq.

I do not think that IOB will be a real source of threat for anyone and source of interest for Iran at the present conditions and under the control of the Islamic Republic of Iran. The government of the Islamic regime of Iran, as an inefficient, unpopular, undemocratic, anti-human rights, corrupt, non-transparent, illogical (ignoring the national interests and defending the hardliner religious zealots all over the world), un-elected, tyrannical, mismanaged, isolated, sanctioned government, which is hostage to the religious ideology of the Arabs of 1400 years ago, is not able to start such a plan. At the same time, the engineers of the conspiracy theories of “petrodollar wars” are neglecting (probably intentionally) many important issues in this case. Most of these theories are based on false assumptions.

The Iranian oil Bourse will not start at the time claimed. It will not be able to make any changes in the oil market and it is not able to do anything important against dollar. The countries like Russia, China, Europe and many others are not so naive to wait until a corrupt and inefficient system like the Islamic Republic of Iran makes a change that they like. If they were interested in doing something like this (changing the dollar base with euro for oil transactions), they would have done it much before. There are several attempts, including by Putin in Russia and the UAE for doing this and they were stopped due to the existing difficulties. The I R of Iran has not solved those difficulties and at the same time it has thousand of important problems over them. Which country or reputed company is ready to establish a brokerage unit for oil (as matter of fact for anything else) in the Kish Island of Iran and put its personnel and establishment subject to the jurisdiction of the revolutionary courts of Iran? Or the illegal acts of the disciplinary forces of the Iranian regime or the irresponsible actions of the “organized thugs” called Bassijis (note the attacks of the organized thugs against the foreign embassies in Iran due to several unimportant cartoons).

That is the petrodollar wars?

Hadi Zamani (2) in his informative and detailed series of articles about the Iranian oil bourse (written in Persian and posted consecutively in http://news.gooya.com) has mentioned: “according to the theory of petrodollar wars, the monopolistic situation of dollar for the foreign exchange reserves of the world imposes a great burden over all countries… It allows the USA to continue to have its structural economic imbalance and lets it keep its hegemony over the international economy… therefore keeping the status of dollar is at the top of the foreign policy priorities of the United States. At the moment, due to the risks and dangers that threaten the status of dollar, the US is following a militaristic policy in the Middle East region in order to stop the collapse of its economic, political and military hegemony… on the basis of the arguments related to the petrodollar wars, the reason for US attack against Iraq� was not combat against international terrorism or stopping Iraq from getting the nuclear weapons. The US aim was keeping the hegemony over the international economy. For the same reason, immediately after the occupation of Iraq, the US officials ordered the oil transactions of Iraq back to the dollar system…”.

Professor Krassimir Petrov (3), from the American University in Bulgaria (his article on this subject has been used by countless sources and websites as an academic argument for the validity of petrodollar wars theory) writes: “… Bush’s war in Iraq was not about existing weapons of mass destruction, about defending human rights, about spreading democracy, or even about seizing oil fields. It was about defending the dollar, ergo the American Empire; it was about setting an example that anyone who demanded payment in currencies other than U.S. Dollars would be likewise punished….The Iranian government has recently proposed to open in March 2006 an Iranian Oil Bourse If so…The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead use with their own currency. The Chinese and the Japanese will be especially eager to adopt the new exchange. It will allow them to drastically lower their enormous dollar reserves and diversify them with Euros… The Russians have economic interest in adopting the Euro… Russians have also revived their nationalism; if embracing the Euro will stab the Americans, they will gladly do it and smugly watch the Americans bleed. The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversification against rising mountains of depreciating dollars. Should the Iranian Oil Bourse gain momentum and accelerate, the interests that matter…will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the exchanges operations: Sabotaging the exchange, coup d’état, Negotiating acceptable terms, joint UN war resolution, unilateral nuclear strike, and unilateral total war. [this section is made brief]”

Jerome R. Corsi (4) has stated in his writings: “Iran and Venezuela have joined forces in an effort to undermine the U.S. dollar. In October 2005, Venezuelan President Hugo Chavez announced that Venezuela was ready to move the country’s foreign-exchange holdings out of the dollar and into the euro. He also called for the creation of a South American central bank designed to hold in Euros all the foreign assets.”

Also, Mike Whitney (5) in his article dated Feb. 4 2006 claims: “Many war-weary newshounds are probably wondering why Russia caved in at the IAEA board meeting and agreed to have Iran sent before the UN Security Council� Obviously, Russia’s foreign minister comment that the referral to the UNSC is “only a warning” doesn’t adequately explain why Russia would have placed its ally in such grave danger of a pre-emptive attack. It may be, in the words of the Godfather, that the Bush administration made Putin “a deal he couldn’t refuse”. For one thing, Most News reports just yesterday that “Lukoil will replace the disgraced Halliburton” in providing fuel in Iraq…The truth is, that even the control of oil is not nearly as critical to the US as maintaining its continued dominance in the exchange of oil in greenbacks. If Iran is allowed to open its oil bourse (exchange) in March and openly compete with the US’s monopoly on trading oil in petrodollars, the central banks across the globe will dump hundreds of billions of dollars overnight, and the American economy will disappear beneath the waves.”

In his other article, Mike Whitney (6) has added: “…The [US] administration has no hope of securing the votes needed for sanctions or punitive action. The trip to the Security Council [of the Iranian nuclear case] is purely a ploy to provide the cover of international legitimacy to another act of unprovoked aggression… We should now be focused on how Washington intends to carry out its war plans, since war appears to be inevitable. Bush has no intention of occupying Iran. Rather, the goal is to destroy major weapons-sites, destabilize the regime, and occupy a sliver of land on the Iraqi border that contains 90% of Iran’s oil wealth. Ultimately, Washington will aim to replace the Mullahs with American-friendly clients who can police their own people and fabricate the appearance of representative government. But, that will have to wait. For now, the administration must prevent the incipient Iran bourse (oil-exchange) from opening in March and precipitating a global sell-off of the debt-ridden dollar..”

The answers to the theory

Paul Craig Roberts has written “readers keep asking if Bush is attacking Iran because it plans to open an oil bourse that would permit oil to trade in Euros…, the answer is no…, the dollar’s value depends on the world’s willingness to hold dollar denominated assets, not on the currency used to pay oil bills.” (7)

Once again looking at the articles of Hadi Zamani on the subject makes many points clear. He writes in the articles mentioned earlier that: “…those who oppose this doctrine argue [I have put the reasons that Zamani has mentioned in numbers changed some words accordingly]:

1- This doctrine exaggerates the status of dollar for the US economy.

2- The doctrine is ignoring the elements that have resulted in the present role of dollar as the reserves currency in the world and coasts of staying in such a position.

3- The euro is not able to tolerate the costs of being a currency for exchange reserve and the European countries are not ready for such a burden.

4- This doctrine is not taking into consideration the realities and complex mechanisms of the oil market

5- The doctrine is based on several handpicked evidences and it degrades the functions of the global economy into several conspiracies.

6- The first reason for the present role of dollar as the dominant currency in exchange reserves is the power of the American economy, not political conspiracies. The UIS produces almost one third of the Gross Global Products.

7- In the long run, dollar has more stability as compared to the other currencies.

8- Transferring the euro into the currency for the global reserves will increase its value 20 to 40 percent, and such an increase will weaken the exports of the euro countries considerably. The European economy is not powerful enough to tolerate such a pressure.

9- There is no serious indication that the countries of the world, including the oil exporting countries are ready to accept a euro based oil market. Since 1986 the oil prices are determined according to complex tables and spot changes in the New York and London exchange markets (called New York Mercantile Exchange, or NYMEX and International Petroleum Exchange or IPE correspondingly.)

10- OPEC countries are not ready to change the basis for oil transactions so easily. OPEC has tried several times to change the basis for the oil prices to euro, or Special Drawing Rights (SDRs of the IMF) or a basket of currencies and each time it has been abandoned.

The plan for establishment of Iranian Oil Bourse was first tabled in 2000� The IOB will include petrochemical products and gas too. In the initial phase the transactions does not include crude oil (perhaps up to three years). Later it will include all oil transactions including the swap operations of the Caspian Sea oil. According to the claims of the Iranian government the IOB will turn into a major oil transactions center in the Middle East. The transactions will be in Euros and the monopoly of dollar over the global oil markets will be ended.

However, entering this business requires a reform and preparation in the economic, legal and administrative structure of the country. At the moment Iran lacks proper financial, banking, insurance, customs, and commercial structures, proper tax laws, the dominance of the governmental sector, lack of competition in market, weakness in attraction of foreign investment, lack of necessary expert manpower, lack of necessary advanced technology, weakness in the electronic commerce structure, lack of necessary economic, legal and technical infrastructures, lack of system of the credit cards in global level, lack of commercial customs, Iran is not still a member of the World Trade Organization (WTO), Iran is already under American sanctions, Iran is not in a proper situation in the global economy, Iran has to observe the OPEC quotas, and this limitation cannot work in an international oil bourse. The IOB is based on the good market for the producers, but the fluctuations in the oil prices may put the same countries in a difficult situation.

Zamani adds an important point for those who care about the religious aspects of the IOB and he says, “It seems that the IOB is against the religious rules of Islamic Shari’a in Iran. The IOB faces problems based on the Islamic jurisprudence limitations and stumbling blocks…oil bourse is in fact a future market. One of its aims is to reduce risks of the oil transactions… according to the studies of the Iranian experts, the mechanism of future oil bourse transactions is basically contrary to the Islamic jurisprudence of the Islamic Republic of Iran (please refer to the article in Persian by Hojaolislam Ghanimi Fard, and Mohammad Aram Bonyar in the site of Imame Sadegh University regarding the “Feasibility Study of the Establishment of the Oil Bourse by the Islamic Republic of Iran).” Zamani concludes: “The success of the oil bourse depends on transparency of the economic structure and rationalization of the Iranian foreign policy.” (8)

Also, Colin Nunan has written in the Energy Bulletin “…However, others have claimed that the idea that the currency in which oil is sold matters at all is based on a poor understanding of economics…Those arguing that the denomination of sales is crucial to dollar strength have tended to say that countries are forced to save dollars so that they have dollars to buy oil. Their critics, however, reply that you do not have to save in dollars to buy oil since you can save in whichever currency you want and then buy dollars on the foreign exchange market whenever you want to buy oil. What matters, say the critics, is in which currency people ultimately save rather than in which currency they trade�So can we conclude that an Iranian oil bourse trading oil in Euros is the real reason for the current crisis? Perhaps this is prematurely jumping to conclusions… I have yet to see a clear statement on this from the Iranian government.” (9)

The IOB is a good idea. In the hands of a proper Iranian government that establishes good relations with many countries, including and especially the USA, it could turn in the long run into a profitable center. The present day Iran lacks the necessary preparations for such a move. Even if taking steps for such reforms are started today, it will take some time to make the necessary grounds ready. However, the government of the Islamic regime of Iran is not even walking in the direction of those reforms. Unfortunately the IOB is a stillborn.

Rajendra Pratap Gupta
President
Countryfirst
Cell : + 91- 9323109456
+ 91- 9867300045
(USA) +1515-450-6165
Skype: rajendra.india
E-Mail: mail@rajendragupta.org / rajendragupta@aol.in
http://www.countryfirst.org