The Omani Rial Mystery — Solved!

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

Responding to my bank mystery earlier today, a reader with lots of currency trading experience emails with an explanation for why Iran’s $5.7 billion in Oman had to go through a 3-step transfer (rials —> dollars —> euros) to be converted into euros. Here’s the main point:

Assuming that Bank Muscat had sufficient liquidity, they could have simply transferred the EUR equivalent of USD 5.7 billion to Iran. This would, however, have lead to a significant mismatch in Muscat Bank’s balance sheet. The mismatch would have occurred because banks are de facto required to maintain a balance between their assets and liabilities on a per currency basis…. Sending out EUR to Iran would have reduced its EUR assets, while cancelling its OMR liability (the deposit of Iran) would have reduced an OMR liability. This would have created a situation where Bank Muscat was long OMR and short EUR. In order to restore the required balance on a per currency basis, Bank Muscat would have needed to trade (in one or more steps) OMR  for EUR. Given the size, they likely would have needed to do this in advance of the transfer of EUR to Iran.

So, Bank Muscat would have needed to make a market transaction to balance its currency risks in order to send out the funds. This transaction would have been absolutely enormous for Bank Muscat. According to Wikipedia, it has USD 28 billion or so in assets. I cannot emphasize enough that the required foreign exchange trade would have been huge and unusual….It is also worth noting that the OMR to EUR market is illiquid, meaning, in this case, that there are not sufficient customers for any bank wishing to buy OMR in exchange for EUR for the market to have satisfied that order at any price.

Primarily, then, we have a tiny bank that couldn’t possibly conduct a huge trade in a currency pair that’s illiquid to begin with. It’s too risky, assuming they could even do it in the first place. And even though the Treasury Department granted a license and urged American banks to cooperate in the 3-step trade, none of them wanted to. They’ve been trained to be so wary of Iranian business that they were afraid of someday being hauled up on charges of failing to comply with sanctions no matter what fancy paperwork Treasury had given them.

Fine. That makes sense unless someone comes up with something better. But it raises another question: Why did Iran park $5.7 billion in a tiny bank in Oman? Surely there were bigger banks around that were friendly enough to manage the funds for them?

WE CAME UP SHORT.

We just wrapped up a shorter-than-normal, urgent-as-ever fundraising drive and we came up about $45,000 short of our $300,000 goal.

That means we're going to have upwards of $350,000, maybe more, to raise in online donations between now and June 30, when our fiscal year ends and we have to get to break-even. And even though there's zero cushion to miss the mark, we won't be all that in your face about our fundraising again until June.

So we urgently need this specific ask, what you're reading right now, to start bringing in more donations than it ever has. The reality, for these next few months and next few years, is that we have to start finding ways to grow our online supporter base in a big way—and we're optimistic we can keep making real headway by being real with you about this.

Because the bottom line: Corporations and powerful people with deep pockets will never sustain the type of journalism Mother Jones exists to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we hope you might consider pitching in before moving on to whatever it is you're about to do next. We really need to see if we'll be able to raise more with this real estate on a daily basis than we have been, so we're hoping to see a promising start.

payment methods

WE CAME UP SHORT.

We just wrapped up a shorter-than-normal, urgent-as-ever fundraising drive and we came up about $45,000 short of our $300,000 goal.

That means we're going to have upwards of $350,000, maybe more, to raise in online donations between now and June 30, when our fiscal year ends and we have to get to break-even. And even though there's zero cushion to miss the mark, we won't be all that in your face about our fundraising again until June.

So we urgently need this specific ask, what you're reading right now, to start bringing in more donations than it ever has. The reality, for these next few months and next few years, is that we have to start finding ways to grow our online supporter base in a big way—and we're optimistic we can keep making real headway by being real with you about this.

Because the bottom line: Corporations and powerful people with deep pockets will never sustain the type of journalism Mother Jones exists to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we hope you might consider pitching in before moving on to whatever it is you're about to do next. We really need to see if we'll be able to raise more with this real estate on a daily basis than we have been, so we're hoping to see a promising start.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate