Iran, Opec's second biggest oil producer, launched an oil exchange on Sunday with the first trade made in a petrochemical product but planning to expand to include  transactions in crude in future.

The bourse, based on the Gulf economic free zone island of Kish, has been planned for years but has faced repeated delays. When plans were first mooted, some analysts speculated Iran might use it to undermine the importance of the US dollar by pricing crude in euros or other currencies.

An official on Sunday said trading would be in Iranian rials and other currencies approved by the central bank but gave no details. The bank has been seeking to diversify Iran's reserves away from the dollar because of US sanctions on the Islamic Republic.

Iran's state oil company has also been seeking more payments for crude exports in currencies other than the dollar.

'Trading of oil products in the first phase of the exchange can make us more competent and ready to begin the supply of crude oil in the second and long-term phase,' Oil Minister Gholamhossein Nozari said.

He gave no details of when the second phase would start when he spoke to reporters in a trading room in Tehran from which dealers can also conduct business on the exchange.

After his comments, the minister gave the nod to the first trade, a transaction in the petrochemical product linear low-density polyethylene.

The bourse will also trade other oil products and industrial pipes used in the energy industry. Oil products are currently traded domestically at subsidised prices and Iran is seeking to establish a more competitive pricing platform, the oil minister said.

Ali Akbar Hashemian, managing director of Iran Products Bourse Company, which runs the exchange, said Iran wanted to deregulate prices of petrochemicals and other oil products and create more transparency as part of a privatisation drive.

Price deregulation would help attract more investment into
the oil industry, he said.

Iran has been seeking to sell off many state firms, though not the vital upstream oil and gas industry. Progress has been slow with investors often showing limited interest.

Economy Minister Davoud Danesh-Jafari, whose ministry along with other exchange bodies will supervise the new Kish bourse, said Iran wanted to raise productivity in the oil and petrochemical industry through abolishing subsidised prices.

An oil ministry official said in December 70 per cent of Iran's crude export earnings were now paid for in euros and 20 percent in Japanese yen. He said the remainder was in dollars but would be replaced by other currencies.

Iran's ambassador to Moscow, Gholamreza Ansari, suggested in comments to Russian media, reported on Friday, that Iran could consider oil trading in Russian roubles. His remarks were later carried by Iran's official IRNA news agency.-Reuters