Killing the dollar in Iran
Could the proposed Iranian oil bourse (IOB) become the catalyst for a significant blow to the influential position the US dollar enjoys? Manifold supply fears have driven the price of crude oil to its recent high of US$67.10 - only a notch below its highest price in inflation-adjusted dollar terms. With the world facing a daily bill of roughly $5.5 billion for crude oil at current price levels, it becomes apparent that sellers and purchasers of the black gold are looking into all ways that could lead to a financial improvement on their respective sides.
Non-US-dollar holders so far have been the victim of additional transaction costs in the oil trade. The necessary conversion of local currencies into oil-buying greenbacks can be considered a hidden tax, charged and enjoyed by the international banking sector. The IOB, by eliminating this transaction cost, will become a factor that could unsettle the dollar's dominant position. While the worldwide bottleneck of inadequate refining facilities and partly dramatic declines in production - for example in the North Sea - are two factors that cannot be eliminated in the short term, there is one area left which could result in smiling faces of oil producers as well as most buyers.
Oil consumers are entangled in a web of supply fears that span the globe. In Venezuela, President Hugo Chavez threatens to divert oil supplies from the US to China, which faces severe gasoline and diesel shortages these days. Attacks on Iraqi oil installations have slowed exports there. Ecuador's oil industry is still recovering from a strike, while Nigerian oil companies are in the middle of efforts to avoid a strike there.
Until now, oil has been solely priced, traded and paid for in the greenback on markets in both London and New York. But monthly worldwide oil revenues of over $110 billion (on a 20-trading-day basis) - a third of which ends up with OPEC (Organization of the Petroleum Exporting Countries) members - raise the question of what happens to these cash mountains. According to the most recent data from the US Treasury Department, OPEC members have parked only a skimpy $120 billion in direct dollar holdings, which are almost equally split between equities and American debt paper. This is a clear indication that oil producers are investing their windfalls elsewhere. The yield spread between US and EU debt papers in favor of the EU is another hint where the petrodollars might be heading.
Especially in the case of Iran, it does not make sense to accept dollars only for its much-desired commodity. Given that Iran is seen as a hostile country by the current US administration for its intention to build its own nuclear reactors, one wonders whether the new IOB will not try to attract buyers other than Americans. Iran has recently announced that the new oil exchange will start up its computers in March 2006...cont'd
http://www.atimes.com/atimes/Global_Economy/GH26Dj01.html--------------------------------------------------------------
PETRODOLLAR WARS: Dollars, Euros and the Upcoming Iranian Oil Bourse
by William R. Clark
(Friday August 05 2005)
"A successful Iranian bourse will solidify the petroeuro as an alternative oil transaction currency, and thereby end the petrodollar's hegemonic status as the monopoly oil currency. Therefore, a graduated approach is needed to avoid precipitous U.S. economic dislocations." "This notion that the United States is getting ready to attack Iran is simply ridiculous...Having said that, all options are on the table." -- President George W. Bush, February 2005
Contemporary warfare has traditionally involved underlying conflicts regarding economics and resources. Today these intertwined conflicts also involve international currencies, and thus increased complexity. Current geopolitical tensions between the United States and Iran extend beyond the publicly stated concerns regarding Iran's nuclear intentions, and likely include a proposed Iranian "petroeuro" system for oil trade. Similar to the Iraq war, military operations against Iran relate to the macroeconomics of 'petrodollar recycling' and the unpublicized but real challenge to U.S. dollar supremacy from the euro as an alternative oil transaction currency.
It is now obvious the invasion of Iraq had less to do with any threat from Saddam's long-gone WMD program and certainly less to do to do with fighting International terrorism than it has to do with gaining strategic control over Iraq's hydrocarbon reserves and in doing so maintain the U.S. dollar as the monopoly currency for the critical international oil market. Throughout 2004 information provided by former administration insiders revealed the Bush/Cheney administration entered into office with the intention of toppling Saddam.<1><2> Candidly stated, 'Operation Iraqi Freedom' was a war designed to install a pro-U.S. government in Iraq, establish multiple U.S military bases before the onset of global Peak Oil, and to reconvert Iraq back to petrodollars while hoping to thwart further OPEC momentum towards the euro as an alternative oil transaction currency ( i.e. "petroeuro").<3> However, subsequent geopolitical events have exposed neoconservative strategy as fundamentally flawed, with Iran moving towards a petroeuro system for international oil trades, while Russia evaluates this option with the European Union.
http://usa.mediamonitors.net/content/view/full/17450
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