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Iran poses threat to dominance of the US dollar

21.03.2006
 
Pages: 12
Iran poses threat to dominance of the US dollar

This week in the world of economics began with the opening of the international oil exchange in Iran. The intrigue of the situation is accentuated by the fact that trading will take place in the European currency. This in itself is setting a precedent: in modern history oil has been quoted exclusively in dollars.

Alarmists and antiglobalists from all countries have rushed to describe this as yet another sentence against the hegemony of the dollar and the USA. It can not be ruled out that this idea is what is motivating the Iranian authorities. At the height of tension in relations between the USA and Iran the latter’s move looks like a blow to the economic power of its enemy.

This cannot be deemed a weak blow – Iran has a share of at least 4% of worldwide oil production. Moreover, it has been declared that the format of the exchange will meet international norms: the question now is: which other of the Persian Gulf states will support Iran?

“The situation there will depend on the extent to which other countries and regions will want to convert from the dollar to the euro,” the analyst of IK ‘FINAM” Olga Belenkaya told Pravda.Ru. “It is not a fact that Saudi Arabia will want to convert to the euro. If this is just something inside Iran, which will be selling oil in euros, then it is not very dangerous, because all the same its share in oil production is not that great.”

Analysts are for the moment being cautious in their predictions – everyone is advising to wait and see how this week at least will turn out. The dollar has slipped somewhat in world markets, but experts tend to think that this small fall was caused by the events of last week.

In order to contemplate the consequences of the opening of the euro oil market in Iran, it is necessary to look at its origins. However surprising this may be, the man behind the idea is the British financier Chris Cook, former director of the International Petroleum Exchange in London. In 2001 he wrote a letter to the head of the Iranian Central Bank Mohsen Nourbakhsh.

The letter said that the structure of the international oil markets is closely linked to trade brokers, and especially to investment banks, which has a disadvantageous effect on states such as Iran, which are both producers and consumers at the same time. Chris Cook advised Iran to make a decision as soon as possible about creating a Middle East exchange for energy resources which would set a new standard for oil prices in the Persian Gulf .

And not a word was said about “opposing the Atlanticists”. Ideas for shaking the dollar through unilateral efforts have always fallen apart – Iran , if anyone, should know about that.

We remember how at the end of the 1970s, when the OPEC countries agreed to sell oil for dollars and inflated the selling cost of a barrel, oil prices rocketed up by 400%. France, Germany and Japan suddenly decided to purchase oil in their own currencies and thus lower the pressure from the American currency.

In reply the US Treasury and the Pentagon did everything they could to ensure that this did not happen: secret diplomatic treaties, threats and military agreements were taken between the USA and the main OPEC oil producer, Saudi Arabia .

This is what started a new stage in the unlimited power of American financial system. Profit from the export of oil dollars by OPEC countries ended up in the hands of large banks in New York and London and resurfaced in the form of loans to countries experiencing an oil deficit. For example, to Brazil and Argentina, which would later be caught up in the quagmire of the tragic Latin American debt crisis.

Another example of a revolt against the oil dollar took place in Iraq. Two years before the US invasion of Iraq, Saddam Hussein switched from the dollar to the euro. This was one of the reasons for the aggression of American forces against this country.

The Americans have come up with plenty of reasons for the invasion of Iraq. Therefore it is logical to assume that with the slightest danger to the American financial world order, the White House will put an end to the Iranian experiment in trading oil for euros with the use of winged missiles and Abrams tanks.

The opinion of Europe, which presumably morally supports Iran ’s initiative, will remain as just that – as it did in all the global massacres of recent years.

It is Russia who really might be hit by the opening of the oil exchange in Iran. In any case, Russian analysts are not ruling out this turn of events.

“There are rumours going around that Europe is looking for alternative fuel suppliers,” Rosbank analyst Pavel Suprunov told Pravda.ru. After the fuel crises during the winter, Europeans are extremely concerned by their heavy dependence on Russia, therefore they would like to diversify their supplies. “I think that there is nowhere left for them to go, they have to look at the Middle East ,” says Suprunov.

The analyst does not exclude the possibility that, with the help of the Iranian oil exchange, the Old World countries may try to work more closely with oil exporters from the Middle East. “They have already declared that they will strive to increase their supplies from there”, affirms Suprunov.

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