Petro-Euro: A reality or just a distant

[Sanjuro]

In the current ‘crisis’ over Iran’s plans to develop nuclear technology, the real reason for open U.S. hostility towards Iran is often over-looked. For the past few years, Iran has been planning to open its own oil exchange — the Iranian Oil Bourse (IOB) — with the alleged goal of becoming the dominant centre of the Middle East oil trade. Currently there are only two oil trading centres in the world; New York and London and both trade only in U.S. Dollars. What will make the proposed IOB different is that it has stated that it will trade in Euros not Dollars.

The dollar has long been the dominant currency for international oil trade and the U.S. economy has benefited hugely from this status as it has led to being the world’s largest reserve currency kept by State Banks the world over. It is an open secret that since the 1970’s, OPEC (i.e. Saudi Arabia) has been instructed by the U.S. to only trade in US Dollars.

The debate over the ultimate financial impact of trading oil in Euros rather than dollars is a complex one, but according to many experts, such a move could lead to a collapse in value for the American currency, potentially putting the U.S. economy in its greatest crisis since the depression era of the 1930s. The IOB has been on Iran's agenda for quite some time and different dates have informally been announced for its opening, all which have been quietly dropped as the deadline neared. The question is whether Iran wishes to have the nuclear issue resolved before taking on the US Dollar in the IOB or whether Iran has been intimidated by U.S. pressure and threats of possible nuclear strikes and decided to postpone the IOB indefinitely.

March 20, the latest rumoured date, would have coincided with the Persian calendar year. The Iranian Oil Ministry's public relations department has denied that the date corresponded to the opening of the bourse, and has mostly remained silent about the existence of such a program.

Of course, the effectiveness of the IOB will depend on whether the big international oil trading companies decide to accept deals in euros or not. China, which is emerging as Iran’s largest customer, would have no objection to paying Iran in Euros and thus begin the move from the dollar to the euro.

"The weapon of oil in the hands of Iran's regime is more dangerous than any other weapon," said a recently published article in Italy's Panorama newsmagazine. Iran's Deputy Oil Minister Mohammad Javad Assemipour, director of the IOB program, told Panorama that the oil trading centre, due to open in a few months, will turn Iran into a major oil exchange point.

"Iran's oil exchange with the region's countries and also some of the East Asia states will take place in Euros instead of U.S. dollars," said Assemipour.

Some of the major oil-producing countries such as Venezuela (which has boosted its economic ties with Iran) and a few of the larger oil consuming countries, most notably China and India, have already announced their support for the IOB. There is speculation that the IOB represents Iran's plan to escape any possible future economic sanctions spearheaded by the U.S. However, some postulate that the plan could also endanger the continued existence of Iran's regime. William Clark, an American security expert, predicted that if Iran threatened the hegemony of the U.S. dollar in the international oil market, the White House would immediately order a military attack against it.

Experts point to the fact that the Iraq invasion in 2003 took place after Saddam Hussein refused to accept dollars as a payment medium for Iraq’s oil exports and Oil for Food programme, choosing Euros instead. After discovering no Weapons of Mass Destruction in Iraq, speculation naturally moved onto the real cause of the invasion; many now are convinced that was the White House's fear of the possible financial repercussions of Saddam Hussein's plan to substitute Dollars for Euros.

Even more worrying than Iran’s statements, however, were those recently made by the Russian Finance Minister, Alexei Kudrin, in a recent meeting of the World Bank and International Monetary Fund in Washington. Kudrin caused his American hosts huge discomfort by openly questioning the dollar's pre-eminence as the world's "absolute" reserve currency.

The greenback's recent volatility and the yawning U.S. trade deficit "are definitely causing concern with regard to its reserve currency status," he said. "The international community can hardly be satisfied with this instability." The U.S. Federal Reserve, in particular, has been forced to take drastic action - raising interest rates 15 times since June 2004 to keep inflation in check.

Given the fact that Iraq’s oil production is now lower than before the U.S. invasion and that the country is now a net importer of oil (incredible for a country sitting on the world’s second largest known reserves) and its oil effectively not available in the international market despite the presence of over 130,000 U.S. troops, it is little wonder if finance ministers and governors of State Banks all over the world are getting nervous about the U.S. military’s ability to ensure oil supplies; a task it has been charged with exclusively since the First Gulf War of 1991.

Russia with its huge oil and gas reserves could present an even bigger challenge to the U.S. and the dollar's supremacy and could not be threatened by any American political or military retaliation same way as Iran. The irony of the situation is that Iran and Russia are both in a much stronger bargaining position given the U.S. failure in Iraq to increase or protect oil supplies, thereby leading to a huge increase in oil prices, making both Iran and Russia much richer in the process.

The dollar’s current position is due to the fact that the U.S. currency accounts for more than two thirds of all central bank reserves worldwide and the fact that all international oil transactions have to be in US Dollars, thereby making the dollar the international oil currency. This reserve status means that the dollar is constantly in demand, whatever the underlying strength of the U.S. economy. And now, with massive trade and budget deficits to finance, America is increasingly reliant on this status. The unprecedented weight of U.S. liabilities means that any threat to the dollar's dominance could result in a currency collapse, plunging the world's largest economy into recession.

Recently Sweden has cut its dollar holdings, from 37 per cent of central bank reserves to 20 per cent, with the Euros share rising to 50 per cent. Central banks in some Gulf States have also lately mooted a shift into the Euro. Such sentiments helped push the dollar to a seven-month low against the single currency last week.

Another important point is that the EU is Russia's main trading partner. More than two thirds of Russia's oil and gas is exported to the EU, which makes Russia a strong candidate to become the first major oil exporter to start trading in Euros. The reality is that as long as most of Opec's oil - read Saudi Arabia - is priced in dollars, the U.S. currency will retain its hegemony. But the opening of an oil bourse in Tehran, which looks likely sooner or later, will signal at least tacit Saudi consent for euro-based oil trading.

The U.S. knows this, which is why it is very sensitive to any debate on the dollar’s position. The next 12 months will decide if Russia or Iran will take the first meaningful steps to challenge the dollar and whether the Petro-Euro will become a reality rather than just a distant nightmare for the U.S. government.

S

[bathory]

apparently Reagan was also pretty worried about Iran moving to the euro too

[Watzel]

Good thing we don't need Iranian oil. We get our oil elsewhere and produce 47,5% of what we use from our own oil sources.

All this will do is speed up Americas conversion to Ethanol and Bio-Diesel and then after the world follows, Iran won't be able to give that nasty **** away.

[Sanjuro]

Maybe, but US wants oil traded in USD not euro, its war about USD survival in the world market.

[Irani]

Good thing we don't need Iranian oil. We get our oil elsewhere and produce 47,5% of what we use from our own oil sources.

All this will do is speed up Americas conversion to Ethanol and Bio-Diesel and then after the world follows, Iran won't be able to give that nasty **** away.

oil is not just used for machines and autos, oil keeping world economy in balance. the dollar becomed strong because of oil, all oil is buyed in american dollar, so if you want oil you need buy dollar first and that is good for america. if china need to help america economy to boost selling product then china buy more oil because then they also buy dollar. oil is not just oil anymore, its keeping world economy on balance. america get 50% of oil in own land, but america dollar is depend on oil.

[Sanjuro]

oil is not just used for machines and autos, oil keeping world economy in balance. the dollar becomed strong because of oil, all oil is buyed in american dollar, so if you want oil you need buy dollar first and that is good for america. if china need to help america economy to boost selling product then china buy more oil because then they also buy dollar. oil is not just oil anymore, its keeping world economy on balance. america get 50% of oil in own land, but america dollar is depend on oil.

Yeah, but many people dont understand this and think that US is good ol' Santa who gives "freedom" presents for free to everyone.

Its business and war is business too.

[Watzel]

Still, we are converting. What cha gunna do then with all that oil nobody wants, drink it?

[PLO]

oil supplies about 40% of the world’s energy and 96% of its transportation energy. Since the shift from coal to oil, the world has consumed over 875 billion barrels. Another 1,000 billion barrels of proved and probable reserves remain to be recovered. From now to 2020, world oil consumption will rise by about 60%. Transportation will be the fastest growing oil-consuming sector. By 2025, the number of cars will increase to well over 1.25 billion from approximately 700 million today. Global consumption of gasoline could double. The two countries with the highest rate of growth in oil use are China and India, whose combined populations account for a third of humanity. In the next two decades, China's oil consumption is expected to grow at a rate of 7.5% per year and India’s 5.5%. (Compare to a 1% growth for the industrialized countries). It will be strategically imperative for these countries to secure their access to oil. Now, Watzel what are these "conversions" your talking about becuase much like China andIndia, american oil consumption is also on the rise.

btw Iran and Iraq account for 20% of the worlds oil, hint hint.

Edited May 1, 2006 by PLO

[Sanjuro]

Still, we are converting. What cha gunna do then with all that oil nobody wants, drink it?

US is not capable to perform this "converting" without going broke, you genius. Maybe in many years, but with broken economy like US have today....hmm, I wouldnt be surprised if US would just broke even without starting this "converting".

What is your argument that US can convert to something else than oil? Because Mr. Bush said so? Yeah, your beloved Mr. Bush said that Iraq had WoMD too...trust a liar and you will find yourself into deep hole which is surrounded by web of lies with no exit.

[Watzel]

You will see. Very soon. And a let you in on a secret, Bush has nothing to do with the conversion. It is being done by private companies.

We are in the process, GM is leading, to convert cars to be flex fuel operating. This means they can burn gas or ethanol or a combination of the two fuels. I know that when an opportunity to make money comes to Americans you very quickly see someone make use of it. Soon they will be selling conversion kits for all cars on the road today so they can also burn both fuels. Also electric cars and motorcycles are very soon to be available. Actually, I can buy an electric car right now but I am waiting for them to improve a little. But I can be persuaded to make that purchase earlier if prices get jacked up by the M.E. oil pigs.

So oil consumption by America will soon be coming down, we are at the peak. All projections are IF nothing happens with alternative fuels. But that is happening already.

Too band for the M. E. I guess they should have just kept their mouths shut and kept the price low. Now they are going to regret it.

[Sanjuro]

Too band for the M. E. I guess they should have just kept their mouths shut and kept the price low. Now they are going to regret it.

Well I dont believe that US will end its oil addiction in near future (rebuilding army, power supply etc etc).

But if miracle will happen and US will convert to something else, Middle east oil will be sold to China, so there is nothing to regret.

But lets face the truth, oil will be in the rotation for like 10 - 30 years for sure, so in your life time, Watzel, these miracles wont came truth.

[Watzel]

I'm not worried about living long enough to see it. But I do want my children to be free of being held in economic hostage by the M. E. oil monsters. And I know they will. Like I said before, what are you going to do with it when no one wants it, including China?

Brazil is a good example. They don't need your oil. The trend will only grow because of the M.E. insanity and greed.

[Sanjuro]

I'm not worried about living long enough to see it. But I do want my children to be free of being held in economic hostage by the M. E. oil monsters. And I know they will. Like I said before, what are you going to do with it when no one wants it, including China?

Brazil is a good example. They don't need your oil. The trend will only grow because of the M.E. insanity and greed.

You dont need my oil? .. well maybe because I dont have any?

And, yeah, there will be need for oil till it will go dry. (its about 30 years)

[StalingradK]

Not really, many car companies are finding and researching alternative sources for energy. We don't need oil to keep up our economy, we can just make even more money off the newer fuel sources. The problem is finding them. Slowly the public is converting to alternative fuel sources for cars versus oil. My state is home of the car that runs on Veggie Grease.