The Last Gasp of the Dollar? Iran bourse opens next week

[Demeter]

http://www.opednews.com/articles/opedne_mike_whi_060508_the_last_gasp_of_the.htm


The Last Gasp of the Dollar? Iran bourse opens next week

By Mike Whitney

If one day the world's largest oil producers demanded euros for their barrels, "it would be the financial equivalent of a nuclear strike.” Bill O'Grady, A.G. Edwards commodities analyst. “Everybody knows the real reason for American belligerence is not the Iranian nuclear program, but the decision to launch an oil bourse where oil will be traded in euros instead of US dollars….The oil market will break the dominance of the dollar and lead to a decline of global American hegemony.” Igor Panarin, Russian political scientist

Overnight the story of Iran’s proposed oil bourse has slipped into the mainstream press exposing the real reasons behind Washington’s ongoing hostility towards Tehran. Up to this point, analysts have brushed aside the importance of the upcoming oil-exchange as a Leftist-Internet conspiracy theory unworthy of further consideration. Now, the Associated Press has clarified the issue showing that an Iran oil bourse “could lead central bankers around the world to convert some of their dollar reserves into euros, possibly causing a decline in the dollar’s value”.

Currently, the world is drowning in dollars, even a small movement could trigger a massive recession in the United States. There’s nothing remotely “conspiratorial” about this. It is simply a matter of supply and demand. If the oil bourse creates less demand for the dollar, the value of the dollar will sink accordingly; pushing energy, housing, food and other prices higher.

Oil has been linked to the dollar since the 1970s when OPEC agreed to denominate it exclusively in dollars. This provided the US a virtual monopoly which has allowed it to run huge account deficits without fear of crippling interest rate hikes. As Bill O’ Grady of A.G.Edwards said, “If OPEC decided they didn’t want dollars anymore, it would be the end of American hegemony by signaling the end to the dollar as the sole reserve currency.”



Authors Bio: Mike is a freelance writer living in Washington state.

[MaggieSwanson]

1. K&R

Glad to see the AP reporting this, it's important that it is finally being covered...but will it be too late?

[kaygore]

3. Too late plus it actually will prompt some in the U.S. to see

nuking Iran as a rational solution.

I spoke with a 20 something Republican male in Sarasota on election day 2004 when we were both handing out literature for our respective parties at one of the polls.

This guy actually said that it would be worth killing a million innocent people if the result was that gas would be $1.00. And he was serious!

Can you imagine how many people he would be willing to see killed to keep the dollar strong and to maintain our highly materialistic way of life!!!???

By the way, this guy had been a social worker but was going back to school the following fall to become a lawyer!

[genieroze]

10. Tell him to enlist. Uncle Sam needs oil.

[mom cat]

15. At least he was honest about wanting to kill for cheap oil.

Bush tries to cloak his genocide with platitudes.

[CJCRANE]

16. Ask him

if it would be worth it if he was one of those people killed? Or if he was drafted to fight in the resulting war?

Then tell him that war and instability generally cause gas prices to rise (as in the current situation).

[kaygore]

2. Saddam was going to price oil in Euros and we attacked

Can you imagine what Iran's double threat will do?

Well, it has been a nice life while we had it!

[TheCentepedeShoes]

5. IIRC (and feel free to

correct me if I'm wrong) but Saddam had already started selling oil in Euros before the Selection of 2000. And he was riduculed at the time because then the Euro was worth about 80% of the US dollar. Course things have change re the Euro vs $. I've seen where folks think the bourse is going to be a calamity to the $ and where it's going to be no big deal. What do I know?? Reading Greider's "Secrets of the Temple" right now and starting to think I need the Dummies version. But I don't think it's necessarily what for sure will happen, but what the PNAC gallery thinks (fears) will happen.

[kaygore]

9. Good points!

[Drum]

4. Perhaps I missed it,

But where exactly is it written that "Iran bourse opens next week"? The trade info sounds sound to this layperson, but who's saying when Iran's Euro-bourse really gets going?

[mcscajun]

7. Here's some background from Business Week

The Associated Press/TEHRAN, Iran
Analysts skeptical of Iran oil plan

MAY. 5 12:32 P.M. ET Iran took a step on Friday toward establishing an oil market denominated in euros, a plan analysts described as highly unlikely to materialize but which in theory could have serious consequences for the U.S. economy.

(snip)

O'Grady said there are practical reasons why the Iranian threat is an empty one.

For starters, Iran is not a very attractive site for a market, given the volatile nature of its politics, the U.S. sanctions against it and the lack of a fair legal system. Moreover, there is no indication that the European Union is interested in vying to become the world's central bank, which requires a willingness to run large currency deficits, he said. For the U.S., that has meant allowing cheap imports to undermine the strength of some major industries, including textiles, autos and electronics manufacturing.

(snip)

Oil prices jumped above $75 a barrel last month amid escalating diplomatic tensions between Washington and Tehran. On Friday, crude oil futures traded just above $70 a barrel.

http://www.businessweek.com/ap/financialnews/D8HDNSM07.htm?campaign_id=apn_home_down&chan=db

[Drum]

11. Thank you,

and as I said, I don't doubt the consequences of an Iran Euro bourse (and why this has the Bushies, et al, freakin' out.)

But still, OP and mcscajun, who is saying that it opens next week??

Things that I see cited here on DU and on other blogs all say that the project starts and stops, lurches unpredictably toward reality. I too read over the weekend that Iran "took a step on Friday toward establishing...) and don't see that news as anything up&running so soon.

Which is it?

[mcscajun]

12. If you read the excerpt from BW, you'll see that this thing just

isn't Flying Off the Ground...it's taking one stuttering step at a time toward reality.

The reports of its birth are somewhat exaggerated, and premature. It'll be a bourse when trading starts in it, and not a day before. And in another post (#8), you'll see that some are discounting the "threat" completely.

[Drum]

13. I completely agree.

but I thought that in giving me that background you were agreeing with the OP headline, that the bourse was opening next week. I think we both are in synch thinking it's opening is a long way off.

I was really just reiterating my earlier point: Demeter's headline is misleading.

[mcscajun]

14. Nope...all I was doing was providing background.

:)

It has potential...but its potential must be realized to be of significance. That's why so far, the stories on this are mainly in trade/financial papers. Nobody else understands or cares about it...yet.

We're in agreement here.

[Bruden]

6. It's amazing how unreported this story is.

I went and googled for info on this and found nothing but an occasional mention in some minor foreign news sources, plus the usual blog talk. I can't find stories about this is any major Western press source, AT ALL.

[mcscajun]

8. They are out there...

I Googled "Iran oil bourse" and selected "News" rather than "Web". Here's what I found:

Copies of the AP story in the Los Angeles Times and Business Week, naturally. Multiple large and small news outlets were also carrying the AP wire story, which is par for the course. Here's one link:
http://www.businessweek.com/ap/financialnews/D8HDNSM07.htm?campaign_id=apn_home_down&chan=db

An article in Forbes:

Iran's oil ministry on Friday also made a move to establish an oil-trading market denominated in euros instead of U.S. dollars, granting a license for the bourse, according to a report from the country's state-run television.

http://www.forbes.com/markets/feeds/afx/2006/05/07/afx2726426.html

A totally independent article out of the UK:

Were the Iranians to establish a Middle-East based euro-only oil exchange, the dollar's unique petrocurrency status could unravel. That, in turn, would threaten its broader dominance - which, given America's groaning twin deficit, could seriously hurt the US economy.

Some cite this as the real reason the US wants to attack Iran: to protect the dollar's unique position. I wouldn't go that far, but the prospect of a non-dollar oil exchange in Tehran is certainly an aggravating factor.

The opening of Iran's new oil exchange has recently been delayed. But, having spoken with numerous officials in Tehran, and western consultants who've been working with the Iranians for several years, I think it will go ahead. The exchange entity has already been legally incorporated in Iran and a site purchased to house administrative and regulatory staff.

The reality is that as long as most of Opec's oil - read Saudi Arabia - is priced in dollars, the US currency will retain its hegemony. But the opening of an oil bourse in Tehran, which now looks likely, will signal at least tacit Saudi consent for euro-based oil trading. The US knows this, which is why it is nervous about the dollar's status being questioned.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/04/23/ccliam23.xml

And via the Scripps Howard News Service, this from the San Francisco Chronicle:

Iran has a plan to destroy America, and it has nothing to do with the bomb.

(snip)

The greenback's value will collapse. The American economy will tank. The U.S.-dominated New World Order will disappear in a flurry of currency trades.

This tall tale has circulated on the Web for months. Bloggers type apocalyptic postings about it. People who identify themselves as economists engage in detailed, sometimes arcane debates on it. And like any good online story, the saga of the Iranian oil exchange, or bourse, has taken on a viral life of its own.

(snip)

The story contains several grains of truth. Iran does, in fact, want to create an oil exchange....But it's far from clear that the effort will take off. And even if it does, most economists consider it little threat to the United States.

http://www.shns.com/shns/g_index2.cfm?action=detail&pk=IRAN-BLOGS-04-07-06

[TrogL]

17. US troops are massing on the Iran border

http://www.zaman.com/?bl=international&alt=&trh=20060511&hn=33036

When they invaded Iraq, their first priority was guarding the Oil Ministry.

Guess we know where they're headed now.

[cliss]

18. The Iran oil bourse has the potential

to cripple the US Petrodollar and thereby send our currency spiraling. Don't forget: this kind of thing has been done before.

In Carter's era, we saw OPEC. This was the oil petroleum countries banding together and creating a cartel. One of their first goals was to restrict output in order to bring the price up. They succeeded in doing this. Remember the gas lines, the fights at the local gas station? Brought to you by OPEC (Organization of petroleum exporting countries).

Now, Iran will probably not "dump" the dollar. Don't forget, they have vast dollar holdings. In Europe alone, they have around $50 billion in cash, sitting in banks. They don't want to see the system fall, any more than the rest of the world does. They will probably diversify their holdings, so that the US dollar is not the KING any more. How about that George Bush?

The most frightening thing about this for Washington, is that Iran is MAKING ITS OWN DECISIONS. This drives them crazy. They are kept out of it. That's what scares them most of all.

Iran is extremely powerful. They have one of the world's largest reserves of petroleum. They have the world's largest supply of natural gas.

[kestrel91316]

19. Expect the nuking of Iran to begin ANY DAY NOW..................

[Demeter]

20. kickety kick

[LibertyorDeath]

21. Kick