...Well, some of you might recall my December 2002 essay/hypothesis regarding the Real Reasons for the Upcoming War with Iraq...which unfolded mostly as I predicted a few months later in 2003.
FYI: The Iranians are about to committ an offense far greater than Saddam's conversion to the euro for his oil exports. Iran is going to compete with New York's NYMEX and London's IPE with respect to international oil trades - using a *EURO BASED CRUDE OIL MARKER.*
What does that mean? Well, it means that without some sort of US intervention, the euro is going to establish a firm foothold in the international oil trade - which given our debt levels and the neocon desire for U.S. global domination - prvides a rather problematic situation.
Below is an exert from my upcoming book 'Petrodollar Warfare' - in which I will try to explain the two coalescing forces that are driving the neocons - Peak Oil and the challenge to US petrodollar hegemony from the emergence of a potential petroeuro... Saddam was chapter one is this phase, Chavez was almost chapter two in April 2002, Iran is looking like chapter three. Russia will ultimately go petroeuro - but thankfully the neocons are not *quite insane* enough to make that chapter four in the petrowarfare phase of American history...but perhaps Nigeria will fulfil that role?
BTW, the Iranian knows all about these issues, and any nuclear weapon they develop will be *defensive* in nature (Afterall, North Korea has openly threatened the U.S. - but they have no oil - hence they are allowed to have nukes). Remember, Iran is likely sitting on as much oil as Iraq (due to deterioation/permanent damage of Iraq's two main/giant oil reseviours). Iran is likely worried as - as the other member in the last Axis of Evil with Oil - that without a nuclear deterrent, the US under a Bush II term will call up a draft and prepare for operations against Iran - WMD or not. (it's unclear as to whether covert or overt operations might be employed at this moment - asnd IMO both are likely to fail - and produce some very unintended consequences...but the neocons don't study history)
FWIW, here's the hardnosed truth about Iran...
Hint: One of the Federal Reserves's Greatest Nightmare's may unfold in exactly 6-months (March 2005): A Euro-denominated International Oil Marker (ie. a euro pricing mechanism for oil trades)
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.
To date, one of the more difficult “technical obstacles” concerning a petroeuro oil transaction trading system is the lack of a euro-denominated oil pricing standard, or oil “marker” as it is referred to in the industry. The three current oil “markers” are all U.S. dollar denominated, and although Iran is requiring payments in the euro for its European oil exports, the oil pricing for trades are still denominated in the dollar.
Therefore a potentially significant news development was reported in June 2004 announcing Iran’s intentions to create of an Iranian oil Bourse. (The word “Bourse” refers to a stock exchange for securities trading, and is derived from the French stock exchange in Paris, the Federation Internationale des Bourses de Valeurs.) This announcement portended competition would arise between the Iranian oil bourse and the U.S.-owned London’s International Petroleum Exchange (IPE), as well as the New York Mercantile Exchange (NYMEX).
Acknowledging that many of the oil contracts for Iran and Saudi Arabia are linked to the United Kingdom’s Brent crude marker, the Iranian bourse could create a significant shift in the flow of international commerce into the Middle East. If Iran’s bourse becomes a successful alternative for oil trades, it would challenge the hegemony currently enjoyed by the financial centers in both London (IPE) and New York (NYMEX), a risk not overlooked in the following article:
“Iran is to launch an oil trading market for Middle East and Opec producers that could threaten the supremacy of London's International Petroleum Exchange.”
“…He played down the dangers that the new exchange could eventually pose for the IPE or Nymex, saying he hoped they might be able to cooperate in some way.
Some industry experts have warned the Iranians and other OPEC producers that western exchanges are controlled by big financial and oil corporations, which have a vested interest in market volatility.
The IPE, bought in 2001 by a consortium that includes BP, Goldman Sachs and Morgan Stanley, was unwilling to discuss the Iranian move yesterday. "We would not have any comment to make on it at this stage," said an IPE spokeswoman.“
It is unclear at the time of writing if this project will be successful, or could it prompt an overt U.S. military intervention - thereby signaling the second phase of petrodollar warfare in the Middle East. Regardless of the potential response, the emergence of an oil exchange market in the Middle East is not entirely surprising given the post-domestic peaking and decline of oil exports in the U.S. and U.K, in comparison to the remaining oil reserves in Iran, Iraq and Saudi Arabia. According to Mohammad Javad Asemipour, an advisor to Iran’s oil ministry and the individual responsible for this project, this new oil exchange is scheduled to begin oil trading in 2005.
“Asemipour said the platform should be trading crude, natural gas and petrochemicals by the start of the new Iranian year, which falls on March 21, 2005.
He said other members of the Organization of Petroleum Exporting Countries - Iran is the producer group's second-largest producer behind Saudi Arabia - as well as oil producers from the Caspian region would eventually participate in the exchange.”
The macroeconomic implications of a successful Iranian Bourse are worthy of note. Considering that Iran has switched to the euro for its oil payments from E.U. and ACU customers, it would be logical to assume the proposed Iranian Bourse would usher in a fourth crude oil marker – denominated in the euro currency. Such a development would remove perhaps the main “technical obstacle” for a broad-based petroeuro system for international oil trades. Furthermore, according to the following report, Saudi investors may be interested in participating in the Iranian oil exchange market, further illustrating why petrodollar recycling is unsustainable.
“Chris Cook, who previously worked for the IPE and now offers consultancy services to markets through Partnerships Consulting LLP in London, commented: "Post-9/11, there has also been an interest in the project from the Saudis, who weren't interested in participating before."
Others familiar with Iran's economy said since 9/11, Saudi Arabian investors are opting to invest in Iran rather than traditional western markets as the kingdom's relations with the U.S. have weakened Iran's oil ministry has made no secret of its eagerness to attract much needed foreign investment in its energy sector and broaden its choice of oil buyers.
Along with several other members of OPEC, Iranian oil officials believe crude trading on the New York Mercantile Exchange and the IPE is controlled by the oil majors and big financial companies, who benefit from market volatility.”
It appears the final three pivotal items that would create the OPEC transition to euros will be based on (1) if and when Norway's Brent crude is re-dominated in euros, (2) if and when the U.K. adopts the euro, and (3) whether or not Iran’s proposed Oil Bourse (exchange) is successful and utilizes the euro as its oil transaction currency standard. Regarding the U.K., Tony Blair has lobbied heavily for the U.K. to adopt the euro, and its adoption would seem imminent within this decade. If and when the U.K. adopts the euro currency, we are likely to see a concerted effort to quickly establish the euro as an international reserve currency. Given the U.K.’s uncomfortable juxtaposition between the financial interests of the U.S. and the E.U., the fulfilment of this hypothesis would represent a monumental realignment of the transatlantic relationship.
References:
Macalister, Terry, ‘Iran takes on west's control of oil trading,’ UK Guardian, June 16, 2004
URL:
http://www.guardian.co.uk/business/story/0,3604,1239644,00.html402. “Iran Eyes Deal on Oil Bourse; IPE Chairman Visits Tehran,” Rigzone.com (July 8, 2004)
URL:
http://www.rigzone.com/news/article.asp?a_id=14588
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