US$: Forget Iran, the problem’s at home

The opening of the Tehran bourse has been described by a Bulgarian university professor named Krassimir Petrov as ”the ultimate nuclear weapon that can swiftly destroy the financial system underpinning the American empire”. Both Petrov and William Clark, writing in a publication called the Energy Bulletin, have suggested that the decision by US President George W Bush to attack Iraq on March 20, 2003, was to thwart then-dictator Saddam Hussein’s move to price his crude in euros rather than dollars. They and other writers have been warning that Iran’s decision to open a euro-denominated oil bourse places the mullahs in the same danger of being attacked.

That appears to be an overstretch. First, there is the question of how much crude an Iranian oil bourse would handle. Iran is the
world’s fourth-largest producer of crude, pumping only about 5% of the world total, and is unlikely to add much to that, according to a Hong Kong-based energy research analyst for a major US investment bank in an interview with Asia Times Online. He prefers to remain unnamed.

..By and large, once crude transactions take place in euros, the euros are exchanged for dollars. In November 2000, when Saddam Hussein announced he would switch international transactions from a US dollar standard to euros, a United Nations study estimated that Iraq’s initial shift in pricing cost the country at least $270 million in transaction and other costs. Saddam recouped that money when the euro rose 17% against the dollar on other factors.

This obviously leaves the world’s holders of US Treasuries in a quandary. There is little doubt that they would love to diversify away from the US currency, not least because of the growing danger of a dollar collapse. But a possible dollar collapse is much more likely to stem from the unsustainability of the country’s gigantic and growing trade and budgetary deficits and the irrational fiscal policies of the Bush administration.

Asia Times