We are seven months away from a history-making event.
On March 20th, 2006, Iran is planning to open an International Oil Bourse (market) for the express purpose of trading oil priced exclusively in Euros. The world currently does all oil trades in US dollars, commonly referred to as the petro-dollar. Introducing an alternative currency that directly competes against the US dollar will facilitate many global economic changes.
The US, of course, stands to be the most affected. Up until now, the Americans have been able to maintain a high demand for their currency due to its role in purchasing the world’s primary energy resource. This demand has allowed the US to mushroom its debt to record levels supported by the selling of US treasury bills to foreign countries. How will the US continue to operate if countries stop floating their debt and turn instead towards the Euro?
Evidence of the US acting out of concern over their dollar hegemony can be seen in the war with Iraq. In September 2000 Iraq began selling all oil exports in euros. The euro then increased in value which added much profitability to European operations. The US invaded and shortly thereafter (four months to be exact) reverted all Iraqi oil trades back to the US dollar as well as nullifying previous foreign contracts. It has been surmised that the US invaded Iraq not just to control oil reserves but also to protect its all-important petro-dollar.
Fast-forward to the present day situation with Iran, a country being victimized through a US smear campaign. President Bush has continuously tried to promote Iran as an “axis of evil” country through accusations that Iran secretly’ tried to develop nuclear weapons and harbors terrorists. To date, none of these claims have ever been substantiated.
Iran’s stance on their nuclear plans is well justified. Iran has been a member of the nuclear Non-Proliferation Treaty since 2003. They have followed all guidelines from the IAEA since then and have given full transparency to their nuclear program. Iran even voluntarily ceased their uranium enrichment program as an act of confidence building.
A stark contrast is the country of Pakistan, which is not a member of the Non-Proliferation Treaty. They have recently tested a cruise missile capable of carrying nuclear warheads for distances of up to 500 kms. Pakistan also has a long history of selling nuclear weapons technology to foreign countries. Yet, Iran is the one being made out as the bad guy.
Add to the mix a number of high profile leaks originating from the Pentagon indicating that plans have been made to attack Iran in the event of a terrorist attack on US soil, regardless of involvement or not.
The world’s second largest oil consumer, China, is also one of Iran’s major foreign investors, having signed billions of dollars worth of trade agreements in the last year alone. Both Russia and India have also made substantial investments in Iran. An attack on Iran will not be welcomed by those countries who have invested their energy futures in Iranian oil and gas reserves.
World headlines being played out in the media are beginning to relate back to one issue—the petro-dollar. As we get closer to March 20th, 2006, we will find out just how threatened the US feels about having another petro-currency in the world. If the Iranian Oil Bourse opens, it is conceivable that the US will find out exactly what their money is made of—which is paper and little else.