Iran's Oil Bourse
By Ardeshir Ommani
On Wall Street as well as on
Street, it is increasingly
becoming common knowledge that since 2001 the United
almighty dollar has lost more than half its purchasing power against the euro
and inescapably is fast turning into the "new American peso." If six years
ago a euro could be purchased for 86 cents, today it costs $1.40 to obtain the
same euro. But it is not just against the euro that the dollar is losing
ground - it has depreciated in value against a host of other major international
currencies and even minor ones like the peso of the Philippines.
The downward direction of the value
of the U.S. dollar among most of the international currencies could be
theoretically the result of many economic factors such as a lower rate of labor
productivity, a lower interest rate or the arbitrary political hurdles raised in
the way of foreign capital to purchase a commanding share of U.S.
equities. But aside from the above probable causes, the overwhelming
pressure on the U.S. dollar comes from the U.S.'s
tremendously huge foreign debt. There is an inverse relationship between
the quantity borrowed by the U.S. from foreign sources
and the value of the U.S. currency: the more the
borrows, the lower the value of the U.S. dollar tends. Last year, the
U.S. ran a current account
deficit of $811 billion, or 6% of the Gross Domestic Product (G.D.P.), which
brought the U.S.
net foreign debt to $2.5 trillion or close to 20% of the G.D.P.
Presently foreign investors own a record 80 percent of the Treasury
notes due in 3 to 10 years. To show the depth of U.S. dependency on foreign
financing, it is crucial to note that international investors own $672 billion
of the $835.4 billion Treasury securities, according to Lawrence Dyer, a
strategist at HSBC Securities USA in New
Without an exaggeration, the
is the world's largest debtor, caused by disproportionately consuming other
nation's goods and resources. This trend has practically become
irreversible. It is absolutely clear that the U.S.
has been living beyond its means, along with the heavy burden of the wars on its
economy and financial system. In the current situation, as the dollar
drops in value, foreign investors like Japan, China and the Persian Gulf
states could be less willing to purchase U.S.
government-issued notes and treasury bonds. This time around the
could be denied the foreign capital flow needed to cover its current account
deficit, expected to reach $850 billion this year.
U.S. Taxes the World
The ever-shrinking purchasing power
of the dollar for the Organization of the Petroleum Exporting Countries (OPEC)
who were led to accept only the U.S. dollar for the export of their oil and
other strategic resources, and for all those countries that had to convert their
own currencies into U.S. dollars in order to be able to purchase their needed
oil results in two-tier losses.
The first category of loss is
incurred by the oil purchasing countries which have been forced to convert their
national currencies into the U.S. dollar in order to be able to purchase their
needed oil from the highly centralized energy markets of New York and London. Oil
exchange as an on-going process coupled with ever-increasing demand and rise in
prices has led into an ever-increasing support for the value of the dollar and
in turn a downward pull on the currencies of the oil-purchasing nations.
The second category of loss is incurred by the oil-exporting countries through
the constant depreciation of the U.S. dollar. Accepting the idea of the
U.S. dollar as the world's sole reserve currency, many oil-exporting
countries kept their oil income in the form of the dollar for a long time which
has resulted in a heavy loss in its purchasing power vis-à-vis other
On the world scale, the gain for the
U.S. and a gigantic loss for
the rest of the world have been nothing less than two-tier taxation by the
against the rest of the world. Yes, an empire was born that taxed the rest
of the world through making the dollar be the world reserve
In his "Economics of Empires"
article, Krassimir Petrov wrote:
"A nation-state taxes its own
citizens, while an empire taxes other nation-states. The history of
empires, from Greek and Roman to Ottoman and British, teaches that the economic
foundation of every single empire is the taxation of other nations...one part of
the subject taxes went to improve the living standards of the empire; the other
part went to strengthen the military dominance necessary to enforce the
collection of those taxes."(1)
In the case of the
U.S., indirect taxes were
imposed on the rest of the world when in 1972-73 Washington made an iron-clad arrangement with
the King of Saudi Arabia to the effect that the U.S.
government under all circumstances would keep the House of Saud in power in
exchange for accepting only U.S. dollars for its oil. Given the
U.S. heavy dominance over
the decision-making process of the central governments of the oil-producing
countries in the Middle
East, the rest of the members of Organization of the
Petroleum Exporting Countries followed suit. From then on until recently,
oil in the world replaced the gold which was agreed to be the backing of the
dollar under the Bretton Woods Agreement signed by the victorious powers of WWII
In the last half a century if any
oil-producing country around the world demanded a currency other than the U.S.
dollar for its oil, the U.S. Central Intelligence Agency (CIA) made sure that
the head of such government would learn either through political pressure or
military intervention, to change his mind. This is precisely what the
U.S. did to
and Saddam Hussein when he decided to demand euro in place of the U.S.
dollar. Given the massive trade and budget deficit, the
has become increasingly dependent on the status of the dollar to remain the
world reserve currency. In June of 2006 the U.S.
currency accounted for two-thirds of all central bank reserves worldwide.
This reserve status means that the dollar is constantly in demand, regardless of
the underlying weakness of the U.S.
economy. This status has been increasingly a target of criticism by the
governments of other major currencies.
In his annual State of the Nation
address to both houses of parliament on May 10, 2006, President Putin said, "The
ruble must become a more widespread means of international transactions.
To this end, we need to open a stock exchange in Russia
to trade in oil, gas, and other goods to be paid for in
Russia's share of the world's trade in oil
export is 15.2%, Iran's 5.8% and Venezuela's
5.4%. Iran has the world's largest
proven oil reserves after Saudi Arabia and the world's
second largest gas reserves after Russia.
position in the Persian
Gulf and its already-existing vast network of pipelines
makes it one of the major players in the energy world.
Over two years ago, Iran
announced that it plans to create an oil market, Iran Oil Bourse (IOB) which
would trade for oil in euro instead of the U.S. dollar. It goes without
saying that if such a market for oil and gas materializes in a reasonable time
period; it will compete against New
York's Energy Market (NYMEX) and London's International
Petroleum Exchange (IPE). But more importantly the exchange of oil for
euro becomes a serious challenge to the hegemony of the dollar as a world
reserve currency and could spell a beginning of an end to the American
Finally, on October 2, 2007,
Mohammad-Ali Khatibi, deputy head of the National Iranian Oil Company (NIOC), in
charge of the marketing announced that Iran
has drastically lowered the use of the U.S. dollar in payment for its oil export
by 15%. Khatibi was reported as saying that "Iran
is selling about 85% of its oil in the non-dollar currencies," nearly 65% in
euro and soon 20% in yen. In July, the NIOC requested from its customers
who import over 300,000 barrels per day (bpd) of Iranian oil, to pay in
yen. A switch in currency by Nippon Oil and other Japanese oil refiners to
yen has helped Iran
to achieve its goal of reducing its exposure to the dollar and as a result, in
the period over the last two years it has avoided the loss emanating from the
constant depreciation of the dollar. The switch from dollar to yen was not
an easy decision for Japan to make, knowing that the U.S. applies all sorts of
pressures on the world financial markets and threats against individual state
apparatuses, wanting them to dump the idea and refrain from paying in currencies
other than the dollar, although paying in their own national currency is
naturally in their best interest.
It is not a secret to anyone that
is well-positioned with regard to its foreign currency reserves. Its total
reserves held in foreign banks have risen by 37% over the past year to the level
of $65 billion by the end of June 2007. Iran's demand for currencies
other than the dollar for its oil is another reason for the United
aggressive polices towards that country. But for many reasons, we all know
that it can't do to Iran what it did to
(1) The Proposed Iranian Oil
Bourse, by Krassimir Petrov
(2) The Collapse of the Petrodollars
Looming, Dave Kimble
About the author: Ardeshir
Ommani is a writer and an activist in the anti-war and
anti-imperialist struggle for many years, including against the Vietnam
War. Ardeshir is a co-founder of the American-Iranian Friendship Committee
(AIFC) which strives to build a movement promoting peace and preventing a
U.S.-led war on Iran.
, where news and analysis of U.S.-Iran's relations can be found, along with
observations of life in Iran based on recent visits
Ardeshir helped launch the successful www.StopWarOnIran.org campaign, the
very first Iran
internet anti-war campaign. In the 1960's, he was a co-founder of the
Iranian Students Association (ISA), which contributed to the struggle against
the Shah of Iran, a U.S.
puppet. Two of his recent articles: "Emergence of a United Front Against
Bush" can be viewed at www.mathaba.net and "U.S. Arms
Sales - Source of Instability" at payvand.com.
... Payvand News - 10/19/07 ... --