One bonobo's view of the world...and stuff.

Monday, December 18, 2006

The Petrodollar Wars.

On the day in which British news sources weill be leading on the arrest of a suspect for the murder of five women, it would be all too easy to overlook a piece of news that is bound to have major implications over the forthcoming weeks and months.

Iran is to start calculating its budget in Euros. I'll repeat that: Iran is to start calculating its budget in Euros. This is massive! Why? Wellll...for years, the oil market has been conducted in US dollars. Indeed, some 70% of all currency reserves worldwide are held in dollars. What this means is that promissary notes are in circulation which far exceed the capacity of the Federal Reserve. If the holders of those notes were to all ask for payback, the US economy would be in freefall. Hence, the US is keen to ensure that the current convention remains in force in a large part of the world economy, ie the oil market.

Now, in 2003, Iraq announced that it would heneceforth like to receive payments from the UN for its 'Oil for Food' programme in Euros. This piqued the interest of Iran and Venezuela, both of whom made similar overtures. The ongoing result has been described by in Rob Newman video as "The biggest punishment beating in history".

Now, we all know that America and Iran (ahem) 'have history'. Following the 1953 US/British overthrow of Mossadegh and the instalalation of the brutal Pahlavi regime, the overthrow of that regime, and the ignominious failure of the military adventure to free US embassy hostages held by a Islamic Republican factions, believed to have included amongst them one Mahmoud Ahmedinejad. Then there was US use of Saddam Hussein as a proxy to contain Iran during the high casualty Iran/Iraq war. However, there have been attempts to thaw relations. It is widely rumoured that Iran made approaches through diplomatic back channels along the lines of "Look...we reckon we can sort out Hamas and Hizbollah*, but for god's sake please have a word with Israel." [Decent citation desperately sought for this story. Any ideas?] When these overtures were batted back by the Bush regime, the theocracy pulled the rug from the reformist Rafsanjani and put in the hawkish Ahmadinejad. Lately the focus has been on Iran's nuclear programme, and on proposals (presumably tested out via back channels) for seeking Iran's help in containing the Iraqi civil war.

One has to ask "What's going on with this latest move?" My guess is that the US has shown its weakness over Iraq. They've been trying to use their economic muscle to make it difficult to move dollars in or out of Iran from overseas accounts. The Iranians have seen their chance to break free. Most of their buisiness is with Europe anyway, plus they have another powerful trading partner who would be more than happy to trade with them in Euros...China. And China is also keen to trade in Euros with Venezuela.

Fascinating blighter, geopolitics, no? So...what happens next...?

* Contrary to some media opinion, Hizbollah is not a straightforward puppet of either Iran or Syria. In an Alice In Wonderland, both are sometimes held to be true, ignoring the likely differences in aims and objectives between Iran's Islamist theocracy and Syria's secularist regime. Hizbollah is a broadly-based federation, although admittedly some Hizbollah factions are closely associated with Iran...including that founded by current Iraqi PM, Nouria al-Maliki.

1 comment:

Dan Goodman said...

Thanks for this post, very interesting stuff!