Iran Oil Bourse and the US $
Iran has announced that, starting March 2006, it will open a bourse (exchange) for selling oil in Euros.
Oil is the most traded commodity in the world, and is pre-dominantly sold through exchanges in New York and London, both of which are US owned (NYMEX and IPE). This ensures that oil is priced in US $. 70% of the world's currency reserves are held in US $.
Iran is the world's second largest producer of oil. If the Iran Oil Bourse (OIB) were to be launched successfully, it would reduce the need for countries to hold their existing levels of US $ and increase the demand for Euro's.
Labeled part of the 'Axis of Evil' by the US, Iran's proposed move seems to serve two strategic purposes: Europe is its largest trading partner, so giving the euro a foothold in the international oil trade makes sense.
It also allows Iran to strike back at the US economically, by reducing the US $ role as a reserve currency. Loss of reserve currency status would lead to a sharp rise in US interest rates and cause a potential recession.
The last country to convert from selling oil in US $ to Euros was Iraq in 2000. The whole WMD issue on Iraq seems to correlate with the enormous pressure being put on Iran on its nuclear development program. While the OIB is unlikely to come to fruition, it is interesting to see how much Iran and China have the ability to destabilise the US $.
A vote by member nations (US, Britain, France, Germany, etc.) at the International Atomic Energy Agency brought pressure on the IAEA to bring Iran in front of the UN Security Council for non-compliance under the Nuclear Non-Proliferation Treaty (NPT).
India, which sided with the European powers in voting to chastise Iran, was accused of hypocrisy, as it has nuclear weapons and is not a signatory to the NPT.
Oil is the most traded commodity in the world, and is pre-dominantly sold through exchanges in New York and London, both of which are US owned (NYMEX and IPE). This ensures that oil is priced in US $. 70% of the world's currency reserves are held in US $.
Iran is the world's second largest producer of oil. If the Iran Oil Bourse (OIB) were to be launched successfully, it would reduce the need for countries to hold their existing levels of US $ and increase the demand for Euro's.
Labeled part of the 'Axis of Evil' by the US, Iran's proposed move seems to serve two strategic purposes: Europe is its largest trading partner, so giving the euro a foothold in the international oil trade makes sense.
It also allows Iran to strike back at the US economically, by reducing the US $ role as a reserve currency. Loss of reserve currency status would lead to a sharp rise in US interest rates and cause a potential recession.
The last country to convert from selling oil in US $ to Euros was Iraq in 2000. The whole WMD issue on Iraq seems to correlate with the enormous pressure being put on Iran on its nuclear development program. While the OIB is unlikely to come to fruition, it is interesting to see how much Iran and China have the ability to destabilise the US $.
A vote by member nations (US, Britain, France, Germany, etc.) at the International Atomic Energy Agency brought pressure on the IAEA to bring Iran in front of the UN Security Council for non-compliance under the Nuclear Non-Proliferation Treaty (NPT).
India, which sided with the European powers in voting to chastise Iran, was accused of hypocrisy, as it has nuclear weapons and is not a signatory to the NPT.
posted by saad at 4:06 PM
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