This will just take a combatant, which is hiding behind their sand castles, to be added to the list of "hands off" bombing areas.
Posted on 02/05/2006 4:52:53 AM PST by RaceBannon
Will Iran's 'petroeuro' threat lead to war?
-------------------------------------------------------------------------------- Posted: February 3, 2006 11:00 a.m. Eastern
© 2006 WorldNetDaily.com
Beginning in 2003, Iran began demanding oil payment in euros, not dollars, although the oil itself was still priced in U.S. currency. Now, Iran is seriously considering establishing an Iranian Oil Bourse, with the goal of competing with the New York Mercantile Exchange, NYMEX, and London's International Petroleum Exchange, IPE.
Right now, the NYMEX and IPE use three oil "markers" to establish price – West Texas Intermediate crude, Norway Brent crude and the UAE Dubai crude. With the establishment of an Iranian Oil Bourse, Tehran wants to create a fourth oil marker, this one priced in the euro.
Many administration critics argue today that the real reason for invading Iraq in 2003 was not to remove WMD from Iraq or to establish freedom but to preserve the dollar dominance of the world's oil market. These same critics argue today that the real reason for the ramp-up of concern over Iran has nothing to do with Iran's secret nuclear weapons program or with President Ahmadinejad's threats to destroy Israel but everything to do with oil.
If the Iranians persist in creating a market mechanism to settle world oil transactions in the euro, the United States will attack just to preserve the oil market for the dollar.
Today, about 70 percent of the world's international foreign currency reserves are held in dollars. If the petroeuro begins to challenge the petrodollar, this percentage could diminish drastically.
The United States depends on the dollar foreign-currency reserves in order to sell the Treasury debt that sustains budget deficits. What if foreign-exchange portfolios from oil sales fell to 60 percent being held in dollars – would that cause a crisis in the U.S. economy? Or would it take 55 percent? Most Americans are completely unaware of this threat Iran represents to the U.S. economy.
The Iranians, however, are fully aware of what they are threatening, and so are top economic experts within the administration.
The Islamic world also has realized that America is at risk because we no longer have a gold-backed currency. For years, former Malaysian Prime Minister Mahathir Mohamad has championed a move for the Muslim nations of the world to establish the gold dinar as the standard currency for settling international oil transactions. In November 2002, the West Malaysian Royal Mint reissued the gold dinar that was in common use in the Muslim world during the Ottoman Empire.
The idea would be to challenge the dollar by arguing that a fixed-value currency backed in gold is more resistant to devaluation than a floating dollar such as the U.S. has had since the administration of Richard Nixon.
In writing "Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil," Craig Smith and I argued that the United States should seriously consider establishing a gold-backed international-trade dollar to preserve stability and value in the international oil market. Clearly, any threat to petrodollar holdings could undermine social programs in the U.S., including Medicare and key welfare programs such as Temporary Assistance for Needy Families.
How close is Iran to opening the Iranian Oil Bourse? The Iranian Oil Bourse is scheduled to be opened in March. Curiously, that is the same month Israel has quietly set as a deadline for a diplomatic resolution of the Iranian nuclear crisis.
Last year, President Bush was ready to concede to his liberal Democratic Party critics, allowing the EU-3 and the IAEA to lead the negotiations with Iran. Our guess is that if Iran does open an oil bourse as planned in March, Bush will take the gloves off.
The Bush administration might play with a nuclear Iran, comfortable with intelligence estimates that Iran needs much more time to produce a bomb. Maybe Iran should look more closely at the lesson of Saddam Hussein. We didn't find the WMDs our faulty intelligence claimed were in Iraq, but Hussein was trading in pertoeuros, with the full blessing of the U.N.
If Iran does open an oil bourse next month, we should expect the warplanes will soon thereafter begin to fly.
--------------------------------------------------------------------------------
Jerome R. Corsi received a Ph.D. from Harvard University in political science in 1972 and has written many books and articles, including co-authoring with John O'Neill the No. 1 New York Times best-seller, "Unfit for Command: Swift Boat Veterans Speak Out Against John Kerry." Dr. Corsi's most recent books include "Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil," which he co-authored with WND columnist Craig. R. Smith, and "Atomic Iran: How the Terrorist Regime Bought the Bomb and American Politicians."
Just another straw on the camel's back...
More competition leads to lower prices, not war.
I'm just going to take a shot in the dark and boldly state that the motives of the Iranians is not to lower the price of crude.
Will Iran's 'petroeuro' threat lead to war?
No, but its work on the a-bomb might.
This will just take a combatant, which is hiding behind their sand castles, to be added to the list of "hands off" bombing areas.
How are they going to raise it? Their actions won't change the supply or the demand.
Cortez said, "Of course, we're doing it for the go-o-o-o-ld! It's in our culture, man! Didn't you know that everything is about the go-o-o-o-ld?"
Oh...Corsi!
Corsi's full of it and a little to late with his "oil-for-war" rhetoric.
IAEA refers Iran to UN Security Council over nuclear activities
http://www.freerepublic.com/focus/f-news/1571601/posts
(passed 27-3)
...that, after Iran made all kinds of threats regarding its impending referral to the IAEA. And BTW, Iran's missiles will reach Rome as well as several other west European capitals, so the issue is also of interest to people in other countries.
Just more made up nonsense from the Tin Foil Hat crowd. It is IRRELEVENT to the US Economy if Oil is traded in Dollars or Euros. The people HOLDING the dollars have to be able to unload them on someone for something. That means either buying up American goods or assets. The Dollars will simply transfer from one holder to another. Gee do ANY of these wack jobs understand basic Econ?
My response to a similar article on a thread two weeks ago.
"This is gold bug nonsense. There are litterally hundreds of billion in foreign currency exchanged every day. Someone who wants to buy oil in euros swaps his euros for dollars the momemt of the trade. While this creates an artifical demand for dollars it is tiny in comparison to the American economy. For example if there are 100 million barrels of oil traded daily at $65.00 a barrel, that is a demand of only, $6.5 billion dollars for the oil trade every day. The American economy is over $10 trillion dollars in size. Which make $6.5 billion a mere 0.65% of the size of the economy.
I posit another theory. The American government is the most free has the strongest property rights and is the only country with the millitary might to protect its interests globally. That certainly makes it a better investment than, any other currency."
"More competition leads to lower prices, not war"
The idea here isn't to introduce competition, but to reduce the need of other nations to purchase and hold dollars in order to purchase oil. The problem with the theory (and this theory has been cited by all sorts of people, including AQ) is that the value of non-oil-exchange dollar exchanges each day absolutely dwarf oil-exchange dollar exchanges. For the theory to hold, oil would have to be one of the few and major reasons anyone anywhere holds dollars, and reality is vastly different. It's _an_ issue, certainly, and an important one, but far from the economy-making-or-breaking issue people like this (or AQ) try to get people to believe.
sounds like the 'war for oil' chants are starting already
you do math in a very interesting way. you mention the need for 6.5 billion daily, yet you contrast that with an annual number of 10 trillion for the gdp of the usa. i think its closer to 14 trillion by the way, but nonetheless, you need to use a number like 365 to make your argument possible. and yes, we would go to war to keep oil being traded in dollars, it is worth it.
We could have one shopping-mall a week blown up... and the MSM/DNC cabal would still deny we were at war.
My guess is they'd use a term out of one of John F'n Kerry's debate responses... “nuisance”.
Multiply .65% times 365 days and what do you get?
U.S. GDP is about 12.7 trillion USD right now. And the comparison isn't against US GDP, the comparison is against daily dollars exchanged globally, for example in the foreign exchange market (which measures around two trillion dollars traded daily).
The value of Iran's oil trading last year was around 55 billion. For the year.
Thanks for that explanation. I think it is possible that the Iranians are going to learn the law of unintended consequences. Markets are not just theoretical, they may find they have to lower prices to build their new market.
major bump.
I am not sure how to say it, but if a nation's economy is thteatened by economicsa, they have a right to survival.
Having oil used against us as an econoic weapon is an act of war through money: fight without firing a shot, so to speak.
While I do believe there are military/terrorist threats within Iran and Iraq, the use of oil against us is a legitimate threat
It is the swapping that is the concern
What happens when people no longer have to swap to dollars?
The dollar devalues.
the lack of trading in dollars leads to a devaluing of the dollar, not trade with dollars
No, you dont get it.
the WORLD has caches of dollars to buy gold in, in their banks
When oil switches to Euros, those dollars are meaningless, and these countries that have hundreds of billions in their banks dump their dollars to switch to Euroes, the value of Euros rises while dollars dump
What happens when the dollar dumps?
What happens when the Euro rises?
I'm not sure what consequences they may reap from it. It certainly doesn't make us happy, we'd prefer not to have it happen, and the issue of whether others will follow suit is another concern. But it's hardly something we'd sensibly go to war over (or trump up other charges in order to mask our real intent).
Down the line something like this could be more serious, but I can't see it ever becoming a singular war issue. In the future, though we're likely to overtake the combined EU economy again, dollar depreciation will continue to make the euro an increasingly attractive alternative 'international currency' alongside the dollar, and we'll increasingly see issues of commodities priced in euros rather than dollars. (And further down the road the yuan will come into the picture.) All the better reason not to let such an open and meddlingly hostile Iran hang around, but again our very ham-handed handling of central and latin America is generating similar economic concerns there so ... hey ...
My only real point is that the "petrodollar/petroeuro" theory that's been floating around on the internet for ages now (and which is swallowed by so many, and peddled by so many more) simply doesn't make sense when it's broken down. It's _fantastic_ for gold peddlers and their audience, and for anyone who wants to make the case that the U.S. is a declining house of cards, but it's just not logical.
Like others have explained, the Iranian dollar volume is low. More importantly, the demand to hold dollars is dependent on our economy and our foreign purchases, not on the use of dollars as substitutes for transactions. The "petrodollar" is not the reason China has lots of dollars, it's because they want to build their manufacturing base so they subsidize their exports by buying dollars. That demand dwarfs any petrodollar demand.
The only person mentioning the Gold thing here is yourself, so, I dont know what you mean by it...
BS!
More of the same nonsense that is posted semi-regularly here concerning payment for oil in Euro's instead of Dollars.
And I'm now patiently waiting for the calls to attack anyone who ponders such a "move" to save the US economy from certain DOOM!! /sarc off
Why do you keep posting this gutter-garbage?
I agree the petrodollar theory is overrated and oversold. The consequences for Iran might be that they become more dominant in Europe as they use their euros there. The trade currency may have an impact on trading but I certainly don't think it will have much impact on who buys and hold dollars and dollar-denominated assets.
Right, you are!
I keep posting "we are at war" because I am becoming paranoid that the constant babbling of the Left may begin to have a subliminal, hypnotic effect on me.
Let's see ... clean the guns, thought I did that last week ?? re-count the ammo, check the provisons, less the wings, ribs, and beer for Super Bowl Sunday and make certain all fuel cans are filled.
Yep ... I'm ready! ;)
because I believe it is not a tin foil hat idea, I see it as a great possibility of an economic attack against the U.S. by our new enemies: Islam aligned with China.
I see this as a reality, maybe not the nation ending event as some declare it, but certainly as a serious event that may bring us to a massive depression due to a dramatic devaluing of the dollar due to 1/5 of the world no longer trading oil in dollars, and then, more things in Euros than dollars once they see it's economic effect on us.
War without firing a shot, bragging rights of our economic enemies, a chance to stab the great satan.
damn right i think it is a possibility
I wholeheartedly agree. It also helps to look at the economies that are behind the Euro. They produce and export very little. In fact, a lot of their manufacturing base moved off shore with a good bit of it coming to the good 'ole USA. All the EU members have huge debt thanks to decades of failed Socialism. They all have very high unemployment by US standards, and by and large their workforce is lazy.
I think the EU is a sinking ship. If the Iranians want to price their oil in Euros, I say do it. In the mean time, we need to enact the Fair Tax, create a tax haven for manufacturing, and watch as the last vestage of the Socialist EU slips below the murky waters of failure.
We sell more goods and services worldwide, which creates jobs and enriches our people.
What happens when the Euro rises?
They sell less goods and services worldwide, create even higher unemployement and their socialistic systems are further strained. (perhaps to the point of failure)
Turn up the bass.
only in a zero sum game
And this aint that.
Plus, with the loss of so much manufacturing in the USA, what will we sell?
OUR economy is going to affect China's??
YOU need to stop taking the brown acid....
There is still hundreds of millions of dollars in Iranian banks, they can just dump it on the market without any connection to oil at all, and that will affect us by devaluing the dollar, even for only a short period.
Imagine if their trading dollars went to the Euro 100%
Then China's trading currency
Then malaysia
Then South East Asia...
Then Syria, then Lebanon, then northern Africa...
you have 1 Billion muslims in the world, many countries
Only Saudi Arabia will stay, and maybe Kuwait.
Much of South America will be lost to the Euro once they see the way it affects us.
Do you see a pattern here? And just what is preventing European counteries from trading in Euros for oil?
Imagine that: Europe trading in Euros for oil!
This is not a remote chance, it is a distinct possibility.
What economic suicide?
What do these other nations have to buy from us?
Just what do we sell that isn't made eslsewhere for cheaper prices in China and Taiwan or Japan or Malaysia or Indonesia?
Enlighten me. Because even Boeing went to China, and they dont even need to buy American planes at all...not new ones anyways, where do you think all our old 737's went? Davis-Monthan?
What happens when the Euro rises?
Our manufacturers benefit mightily as exports increase and competing imports become more costly. Our trade deficit improves. There are more European tourists. People get more good manufacturing jobs.
On the downside, luxury European cars, luxury European vacations, and (now that the yuan is going to be partially pegged to the euro) shoddy plastic Chinese crap at WalMart all become more expensive.
-ccm
what manufacturers?
remember, I just went through a LONG time of repeated unemployment because of the loss of manufacturing in the northeast...
I personnaly worked at 3 places that went to China, and even made the drawings for one place that went straight to China...
The work and material is already gone, so, to dream of our manufacturing base to increase is smoking crack...
And certainly better than the Euro, which, given the recent set backs to European integration, debt problems, irresponsible spending and lack of real accountability may not be around all that long...
Maybe lower prices in real terms, but not necessarily lower prices in U.S. dollars.
The author has a very good point here. If you go back over the last 60 years, you'll find that behind almost every U.S. military campaign there was an attempt on the part of the "enemy" to nationalize/control a key sector of its economy.
Go back and do some serious research on the 1973 "Arab oil embargo," and you'll find that what you've posted here is absolute nonsense. What the Iranians are saying is that they don't want to sell their oil for U.S. dollars -- because they believe the euro will be a more stable currency from this point forward (at least for the foreseeable future). Buying U.S. treasury bills that pay 4% interest is a bad investment when you believe the U.S. is about to embark on a long-term campaign to inflate the U.S. dollar in order to meet this country's childish, delusional expectations for big-government entitlements.
That's an excellent point, but not entirely related to the movement of jobs overseas. The "loss of manufacturing in the Northeast" began about 70 years ago, when FDR's New Deal helped build the transportation and energy infrastructure of the South to the point where that region's cheap labor and loose regulatory climate made it an attractive alternative to the old industrial cities of the Northeast.
I could even go back further than that, and point out that the demise of manufacturing in the Northeast actually began when the advent of Henry Ford's assembly-line process basically made every multi-story industrial building in the Northeast obsolete.
What I find interesting is that Iran is giving the US and Israel every incentive in the book to attack. It's almost as if Tehran is thinking "What can we do to FORCE America and/or Israel to attack?" If they just wanted to damage the dollar they could tone down the nuclear rhetoric and just declare that they have every right to act in a global free market by setting up an oil bourse. Why should they muddy the waters with inflammatory war rhetoric?
I think they want global jihad - and the return of the 12th Imam. True nutcases are operating here - not amenable to rational economic or political incentives. I imagine the plotters reasoning thusly "Open an oil bourse to threaten the dollar? Maybe - but not good enough to really hack people up, except the members of the Fed. What can we do to give the western man in the street a howling reason to attack? How about we actively and overtly announce that we're breaking our agreement concerning uranium enrichment, let loose rumors about a March nuclear test, then threaten to wipe out Israel, then test a missile that can reach Israel and a good bit of Europe to boot? Think that'll be enough to bring back the 12th Imam? How does March look for everybody? Good, mark it on your calendars."
The whole thing seems like a well-staged opera. All the players, both friends and enemies, seem to know their part and are marching hellbent for March.
Yeah, I know - tinfoil and all that. But who can explain Iran's moves from a rational perspective?
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