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Challenging
the mighty dollar
If major nations trade on Iran's oil bourse, it may start a 'dollar
flight' effect
By Ramin Davoodi
03/08/06 "ICH" -- -- It's becoming increasingly obvious that
there is a looming crisis brewing over Iran. The true 'whys' and 'what's'
of the issue, however, are clouded to the American public due to our
modern press and to the nature of the underlying stakes involved.
What people read is that there is a growing threat of a nuclear Iran
that will threaten the safety of the West. Yet, that's essentially
all that is said or written on the issue. However, to critically
thinking people who turn to the internet and to foreign press for
their news, the brewing crisis most likely has to do with intricate
issues involving our incessant dependencies, not just on oil for our
transportation and industrial needs, but more importantly for the
means by which our modern economic system operates in the US, UK and
much of the rest of the industrialized western world (strong hint:
It's not a truly "free market").
You see, control over global oil trading and pricing standards
essentially underwrites the sanctity of the US dollar as a fiat
(i.e. government mandated) currency for trade and investments. Were
anything to threaten that delicate arrangement between control over
oil pricing in particular, and our economic system in general, then
there would be tectonic shifts in global finance to the detriment of
the banks and energy companies that essentially dictate the means
and mores of modern US-dominated geopolitics, trade and wealth
creation around the world.
I use the term "detriment" because of the conspicuously
Himalayan-sized US trade and fiscal deficits that are not being
reconciled by our government with the nations of the world that lend
their savings to the US. Meanwhile, these nations are simultaneously
being forced to buy and sell oil using our weakening dollar.
Something's gotta give.
Those that sense this issue is either a bit too simplistic, archaic
or even far-fetched should consider that the only two oil trading
systems in the world right now -- the International Petroleum
Exchange (IPE) in London and the New York Mercantile Exchange (NYMEX)
-- are owned by large global banks based in either the US or UK
(Goldman Sachs, et al.).
It should come as no coincidence that the ownership of the oil
exchanges that set the West Texas Intermediate (in the US) and the
North Sea Brent Crude (in the UK) oil markers -- two markers which,
in turn, determine the price of oil per barrel globally -- is in the
hands of Wall Street's largest investment banks.
What does all of this have to do with Iran?
In 2004, Iran decided to do what Iraq did before it -- start the
process of eventually selling its oil and natural gas in euros
instead of the globally mandated US dollar. Yet, Iran is
'one-upping' Iraq by starting its own energy exchange, labeled the
Iran Oil Bourse, which would rival the aforementioned exchanges in
London and New York.
[It's interesting to note here that, in a particularly instructive
scene in the movie "Syriana", the Saudi Prince Nasir played by
Alexander Liddig retorts to Matt Damon's character 'Bryan' that,
indeed, Nasir wishes to set up his own national oil exchange, along
with other progressive steps necessary to improve the infrastructure
of his nation. Prince Nasir's fate in the film is also
understandable, in light of such ambitious yet noble yearnings.]
This oil bourse is set to float in Tehran in March 2006. Although
scoffed at as wildly implausible by market analysts in the US and
UK, the bourse has also been seen as potentially very lucrative for
investors and nations' central banks that wish to diversify their
currency holdings and energy trading reserves away from the US
dollar. Upon prudent observation, and on par, the input of the
latter crew outweigh the scoffings of the former (just do a Google
search using the words "oil", "Iran", "bourse" and for extra kicks,
"NYMEX").
Were nations such as China, Russia, India, Germany, Venezuela,
Brazil and even Saudi Arabia to consider participating in trades on
this bourse in Iran, it may start a 'dollar flight' effect that the
US Federal Reserve, the Bank of England, and said select investment
banks would have trouble ceasing or reversing under already agreed
upon trading schemes that were set in the mid-1970s (see the new
book, "Petrodollar Warfare" by William Clark for the well researched
history).
Basically, our global economic system is so overleveraged,
profligate and tightly wound up, that something as seemingly obscure
as an energy exchange starting in Tehran can potentially unravel the
whole, intricate Monetarist Ponzi Scheme (regrets to Milton
Friedman, but 'the gig is up', so to speak.).
And apparently, rather than approach the issue through much-needed
negotiations with other industrialized nations so as to provide a
fiscal soft landing for the dollar's debts while allowing for
development in certain poorer countries, our government is
apparently choosing to go to war instead.
Again. Not just any war, mind you, but with a nation of near-70
million nationalistic people who we've alienated for over a
generation already. A people who claim, at least in public, to want
to perform the change away from oil-as-prime-energy dependence that
alternative energy gurus push so heavily in the West.
Some articles that announce, speculate and outright fret about the
likelihoods of such a scenario are provided below:
-- "Trading oil
in euros – does it matter?", by Cóilín Nunan
--
"Iran: the next war", John Pilger
--
"Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil
Bourse", by William Clark
--
"The Proposed Iranian Oil Bourse", by Krassimir Petrov
"Still", people claim, "that doesn't change the fact that Iran is
seeking nuclear weapons." One certainly shouldn't trust the Iranian
government's word on why they seek to procure nuclear technology,
yet a rationalist and realist would sense that, if a major oil
exporting nation wishes to launch an oil bourse that could be deemed
as threatening to the US/UK-backed energy status quo, then that
nation would also seek to adequately arm itself against inevitable
attempts at regime change.
"Yes, but the mullahs want to wipe Israel off the map". In light
of the already preexisting nuclear power inherent in Israel,
Pakistan, Russia, India and obviously the US (which surrounds Iran
with military bases), it doesn't make all that much sense that Iran
would want nukes just so that it can conduct a first strike against
another nation.
Iran's mullahs may be hardliners, but they're not suicidal,
considering the riches Iran sits on. That would contradict the logic
of deterrence, just as our government's building up of further
tactical nuclear weapons, and recent shipping of hundreds of such
"bunker busters" to Israel, contradicts the logic of
anti-proliferation that Iran and others are apparently supposed to
abide by. Please.
Lately, former UN weapons inspector Scott Ritter and other
pundits have claimed that a likely scenario will go like this: The
US or Israel will attack Iran's nuclear targets, Iran will retaliate
by: 1) attacking Israel, and/or 2) trying to take out key oil
production areas in the Gulf, and/or 3) Iranians will blitz across
the Iraqi border. Upon such retaliation, the US will then drop a
nuclear weapon on Iran to halt any further aggression; as such an
act did against Japan 61 years ago. [See:
"Ex-U .N.
inspector: Iran’s next"]
If this is the extent, more or less, of Washington's war gaming,
we're in trouble, because it assumes that Russia and China, two
juggernauts that are heavily invested in Iran's energy and security
sectors, will not respond viscerally to prevent Iran's oil and gas
from being taken from them by the US, UK and Israel. China could
also use a growing quagmire with Iran as an alleyway chance to
finally 'annex' Taiwan once and for all (Russia and China were
conducting joint military exercises last year very close to Taiwan).
Other nations, sensing a growing nuclear catastrophe, could dump
the US dollar altogether as the Federal Reserve and Treasury print
currency by the metric tonnes out of thin air to feed the frenzy
(which may already be in the works, as the Fed will cease revealing
the M3 aggregate money figure in, of all months, March 2006.). Oil
would surpass $200/barrel in the US, gold would break $1000/troy
ounce and martial law would be declared in multiple nations.
All because our government refuses to renegotiate the terms under
which energy commodities are priced and traded around the world,
despite the clear urgency for monetary and fiscal reform.
One has to ask oneself, in an apt yet still eerie paraphrase of
Bud Fox's poignant question posed to Gordon Gekko in the movie "Wall
Street":
How many wars will be enough?
Copyright - Ramin Davoodi - ramid@myway.com
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