Iran's other 'weapon'

Many people talk about the Iran/US issue in military terms but there is another factor that's often overlooked: economic terms. I've read that the Iranians have recently (March this year) set up their own oil burse: simply put - are prepared to sell their oil in Euros rather than Dollars. Not sure how much this would effect the US; some people think that it would effect the Dollar very negatively, others believe that it's not a big deal. However, I also read that Saddam tried this shift in currency/oil sales just before the 2003 invasion.
Apparently, buying in oil in Euros would afford some countries a decent discount, plus they wouldn't have to purchase large ammounts of Dollars.

It does seem like a taunt against the US, doesn't it? Saying we'll use these other countries and their money (which I believe has a higher exchange rate than the U.S. dollar right now) and you guys can go take a flying leap.

Maybe we should be considering what the U.S. will do if they grow desperate enough for that oil.

speakeasy: is it a desperation for oil or a desperation to keep the US economy intact? Or are both (oil/US Dollar) so tightly linked that it is not possible to discuss as seperate issues?

By selling oil in Euro's, the US export more to europe in order for the payment to be in Euro's.

The current system requires other countries to sell to the US in order to get $US, where as the US simply prints more, plus all the oil nations kep there money in bank accounts in new york, the US econemy would collapse catastrophically, over a few months, not years.

wow! then that's as powerful as any bomb fired at one of your allies

Originally posted by adam_weishaupt
I've read that the Iranians have recently (March this year) set up their own oil burse: simply put - are prepared to sell their oil in Euros rather than Dollars.

It didn't happen in the end. It was scheduled for March, but it's been put back a few months now. It's a good point tho - there were many people on this forum who thought the US would attack purely because of the oil burse.

Originally posted by la2
By selling oil in Euro's, the US export more to europe in order for the payment to be in Euro's.

The current system requires other countries to sell to the US in order to get $US, where as the US simply prints more, plus all the oil nations kep there money in bank accounts in new york, the US econemy would collapse catastrophically, over a few months, not years.

lol. uh, what?

The problem with the whole theory is that you have to convince lenders to buy in Euro's, and that is pretty hard to do in banking circles. In fact, even the Europeans are the first to point out it is the fundamental flaw with the Euro right now. Denmark for example wants a Euro based oil borse in Europe, but doesn't see how it can happen until Europe gets its collective butt together and backs the Euro with something tangible enough to be influencial in the world.

The Euro is not backed by pooled gold as per currency in the old borse system, the pre-1980 system btw. Without anything backing up the Euro, it is virtually impossible to find bankers willing to lend for the borse.

The dollar on the other hand doesn't use the gold system, it uses the F-16 system for backing US currency, and in the rough and tough Middle East, that carries a lot of weight. It also carries weight with lenders in the banking community, because they trust the capitalistic Americans to maintain their currency no matter what. The fact that China's economy is backed on the US dollar reinforces this. It is one of those major benefits of the US trade with China that works heavily in the favor of the US.

The reason Iran hasn't done the oil borse is because they know what everyone in Europe, South America, and Asia know. The price of oil will drop, considerably, because Iran will have to sell oil cheaper in order to find buyers, which means Iran would make less money from oil. That is simply unacceptable, oil is where the money is, why decrease its value?

In theory, an oil borse for the Euro in Iran could devalue the Euro as well, much like the US Dollar took a major devalue on the market in the 80s when oil started trading in dollars. The Euro can't just be printed into debt like the dollar, because countries within the Euro stakeholders would have to assume the debt. Not likely, at least while economics remain stagnet in most of Europe.

The economics are pretty complicated, but there are plenty of good readings on the advantages and disadvantages of an oil borse in Euros. I would recommend the Denmark evaluations, as they heavily favor a Euro oil borse, but have had trouble within Europe to find support for it.