[Mb-civic] FW: Iran's Really Big Weapon

[Golsorkhi]

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From: Samii Shahla <shahla at thesamiis.com>
Date: Fri, 20 Jan 2006 14:17:19 -0500
To: Samii Shahla <shahla at thesamiis.com>
Subject: Iran's Really Big Weapon


Iran's Really Big Weapon


January 18, 2006 
United Press International
Martin Walker


WASHINGTON -- The prospect of a mushroom cloud rising from the Dasht-e-Lut,
Iran's Desert of Stones, may not be Tehran's greatest threat to
international stability. A successful test of an Iranian nuclear weapon at
some point in the next few years may prove less destabilizing than a simple
free market economic measure that Iran is said to be planning for March of
this year. 

Tehran is preparing to open a bourse, a mercantile exchange and potentially
a futures market, where traders can buy and sell oil and gas, along the
lines of the International Petroleum Exchange (IPE) in London and the NYTMEX
in New York. 

The differences are first, that this one would price its energy in euros,
not dollars, and second, that it would not use West Texas Intermediate or
Brent Crude (from the North Sea) as its standard oil for pricing. It would
use a Persian Gulf-produced oil instead.

So what? This sounds like a minor change, and possibly even a useful one,
broadening the choice among traders and consumers in the kind of way that
Adam Smith, the 18th century father of modern capitalism, would have
recommended. 

Not so. This could be a far more profoundly punishing blow to American
interests than Iran's ability to manufacture a crude atom bomb that would
have little credibility until it became small and stable and reliable enough
to be delivered on some putative target.

The relationship between the oil price and dollar is intimate and important,
and very useful to the dollar's highly profitable status as the world's
reserve currency. The prospect of a rival bourse and futures market opens
the intriguing possibility, beyond hedging the future oil price, of
profitable arbitrage between the euro and the dollar.

And if oil and gas are to be denominated in more than just one currency, why
not open the trade to others? Why not denominate the price of a barrel of
oil in Japanese Yen, or in Chinese yuan, the currency of the world's second
biggest oil importer?

Why not, in short, end the monopoly rule of the almighty dollar?

Such a move would not be welcomed in Washington, which swiftly moved after
the fall of Baghdad in 2003 to reverse Saddam Hussein's impudent decision to
start selling Iraqi oil for euros, rather than dollars. After all, the great
benefit of running the world's reserve currency means that if all else
fails, the United States Treasury can just print more and more of the stuff
and pay for its oil imports that way.

There are, naturally, limits to the degree to which the United States can
debase its currency, as the world found with the first great OPEC price rise
of 1973, when the price per barrel tripled. This is usually attributed to
the political decision by Saudi Arabia and other Arab oil producers to
punish the United States for its decisive support of Israel in the Yom
Kippur War. That is partly true, but the crucial OPEC decision was as a
direct result of President Richard Nixon's Aug. 15 decision to end the
dollar's link to the gold standard.

The dollar declined in value, which meant the OPEC producers received less
value for their oil. So at their Beirut meeting on Sept. 22, OPEC adopted
resolution XXV:140, which resolved to take "any necessary action ... to
offset any adverse effects on the per barrel real income of member countries
resulting from the international monetary developments as of Aug. 15."

That was also the time when Sheikh Zaki Yamani, the Saudi oil minister,
first mentioned the possibility of deploying the ultimate weapon of an oil
embargo. 

Most of the financial world is currently awaiting another, similar
devaluation of the dollar, in response to the monstrous scale of current
deficit on the U.S. current account. Writing in the Financial Times last
week, Harvard Professor Marty Feldstein suggested that on the basis of the
1985-87 Louvre and Plaza devaluations, the dollar could fall as much as 40
percent or even more.

The markets simply do not know when. But should it come after an Iranian
bourse is up and running, some very tidy sums could be made by those playing
a dollar-euro trade on Tehran's energy futures market.

The Tehran bourse is listed as an objective for this year in Iran's current
five-year plan. The Tehran Times reported July 26 that the final
authorizations had been received for the bourse to go ahead. Mohammad Javad
Asemipour, the technocrat and former deputy petroleum minister who has been
charged with launching the bourse, has made a number of discreet scouting
trips to London, Frankfurt, Moscow and Paris. Just after Christmas, he was
quoted by the Iran Labor News Agency saying "transparency in oil
transactions would be one of the advantages of having such an establishment
"(the bourse), and adding that this would "allow dealers access to related
information and promote equal trade opportunities."

Asemipour is an elusive type, but one who seems convinced that Iran can play
off the European against the Americans, the euro against the dollar. Just
over a year ago, he was quoted in the quasi-official Iran Daily saying that
the Europeans have played "a beautiful game" with the United States during
the years of sanctions, when they actively participated in economic
projects, particularly in the energy sector, across Iran.

"In this game, the Europeans have pretended to be siding with America,
whereas they got involved in business here and developed a sort of
competition with the Americans," he said. "But in practice, they (the
Europeans) have pursued their own interests." There is no shortage of
officials in the Bush administration who nurture such suspicions of the
French and Germans, despite what seems at the moment to be a common concern
about Iran's nuclear ambitions.

The question now is whether the world's traders will come to a Tehran Bourse
if and when it opens, bearing in mind that a similar idea in Dubai failed to
gain much traction. But that was before oil prices reached $65 a barrel, and
before the Dubai's partners in the Gulf Cooperation Council decided it was
time to stop glowering at Iran as a potential enemy, and started to invite
Tehran to their meetings as an observer. Before, that is, the Arab world
began to judge that whatever the American intentions, Iran had become the
real winner of the Iraq War.

The world could be about to change much faster than we think, whether or not
Iran tests an atomic device. There are other, possibly more devastating
weapons available that could hit a financially vulnerable American where it
hurts most.
---

URL: 
http://www.upi.com/InternationalIntelligence/view.php?StoryID=20060118-05233
3-1392r

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