One of the many factors that put pressure on the dollar - the alleged discovery of an oil exchange in Tehran, scheduled for March 20. Tehran Stock Exchange could become the first oil exchange in the world where oil transactions will be carried out not in dollars but in the single European currency.
However, a much greater threat to the dollar is the current account deficit, which in the fourth quarter of 2005 reached 7% of GDP ..
Krassimir Petrov, the Bulgarian professor has published in some media article on the creation of the Iranian Oil Bourse. He described it as "a weapon more powerful than nuclear weapons ..., which can destroy the financial system of the American empire." Petrov and his collaborator, William Clark, who publishes the so-called "Energy Bulletin" believe that the reason the U.S. invaded Iraq in March 2003 was the decision by Saddam Hussein to sell Iraqi oil not in dollars but in euros. These authors believe that it is an attempt to create an Iranian oil exchange, is the underlying cause of the crisis around Iran.
But we think that this is an exaggeration. Try to understand what would happen if Tehran will still bidding for oil in euros.
First, you should imagine what the volume of transactions may be entered into a new market. Iran is the world's fourth largest oil producer. Iranian oil production volumes up 5% of the world.
In an anonymous memo is located in Hong Kong Energy Agency reported that during the last decade, oil production in Iran has been steadily declining due to limited resources.
Another member of the Iranian oil exchange could be Venezuela, whose President Hugo Chavez is not averse to substitute George W. Bush bandwagon.
As for other countries - exporters of oil, they are unlikely to follow the example of those two odious regimes. Saudi Arabia, Kuwait, Mexico, Canada and Norway, countries that are allied with the U.S. and trade relations are unlikely to adopt the euro. Norway in particular, since neither the country nor the United Kingdom, two countries producing oil on the northern shelf and not adopted the euro as their currency.
Russian President Vladimir Putin suggested in 2003 the thought of the possibility of selling Russian oil for euros, but a few days later, Russian officials said they rejected the idea. "This issue is not even worth discussing - the then Prime Minister Mikhail Kasyanov. - If the whole world trades oil in dollars, so it is convenient and buyers and sellers. "
Analysts noted that all other countries except Iran and Venezuela will be guided by the foreign trade not political but commercial interests. If the same policy will prevail over common sense, but political demarche is unlikely to have a strong influence on the world market. So after the U.S. decision to block the state oil company operations in six U.S. ports, a number of Arab countries made statements about the possible diversification of their assets.
March 14 London Independent reported that the United Arab Emirates plan to convert 10% of their dollar assets into euros. At the same time, the head of the Central Bank of Saudi Arabia stated that, in his opinion, the U.S. decision to block the port of Dubai is "discrimination."
Foreign exchange market did not react to these demarches, which is a good example of how the conversations of politicians, not in a position to undermine the U.S. dollar.
Now try to figure out with what the country's oil importers prefer to buy oil for euros instead of dollars. Although the actual weight of the dollar as world reserve currency has steadily decreased over 70% of international reserves, by which is funded and world trade is denominated in U.S. dollars. Only Japan and China own U.S. government bonds and other dollar assets worth about 2 trillion dollars. China has never stated its intention to convert their assets into euros, and only carefully probed the ground on this issue. In this reviewer officials involved in soundings, made People's Bank of China - Central Bank of the Eastern countries.
Japan and China found themselves in very difficult situations. On the one hand, the U.S. is their debtor-hostage. But on the other hand, those countries themselves are hostages of the U.S.. The depreciation of the dollar, which will undoubtedly occur, if the popularity of axis of evil, will cause the devaluation of their currency reserves.
All risks of attempts intentionally or unintentionally "omit" the U.S. dollar came to the surface July 21, 2005, when the Central Bank of China abolished the yuan's tight binding to the dollar (exchange rate was 8.28 yuan per dollar one) and announced that the binding of its currency to a basket of foreign currencies, and also about 2% m corridor to the Dollar / Yuan. For several hours the yuan rose to the current level. At the time of the decision of the Central Bank currency reserves of China amounted to 600 billion U.S. dollars. Rise of yuan by 2% against the dollar led to the fact that China has lost $ 30 billion in foreign reserves.
According to the analytical review of the CIA, China and Japan are two of the world's leading importers of oil, although the volume of consumption, they lag far behind the U.S., which produce 7.1 million barrels per day while consuming about 20 million barrels.
Finally, we will try to answer one more question. What will the country who will receive the exported oil in euros? European market bonds and sloppy in the market by its U.S. bond yield and reliability. And in the old Europe is no place for large investment projects, which could be invested axis of evil.
In short, those who receive euro from the sale of oil, will have to change them for dollars. In November 2000, when Saddam Hussein announced his intention to sell oil not in dollars, and the euro, economists of the United Nations decided that Iraq would lose at the same time about 270 million U.S. dollars. These losses could recover only if the euro would rise against the dollar by 17%.
It is unlikely that the countries that hold their assets in U.S. bonds that will en masse to diversify into the euro in case of Tehran Oil Bourse. The reason for such a move would serve only the threat of the collapse of the dollar. And the probability of collapse is really great, because the already huge trade and budget deficits are growing, thanks to the irrational fiscal policies of the Bush administration. It is in this lies the real threat to the United States.
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