A-ha! Now we know why Iran's in the bullseye!

[Thanatoast]

TEHRAN, Iran - Iran took a step on Friday toward establishing an oil market denominated in euros, a plan analysts described as highly unlikely to materialize but which in theory could have serious consequences for the U.S. economy.

Iranian state-run television said the country's oil ministry granted a license for the euro-denominated market, an idea first floated back in 2004, though just who would trade on it remains unclear.

If the market were to succeed — or if Iran simply demanded payment for its oil in euros — commodities experts said it could lead central bankers around the world to convert some dollar reserves into euros, possibly causing a decline in the dollar's value.

Oil is currently denominated in dollars around the globe, whether through direct sales between producers and consumers or in trades made on markets in New York and London.

But if one day the world's largest oil producers allowed, or worse demanded, euros for their barrels, "it would be the financial equivalent of a nuclear strike," said A.G. Edwards commodities analyst Bill O'Grady.

"If OPEC decided they didn't want dollars anymore," he added, "it would signal an end of American hegemony by signaling an end to the dollar as the sole reserve currency status."

more...

Haven't conspiracy theories already floated about this being the reason for invading Iraq? Because Saddam wanted Euro-denominated oil sales?

This article doesn't seem to think it'll happen, but it says that if it does the consequences for the US would be terrible. First time I've seen news like this not on a tinfoil-hat site.

[XNine]

Originally Posted by Thanatoast

Haven't conspiracy theories already floated about this being the reason for invading Iraq? Because Saddam wanted Euro-denominated oil sales?

This article doesn't seem to think it'll happen, but it says that if it does the consequences for the US would be terrible. First time I've seen news like this not on a tinfoil-hat site.

Makes sense in an odd way. Of course WMD's were used to try and cover up the real reason for the Iraqi occupation, Iran's Nuclear Program may just be the same kind of smoke screen.

Interesting read.

[tristan]

This is written by people who don't understand the currency markets and global economy. Iran could price their oil in pesos for all anybody cares. It would just be more annoying for buyers and sellers who have to convert their existing currency to pesos and back in order to transact business. Central bankers will make their decisions to hold euros or dollar based on a lot of other factors.

[leekohler]

Originally Posted by tristan

This is written by people who don't understand the currency markets and global economy. Iran could price their oil in pesos for all anybody cares. It would just be more annoying for buyers and sellers who have to convert their existing currency to pesos and back in order to transact business. Central bankers will make their decisions to hold euros or dollar based on a lot of other factors.

I agree- what would be the difference? I don't see why this would be devastating to the US.

[zimv20]

because if the dollar loses value, oil will cost us more.

[solvs]

I thought we already knew this. Not much for conspiracy theories, but it's not a conspiracy if it's all out there in the open. Ironically, oil is becoming even more outrageously expensive, partially thanks to our mistakes, and the dollar already dropped. Self fulfilling prophecy if you ask me.

Can't believe this is probably all about money and power. Scratch that. I totally believe this is all about money and power. Gee... wonder why it backfired.

[Queso]

Originally Posted by leekohler

I agree- what would be the difference? I don't see why this would be devastating to the US.

It wouldn't have much effect on the US people, but would seriously damage those who like to use the power of the American economy to influence and control the Governments of other countries. At the moment the only potential challenger to the dominance of the Dollar is the Euro. If the oil market started legitimising commodities being traded internationally in Euros rather than Dollars, it would weaken the power of the US to exert economic pressure on countries it deemed as adopting anti-US policies.

Iran will be finding itself under this type of pressure right now, so it shouldn't surprise us if they do try to switch to Euros, giving the Americans one less card to play against them. It's a dangerous game, because if the US powermongers don't have a method of attacking Iran economically, they will most likely resort to their other option, military force. Iran is probably hoping for Chinese support to stop an attack from happening, but if the Chinese do intervene there will be a price attached. Whatever happens, Iran is in serious trouble.

[zap2]

Well its time the USA starts using Euros

[leekohler]

Originally Posted by zap2

Well its time the USA starts using Euros

Yes! Much prettier than dollars.

[Dont Hurt Me]

I disagree, the US though has a screwed up administration at the " moment" we will straighten ourselves out given time. We are the light of freedom and liberty of this planet. We are simply in a dark place with the Neocon who holds onto power by a mere thread. The People will come through but it takes time and will. Power to all the people and the U.S. Remember the U.S. stopped Hitler, Stalin, and many others. Sure we have strayed with draft dodgers in the whitehouse but the people will make the correction given time. I cant think of any country on this planet of ours that can bring peace and prosperity to all the people of the Earth. Bush will be history soon and he is only a hiccup of history that got through by a hair in the history of the world. He is a ass but soon gone. Have faith we will correct all he has done but it will take a little more time. America is taking notice of his incompetance and lies. Remember Saddam was no saint and Bush isnt a christian by any stretch but time will heal. Have faith in the people not the Corporations.

[mactastic]

Originally Posted by Dont Hurt Me

I disagree, the US though has a screwed up administration at the " moment" we will straighten ourselves out given time. We are the light of freedom and liberty of this planet. We are simply in a dark place with the Neocon who holds onto power by a mere thread. The People will come through but it takes time and will. Power to all the people and the U.S. Remember the U.S. stopped Hitler, Stalin, and many others. Sure we have strayed with draft dodgers in the whitehouse but the people will make the correction given time. I cant think of any country on this planet of ours that can bring peace and prosperity to all the people of the Earth. Bush will be history soon and he is only a hiccup of history that got through by a hair in the history of the world. He is a ass but soon gone. Have faith we will correct all he has done but it will take a little more time. America is taking notice of his incompetance and lies. Remember Saddam was no saint and Bush isnt a christian by any stretch but time will heal. Have faith in the people not the Corporations.

You forgot to mention that the US is a humble nation!

[j26]

Originally Posted by leekohler

I agree- what would be the difference? I don't see why this would be devastating to the US.

Basic economics lesson (not being sarcastic here)

1. USG has a large debt, a considerable portion is overseas
The dollar falls - that debt multiplies in value and costs more tax dollars to service. How long more can the government run deficits?

2. The dollar falls. Imports become more expensive. You might say well fine, we'll just buy American, but remember that things as American as Apple or Nike are not made in America. They are imported.

3. The dollar falls. In an effort to stave off inflation caused by 2, the Fed raises interest rates, choking off growth, causing unemployment. It likely fails, as even governments cannot win against the market, so you end up with stagflation (inflation coupled with no growth). Everyone gets poorer. Inflation leads to wage claims, and competitiveness is eroded further, damaging exports.

4. If the Euro becomes the benchmark currency for oil, the US has to buy euros to get the oil inflating the value ofthe euro against the dollar, exacerbating 1, 2 & 3)