THE ROVING
EYE Slouching towards
Petroeurostan By Pepe
Escobar
It was a discreet, almost hush-hush
affair, but after almost three years of stalling
and endless delays it finally happened. Now more
than ever, it may also signal a geoeconomic
earthquake, a potentially shattering blow to US
dollar hegemony.
The Iranian oil bourse -
the first oil, gas and petrochemical exchange in
the Islamic Republic, and the first within the
Organization of Petroleum Exporting Countries
(OPEC) - was launched on Sunday by Iran’s Oil
Minister Gholam-Hossein Nozari, flanked by
Minister of Economy and Financial Affairs Davoud
Danesh Ja’fari, the man who will head the
exchange.
Officially called the Iranian
International Petroleum Exchange
(IIPE), it is widely known in
Iran and the Persian Gulf as the Kish bourse,
named after Kish island, a free zone (declared by
the shah) in an ideal laissez faire setting: lots
of condos and duty-free malls, no Khomeini
mega-portraits and hordes of young honeymooners
shopping for made-in-Europe home appliances.
Transactions at this early stage will be
in Iran’s currency, the rial, according to Nozari,
ending worldwide speculation that the bourse would
start trading in euros. The Iranian ambassador to
Russia, Gholam-Reza Ansari, has said that "in the
future, we'll be able to use the ruble, Russia’s
national currency, in our operations". He added
that "Russia and Iran, two major producers of the
world’s energy, should encourage oil and gas
transactions in various non-dollar currencies,
releasing the world from being a slave of the
dollar."
Russia’s First Deputy Prime
Minister Dmitry Medvedev said last week that "the
ruble will de facto become one of the regional
reserve currencies".
The opening of the
exchange is just what the Iranians are calling the
first phase. Ultimately, it is intended that it
will compete directly against London’s
International Petroleum Exchange (IPE) and the New
York Mercantile Exchange (NYMEX), both owned by US
corporations (since 2001, NYMEX has been owned by
a consortium that includes BP, Goldman Sachs and
Morgan Stanley). What Iran plans to do in the long
run is quite daring: to confront head-on
Anglo-American energy/corporate banking domination
of the international oil trade.
A lot is
already required to assure the success of the
bourse in this first phase. Other OPEC members,
and especially Iran’s neighbors, the Persian Gulf
petro-monarchies, must be supportive, or at least
"catch the drift".
It makes sense for OPEC
members to support an alternative to both NYMEX
and the IPE, which exercise a de facto monopoly of
the oil and gas market. Their interests do not
always align with those of producer countries.
Numerous contracts related to Iranian or Saudi
oil, for instance, are still indexed to the price
of the UK’s North Sea Brent oil, the production of
which is in terminal declining.
The
proposed direction of the bourse was indicated by
Mohammad Javed Asemipour, then the executive in
charge of establishing the Kish bourse, in 2005.
The outline that Asemipour stressed remains
unchanged: the exchange would start dealing with
petrochemical products, and then with what
everybody really craves - light-sulfur Caspian Sea
crude. This was not going to be an Iranian-style
exchange, but "an international exchange, fully
integrated in the world economy". The ultimate
goal was very ambitious: the creation of a Persian
Gulf benchmark oil price.
Today, Minister
Nozari concedes that Iran’s share of the global
oil trade is still very low. Enter the bourse,
which is the solution to eliminate the middlemen.
Everyone in the oil business knows that high oil
prices are not really due to OPEC - which supplies
40% of the world’s crude - or "al-Qaeda threats".
The main profiteers are middlemen - "traders" to
put it nicely, "speculators" to put it bluntly.
The Petroleum Ministry’s immediate
priorities are to attract much-needed foreign
investment to Iran's energy sector and to expand
its address book of oil buyers. Iran - like so
many developing countries - does not want to
depend on Western oil trading firms such as Philip
Brothers (owned by Citicorp), Cargill or Taurus.
Enron - until its debacle - used to be one of the
most profitable. Some oil companies - such as
Total and Exxon - trade under their own names.
The empire will strike back The
opening of the Iran oil bourse comes at a time
when the future of the US dollar as the world's
dominant currency is in doubt as seldom before.
At the World Economic Forum in Davos last
month, mega-speculator George Soros stressed that
the world was at the end of the dollar era and a
"systemic failure" may be upon us. On February 8
in Dubai, OPEC Secretary-General Abdullah al-Badri
told the London-based Middle East Economic Digest
that OPEC may switch to the euro within a decade.
Iran and Venezuela - supported by Ecuador - are
campaigning inside OPEC for oil to be priced at
least in a basket of currencies and according to
OPEC’s current president, Chakib Khelil, the
organization's finance ministers will soon meet to
discuss the possibility in depth. A committee will
"submit to OPEC its recommendation on a basket of
currencies that OPEC members will deal with",
according to Iraqi Oil Minister Hussein
al-Shahristani.
To be sure, there’s no
evidence yet that ultra-cautious US ally Saudi
Arabia would incur Washington’s wrath by
supporting such a move. But as for Iran, OPEC's
second-largest exporter, it no longer trades a
single barrel of oil in dollars. That is no small
amount of non-dollars. The country's oil revenue
will reach US$63 billion by the end of the current
Iranian year on March 20, according to Nozari.
Iran converted all its oil export payments
to other currencies in December 2007. It now sells
oil to Japan in yen - the Far East country, the
world's second biggest economy, is the top
importer of Iranian oil and Iran is Japan’s
third-largest supplier. Worryingly for the dollar,
other oil producers are preparing to follow Iran's
lead. Qatari Prime Minister Sheikh Hamad bin
Jassim al-Thani has already announced that the
tiny oil-rich emirate would abandon the dollar for
the Qatari riyal before summer. There’s a strong
possibility the United Arab Emirates may also
switch to its own currency.
As the Kish
bourse picks up momentum, increasing amounts of
oil and gas trading will happen in a basket of
currencies - and increasingly the US dollar will
lose its paramount status. Some Middle East
analysts expect the Persian Gulf petro-monarchies
to end their dollar currency peg sooner rather
than later - some say as early as next summer, as
their black gold will increasingly not be traded
in dollars. Iranian economist Hamid Varzi stresses
that the "psychological effect" of Iran’s move
away from the US dollar is "encouraging others to
follow suit".
Iranian officials have
always maintained that Washington has threatened
to disrupt the country's oil exchange - via an
online virus, attempted regime change or even
through a unilateral pre-emptive nuclear strike.
Certainly some analysts argue that the strength of
the US dollar, like the strength of the British
pound before that, is a reflection of, and is
maintained by, those countries' military strength
(see Why Iran's oil bourse can't break
the buck, Asia Times Online, March 10,
2006).
On the other hand, the possible
success of the exchange may be crucial to signal
the US’s waning power in a world evolving towards
multipolarity. The Saudis and the Persian Gulf
petro-monarchies have already decided to reduce
their US dollar holdings. Washington, sooner or
later, may have to pay for its oil and gas imports
in euros.
No wonder Venezuelan President
Hugo Chavez is so demonized by Washington as he
repeats that the empire of the dollar is falling.
Saudi Foreign Minister Prince Saud al-Faisal
conceded during the latest OPEC summit in Riyadh
that the dollar would collapse if OPEC decided to
switch to euros or a basket of currencies. During
a closed meeting - with the microphones on, by
mistake - Prince Saud said: "My feeling is that
the mere mention that OPEC countries are studying
the issue of the dollar is itself going to have an
impact that endangers the interests of the
countries. There will be journalists who will
seize on this point and we don't want the dollar
to collapse instead of doing something good for
OPEC."
The trillion-dollar question is if,
and when, most European and Asian oil importers
may stampede towards the Iranian oil bourse. OPEC
members as well as oil producers from the Caspian
may be inevitably seduced by the advantages of
selling at Kish - with no dreaded middlemen.
Europeans, Chinese and Japanese will also see
benefits if they can buy oil with euros, yen or
even yuan - they won’t need US dollars – and the
same applies to their central banks.
It
would take only a few major oil exporters to
switch from the dollar to the euro - or the yen -
to fatally bomb the petrodollar mothership.
Venezuela, Norway and Russia are all ready to say
goodbye to the petrodollar. France officially
supports a stronger role for the euro in
international oil trade.
It may be a long
way away, but ultimately the emergence of a new
oil marker in euros in Kish will lead the way to
the petroeuro global oil trade. The European Union
imports much more oil from OPEC than the US, and
45% of Middle East imports also come from the EU.
The symbolism of the Iranian oil bourse is
stark; it shows that the flight from the US dollar
is irreversible - and so, sooner rather than
later, is diminution of Washington's capacity to
launch wars on credit. But at this early stage in
the game, only one thing is certain: the empire
will strike back.
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