Sunday, April 6, 2008

I-Ran away from the US$...

The Iranian President, Mahmoud Ahmadinejad, urged OPEC today to stop listing oil prices in US dollars. In my opinion this is sort of a non-news story because 1) Iran and the US don't exactly have the best of relationship with each other, and 2) The US dollar has so grown weak recently that it's not a surprise that foreign countries would want to stop listing their prices in US dollars and weakened the value of their reserves. The real problem with the Iranian President's proposal is that he wants OPEC members to form a joint bank and trade oil under a basket of currencies. Operating under a basket of currencies would make it too complicated and most of the OPEC members recognize this.

Also, as much as OPEC and the US may try to present a front that they are not tied together in mutual interests, we know that they really are. The US needs OPEC's oil production to satisfy our hunger for oil, and OPEC needs the US for simply the same reason. I don't think Iran has a prayer of getting this proposal through especially with the leading producer of OPEC, Saudi Arabia, being a key US ally. I will not be surprised if at some point the oil trade can be convinced to switch to a different currency, such as the euro, but do not see a case where Iran's proposal of trading under a basket of currencies is passed.

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