Iran, having been pressured by the international financial community at the behest of various agencies of the US Government, has decided to make a move. The story below is the latest example of a trend that's been increasingly more common nowadays, which is this: oil-producing countries deciding to sell their oil in a currency other than dollars for whatever reason (hostility towards the United States is a good example).Saddam tried this tactic, and shortly afterwards was shocked and awed (supposedly), and then whacked (definitely). Of course, oil had nothing whatsoever to do with the US decision to invade Iraq - at least, not in the way it's commonly understood. Had Saddam sold Iraqi oil in Euros, it would have been a slap to the back of the sack for the United States, and encouraged more countries to follow suit.
However, fundamental economic weaknesses cannot be shored up by military dominance and cultural hegemony forever. The increasing acceptance of the Euro as a central bank reserve currency, combined with the huge holdings of dollar-denominated government debt (i.e., US Treasury bonds) in China and Japan, will continue to pressure the US dollar and encourage further moves like the one Iran has just made. Reuters has more:
Iran Slashes Oil Transactions In Dollars
(Copyright Reuters, 2007-10-02)
Iran has slashed the use of the dollar in payment for its oil exports to 15 percent, an official said on Tuesday, amid growing pressure from arch-foe the United States on its financial system. The vast majority of transactions for oil from OPEC's number two producer are now being carried out in euros, said Mohammad-Ali Khatibi, deputy head of the National Iranian Oil Company in charge of marketing.
"Iran is selling about 85 percent of its oil in the non-dollar currencies," Khatibi was quoted as saying by state television. "Currently, about 65 percent of the oil sale income is in euros and 20 percent in yen," Khatibi added. Japan, which purchases 20 percent of Iran's crude oil, has recently agreed to pay for the crude oil in yen, he said. He also said that the remaining sums being paid in dollars, about 15 percent, are going to shift to "other creditworthy currencies". Khatibi also cited the United Arab Emirates dirham as one other possible currency for use in oil transactions.
He said the main reason for the move was fluctuations of the dollar on the currency markets and the depreciation of its value since 2004. Iran had previously announced that 60 percent of its oil transactions for export had been switched into euros.
Nobody is accusing the Aryan Brown of being stupid! Iran knows that the US is not in the strongest ecomonic position at the moment, and will only benefit from Iranian Euro-denominated oil. They also get to thumb their noses at the Americans, which must be a nice domestic political bonus for their leaders.
Another previous anti-dollar move that Iran has made was proposing an oil bourse (bourse is the French/international word for exchange) denominated in Euros. That may or may not be worth a war, as this opposing viewpoint explains.
Iran, the world's fourth largest oil exporter, has massively cut down its dependence on the dollar in the face of US pressures. The United States has been seeking to make international banking transactions harder for Iran, as another tool to pressure Tehran into backing down over its controversial nuclear programme. Several European banks have drastically cut business with Iran as a result of US pressure.
The only European banks that have cut ties with Iran are ones that do business in the US. If they have a branch office anywhere in America, their business activities in the States can be sanctioned. Many banks in Europe (especially smaller ones that don't have operations in the US and therefore can't be pressured) are now benefitting from the artificially-increased Iranian demand for their services.
However despite problems with inflation and unemployment at home, Iran's conomy is being helped by revenue windfalls from current high crude oil prices. Iran's foreign currency reserves held in banks abroad have risen by 37 percent over the past year to the equivalent of 65 billion dollars as of the end of June 2007, the central bank said in September.
So... to sum up, poor (or deliberate, if you prefer to see it that way) economic management in the USA can lead to a weaker dollar, which strengthens the Euro, which can encourage oil-producing countries to sell their black gold in Euros, which will generally strengthen their economies, which can (theoretically) do serious damage to the US economy, can lead to them being bombed.
In addition to the link above, here's another excellent, if somewhat polemic, piece on why the US will go to war to protect the petrodollar. And keep in mind that lot of the stuff you have been and probably will be hearing about Iran is just fluff - it's all about the money.
