By Jerome R. Corsi
May 8, 2006
© 2006 WorldNetDaily.com
Last week, Iran's oil ministry granted a license to establish an Iranian oil bourse on the Gulf island of Kish, an economic free zone, to price and trade oil in the Euro, not in the dollar. This idea – strongly backed by the administration of President Mahmoud Ahmadinejad – may well be the final straw that draws the United States into war against Iran.
In 2000, Saddam Hussein received U.N. permission to sell Iraqi oil for euros, not dollars. Saddam further received permission from the United Nations to convert the $10 billion oil-for-food reserve fund from euros to dollars.
Many Bush administration critics have argued that the real reason for the 2003 war against Iraq was not concern that Iraq had or would use WMD, but concern by the U.S. Treasury that Saddam Hussein was waging an international economic war to convince oil-producing nations to hold their foreign exchange currencies in the euro, not the dollar.
The proposal to establish an Iranian oil bourse first surfaced under the presidency of Khatami. The idea languished for months, until last month when President Ahmadinejad again took up the initiative and pressed for action. Iran's goal is to create a bourse where oil is priced in the euro, to compete with the dollar pricing of oil that now dominates the major international oil exchanges, the New York Mercantile Exchange, NYMEX and London's International Petroleum Exchange, IPE.
Pricing oil transactions in the euro will create more of a psychological impact. Iran's real goal is to shift the world away using the dollar as the major currency of foreign exchange holdings. This little understood market has been key to our ability to sustain our economic growth, despite the unprecedented budget deficits of the Bush administration.
Today, the U.S. Treasury is increasingly dependent upon 70 percent or more of world foreign exchange reserves being held in the dollar. China has just signed a $100 billion deal with Iran to develop the huge Yadvaran oil field. For decades to come, Iran promises to be China's major supplier of oil and natural gas. China is also the second largest holder of foreign reserve dollar holdings, second only to Japan. China has already announced their intention to block any serious sanctions coming out of the Security Council deliberations. Undoubtedly, Iran will push China to increase their foreign reserve currency position in the euro, simply to show their economic support for Iran.
We expect that the Iranian oil bourse will be relatively small and experimental at first. But for the Ahmadinejad administration to press for opening the bourse at a time when Iran's nuclear program is being discussed by the Security Council shows the extent of Iran's defiant determination to oppose the United States.
Ahmadinejad has continued to make statements threatening Israel, while asserting that economic sanctions cannot harm Iran economically. Ahmadinejad has a point. With over $200 million a day in windfall oil profits, Iran has more than enough cash flow to support their struggling economy and to fund the aggressive development of their nuclear program.
Iran should be careful, however, in also taking on the established order of international oil. Sanctions already in place shut American oil companies out of participating in Iran's rich oil markets. Iran is the fourth largest exporter of oil in the world, none of which flows directly to the United States. Already the price of oil has spiked to nearly $75 a barrel over international uncertainty with Iran's nuclear program. If a deepening Iranian crisis moves the price of oil toward $80 a barrel, while Iran is threatening to open up an oil bourse to price oil in the euro, Iran is only asking for a confrontation.
Taking on the Bush administration with a possible nuclear threat to Israel is a seriously dangerous policy whose end-game may well end up in war. If Iran wants also to seriously threaten the dollar's position as a dominant foreign reserve currency, a war becomes almost certain. The Iranian oil bourse may never be mentioned by U.S. policymakers as a official reason the United States decides to go to war with Iran, but it may end up being the straw that broke the camel's back.
Jerome R. Corsi received a Ph.D. from Harvard University in political science in 1972 and has written many books and articles, including co-authoring with John O'Neill the No. 1 New York Times best-seller, "Unfit for Command: Swift Boat Veterans Speak Out Against John Kerry." Dr. Corsi's most recent books include "Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil," which he co-authored with WND columnist Craig. R. Smith, and "Atomic Iran: How the Terrorist Regime Bought the Bomb and American Politicians."