Tehran tells OPEC to Dump the Dollar, Caracas agrees

[Satellite Weapon]

Iranian President Mahmoud Ahmadinejad has suggested an end to the trading of oil in US dollars, calling the currency "a worthless piece of paper".


Is this the start of Economic warfare ?


"The main event of the summit was Iran's suggestion that the dollar be replaced as the main currency for the oil market. Venezuela was in favor of that proposal, but all other members rejected it, since their economies are tied to the dollar. Thus, Iran and Venezuela failed to turn OPEC into an anti-American political bloc. But all the members agreed that $100 per barrel is still a low price for oil."

His comments at the end of a rare summit of OPEC heads of state exposed fissures within the 13-member cartel — especially after U.S. ally Saudi Arabia was reluctant to mention concerns about the falling dollar in the summit's final declaration.
The Iranian leader's comments also highlighted the growing challenge that Saudi Arabia, the world's largest oil producer, faces from Iran and its ally Venezuela within the Organization of Petroleum Exporting Countries.
"They get our oil and give us a worthless piece of paper," Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh. He blamed President Bush's policies for the decline of the dollar and its negative effect on other countries.
Oil is priced in U.S. dollars on the world market, and the currency's depreciation has concerned oil producers because it has contributed to rising crude prices and has eroded the value of their dollar reserves.
"All participating leaders showed an interest in changing their hard-currency reserves to a credible hard currency," Ahmadinejad said. "Some said producing countries should designate a single hard currency aside from the U.S. dollar ... to form the basis of our oil trade."
Venezuelan President Hugo Chávez echoed this sentiment Sunday on the sidelines of the summit, saying "the empire of the dollar has to end."
"Don't you see how the dollar has been in free-fall without a parachute?" Chávez said, calling the euro a better option.
Saudi Arabia's King Abdullah had tried to direct the focus of the summit toward studying the effect of the oil industry on the environment, but he continuously faced challenges from Ahmadinejad and Chávez.
Iran and Venezuela have proposed trading oil in a basket of currencies to replace the historic link to the dollar, but they had not been able to generate support from enough fellow OPEC members — many of whom, including Saudi Arabia, are staunch U.S. allies.
Both Iran and Venezuela have antagonistic relationships with the U.S., suggesting that their proposals may have a political motivation as well.
While Tehran has been in a standoff with Washington over its nuclear program, Chávez is a bitter antagonist of Bush's. U.S. sanctions on Iran also have made it increasingly difficult for the country to do business in dollars.

http://seattletimes.nwsource.com/html/nationworld/2004022383_opec19.html

OPEC urged to disconnect oil, dollar

[Anti_tanky]

Everywhere I read now, I just hear about their Batman and Robin shenanigans. Its getting extremely irritating that the media even bothers reporting the garbage which is spurned by these idiots.

I think Chavez is a little more of an idiot though, as he never seems to know what he's talking about and enjoys making vitriolic accusations seemingly out of hand. He gives military men a bad image.

[PanzerMaster]

Economically speaking, an ever eroding currency is bad for a seller. Of course there are a lot of political reason... but recently the dollar plunged very bad.

The last who wanted to dump the dollar was a guy named Saddam... too bad that the morons in Venezuela took time to give anti-US slogans!

If I was the ruler of Venezuela and want to damage America or not damage my own oil revenues (receiving $ instead of €), I would write everywhere in my cities that I love American and Americans, I will not act hostile... then I will dump quietly the dollars down the toilet.

[Vettec]

Although Iran and Venezuela have their moments. They are making a good point here. The dollar has been crushed in the world market. so for Oil producing countries, it makes alot of sense to switch to other currencies. possibly even a bunch of them, like Iran did with their Oil Market. Their Oil is not worth as much as it can be since the actual dollars they are making are worht less and less when buying products from Europe, Asia and even Canada (The Canadian $ is now worth more than the American).

now wether they actually can is another story. cause if they did, this will only do more damage to the dollar, and thats something the US won't be too happy about. Kuwait has already switched though. and UAE seems to following. Anyways the Gulf countries are to have a single currency within the next few yrs. we will have to wait and see if it will be connected to the dollar.

[timetraveller]

And i recently read an article that European based Fashion Model's are asking to be paid in Euro's Instead of Dollars working in the States or for American companies that pay Dollars ,
Because the recently Economic events in the States which is having a roll on effect .. around the world ..

[PanzerMaster]

Although Iran and Venezuela have their moments. They are making a good point here. The dollar has been crushed in the world market. so for Oil producing countries, it makes alot of sense to switch to other currencies. possibly even a bunch of them, like Iran did with their Oil Market. Their Oil is not worth as much as it can be since the actual dollars they are making are worht less and less when buying products from Europe, Asia and even Canada (The Canadian $ is now worth more than the American).

now wether they actually can is another story. cause if they did, this will only do more damage to the dollar, and thats something the US won't be too happy about. Kuwait has already switched though. and UAE seems to following. Anyways the Gulf countries are to have a single currency within the next few yrs. we will have to wait and see if it will be connected to the dollar.

Saudi Arabia and, expecially, China will not be happy too. Those two (and many other countries and entities) are hoarding tons of dollars.

[Freibier]

They are right this time, purchasing power of the dollar outside the US is simply too low.

[mas-36]

I'm not sure what makes me laugh harder. Is it crazy Ahmadinejad? Is it crazy Chavez? Or maybe it's crazy statements in articles, such as:


including Saudi Arabia, are staunch U.S. allies.


roflrofl

[PanzerMaster]

The saddest thing is that in the last months, I think, there was an open work to forge the opinion of US public against Chavez (and then Venezuela)... just in time for the refusal of the dollar by Caracas.

Who want a ticket for the upcoming movie "Venezuelan Freedom"?

[naymeria]

OPEC urged to disconnect oil, dollar

I doubt this will happen. Saudi Arabia has 800 bill. in dollar reserves. Disconnecting the dollar from oil would make the american currency collapse and down with it also saudi arabia would sink. And it's not even the only country to have reserves in dollars.

This is only the political rant of two countries who have some problems with the USA.

Nay

[naymeria]

The saddest thing is that in the last months, I think, there was an open work to forge the opinion of US public against Chavez (and then Venezuela)... just in time for the refusal of the dollar by Caracas.


Even more interesting is how the Chavez's refusal of the dollar managed to get to the headlines, since the opec meeting was private and nothing is mentioned regarding it in the official final conclusions . Apparently, by error, the meeting was broadcasted on a television in a room, where journalists were waiting, just when caracas and teheran were talking about it.
There was an article of the accident on 'il sole 24Ore' of saturday.

Nay

[shocker1]

While I will agree that our dollar is not what the printers of our dollar said it should be with their wise international banker mindset. Oil is a different animal. While we like to moan about media reports of doom and gloom for the USA, the US is a beast when it comes to oil. Not only do we hold vast artificial reserves to drive the market if we see fit. We have huge reserves left untapped for environmental reasons. The US is the 3rd largest producer of oil I do believe and the top importer if China has not taken over yet. Chavez and his pals salivating at Americas pains may find the capitalist dollars hard to be without. Particularly in a world down turn. As much as I agree with the dollars problems it has weathered many storms thus in times of real trouble. People will be casting politics aside and seek shelter in a sturdy house.

When the economic crisis comes as it will if it is not here already, the USA has the capacity to sustain itself economically. Our heavy debt and lack of savings capital will cause more inflation. That is why our dollar stinks and has nothing to do with oil. Granted things would be hard in comparison but nothing approaching 1929. When it does start slipping then politicians will magicly find was to ease the energy burden with "tools" they used to increase the oil prices. These prices have increased tax revenue, made hard to get at oil economicaly viable and pads the pockets of bankers. Technology is also here and will be more prevalent in the area of personal transportation. Pure electric fuel cell vehicles are here and are the future. Oil which has been the engine of humanity will continue for many decades to come and let us not forget Brazil's oil discovery that requires these new oil prices to get at it. IMO we will get used to the new price range and go on.

[PanzerMaster]

While I will agree that our dollar is not what the printers of our dollar said it should be with their wise international banker mindset. Oil is a different animal. While we like to moan about media reports of doom and gloom for the USA, the US is a beast when it comes to oil. Not only do we hold vast artificial reserves to drive the market if we see fit. We have huge reserves left untapped for environmental reasons. The US is the 3rd largest producer of oil I do believe and the top importer if China has not taken over yet. Chavez and his pals salivating at Americas pains may find the capitalist dollars hard to be without. Particularly in a world down turn. As much as I agree with the dollars problems it has weathered many storms thus in times of real trouble. People will be casting politics aside and seek shelter in a sturdy house.


Having untapped reserves of oil is a very wise strategy in the long term.

BTW, I don't fully grasp the macroeconomic scenarios that are out of there, but my guts are telling me that, for planetary peace, a strong or "normal" dollar is better than a dying one (and that said by a euro-using european).

Let's hope that no morons will have the last word both in Caracas and Washington and that the good sense will prevail.

There is much to gain for both US and Venezuela in peaceful trade relations, while, hopefully, Venezuela will try to improve quality of life of their poorest citizens.

[sinophile]

...While we like to moan about media reports of doom and gloom for the USA, the US is a beast when it comes to oil. Not only do we hold vast artificial reserves to drive the market if we see fit. We have huge reserves left untapped for environmental reasons. The US is the 3rd largest producer of oil I do believe and the top importer if China has not taken over yet. ...

The US isn't even in the top 10 in terms of oil reserves.
It consumes est. 20,730,000 bbl/day
It produces est. 7,610,000 bbl/day
It imports est. 13,150,000 bbl/day

The US's proven reserves are 22,450,000,000 bbl, or approx. 3 years worth of oil at 100% domestic consumption. Adjusted for imports the US has enough oil to last approx. 8 yrs.

The costs associated with drilling, processing and environmentally handling domestic oil are high. And don't get me started on refining capacity.

Anyway I think you're wrong.

[Bitogno]

Whatever money is used to sell/Buy commodities it is better to use a basket since it protect the buyer and the seller from moves on the currency market. But the main problem is that oil is treated differently from the other commodities. If Iran and Venezuela were selling potatoes no one would care that they move to euro or a basket of currencies.

[Freibier]

The US should consolidate their national budget and everything will be fine

[Evolv5]

I don't see why they haven't adopted the UK Pound Sterling before. To my knowledge, it's always been one of the most "worthy" if not the most "worthy" currency .
Tell me if I'm wrong.

[naymeria]

This is not the cause of the collapse, this is the effect.

$ is actually collapsing. 1929 is coming.

It's slowly sinking, eventually, if anything. Not collapsing. One thing is a negative trend, which at some point will stop; another is a sudden blow. For the former, there is time for countermeasures and their onsets to start working; for the latter no.
An official announcement of disconnecting the dollar from oil would devaluate it greatly all of a sudden, because it would be like officially anouncing that it is without any hope. Anyway it won't happen. We're not in 1929, where effects remained localized. It would have heavy repercussions worldwide. Noone has interest to see the dollar turn all of a sudden into trash money. There isn't even interest to see it devaluate too much.

Whether we like it or not, we are economically global and many countries and markets are linked to the dollar, which to the other day was, and for much still is, the world currency. So when someone like Chavez comes out with ideas like this, or he hasn't a clue of world economy and how it works or it's just a rant, a rant and again a rant, and wanting to make big political statements with little or no substance underneath.

What instead opec countries might consider in order to balance somewhat the losses, if the dollar continues its trend, is to connect oil to more than one currency, like the dollar, the euro and the yen. And it wouldn't even be a bad idea. This not only would act as a cushion for them, but could also act as a help to globally stabilize oil prices.

Nay

[shocker1]

The US isn't even in the top 10 in terms of oil reserves.
It consumes est. 20,730,000 bbl/day
It produces est. 7,610,000 bbl/day
It imports est. 13,150,000 bbl/day

The US's proven reserves are 22,450,000,000 bbl, or approx. 3 years worth of oil at 100% domestic consumption. Adjusted for imports the US has enough oil to last approx. 8 yrs.

The costs associated with drilling, processing and environmentally handling domestic oil are high. And don't get me started on refining capacity.

Anyway I think you're wrong.
These numbers mean nothing in a global economic down turn that I cited as my logic. Our consumption would plummet and with the new technologies around now. Higher fuel prices could prove a good motivator. So I think you are wrong in the sense you are looking at things from a booming SUV driving economy. It will hurt to transition from that if we need to but like I said the US can weather that storm and sustain itself. Refining capacity is purposly kept weak IMO. The more the oil companies invest in billion dollar refineries the lower fuel prices go and they can't do both. My ultimate point being Chavez and his Iranian pal may find that kicking the bee hive will only get you stung in the ass.

[Ordie]

Chavez is all about politics not economics.

The Saudi's has the largest oil reserves globally and are the price setters. That's what pisses Chavez the most. He has no control.

He needs the high oil revenues to support his "projects" without which he is powerless.

About 1/3 of Venezuela's oil are dedicated towards supporting social programs, providing subsidized fuel at $.06 a gallon in Venezuela, and "gifting" oil to Cuba and Central America

The rest is sold to the US through CITGO refineries and distribution network. Because of the quality of thick oil, the US is one of the few places to refine and sold at a lower price.

To fuel Chavez's revolution, he needs the oil, but he needs expert managers and equipment to reactivate old wells or find new wells.

A few years ago Chavez fired most of the experts in the state oil company for not being "Bolivarian Red" and a few drillers and equipment manufacturers want to invest in Venezuela for fear of being nationalized.

Ironically enough, the fired Venezuelans are now working in Canada and the Middle East. As well as new markets for drilling manufacturers.

Chavez is also concerned about losing marketshare. Brazil, Canada, and Africa are fast becoming new providers of oil who are not OPEC members. That keeps the prices in check and an option for new consumers in China and India.

Domestically, because of the subsidized fuels and incomes, there is little or no incentive to produce and sell products within Venezuela. (Why produce if you can buy elsewhere?).

In the long term being dependent on a single resource is damaging because there is no fallback manufacturing or agriculture base.

In the end Venezuela will continue to be a rich country of poor people.

[TheArmenian]

Let's not be so naive.

If you would like to sell your old car and would like to get say $1000 for it. How much would your asking price start at? You guessed it: higher.

That's what Chavez and Ahmedinjad are doing: to get what they want, they are asking for more. They are asking OPEC members to stop selling their oil in US currency, maybe all they want is to get these countries to stop pegging their currencies against the US$.....which is slowly happening anyways.

It is just negotiations.

My 2 cents worth.

[Rictor]

With the dollar being what it is, and promising to sink even lower in the future, any head of state that continues to take payments exclusively in dollars is guilty of virtually criminal negligence. Chavez and Ahmadinejad are using this opportunity for political grandstanding, but from an economic point of the view they're absolutely right.

[PanzerMaster]

Hint Garret: Top Rated Mutual Fund 165% annual growth.
Better yet what's the fund name, and are the shares the
same, and if so are they still available?

Pardon me, my English is not so well, I don't understand what you are asking

[Kilgor]

Im sure there are some sound economic reasons for OPEC to dump the dollar, but the goblin and the clown and simply pushing it for their American crusade

[ViktorNavorski]

With the dollar being what it is, and promising to sink even lower in the future, any head of state that continues to take payments exclusively in dollars is guilty of virtually criminal negligence. Chavez and Ahmadinejad are using this opportunity for political grandstanding, but from an economic point of the view they're absolutely right.Nope, try again.

[Ivo]

The easiest way to pull the teeth of these "clowns" is to find alternate (non oil based) source of fuel I can tell you they won't be smiling when that happens.

[8thidpathfinderpower]

It's slowly sinking, eventually, if anything. Not collapsing. One thing is a negative trend, which at some point will stop; another is a sudden blow. For the former, there is time for countermeasures and their onsets to start working; for the latter no.
An official announcement of disconnecting the dollar from oil would devalued it greatly all of a sudden, because it would be like officially anouncing that it is without any hope. Anyway it won't happen. We're not in 1929, where effects remained localized. It would have heavy repercussions worldwide. Noone has interest to see the dollar turn all of a sudden into trash money. There isn't even interest to see it devaluate too much.

Whether we like it or not, we are economically global and many countries and markets are linked to the dollar, which to the other day was, and for much still is, the world currency. So when someone like Chavez comes out with ideas like this, or he hasn't a clue of world economy and how it works or it's just a rant, a rant and again a rant, and wanting to make big political statements with little or no substance underneath.

What instead opec countries might consider in order to balance somewhat the losses, if the dollar continues its trend, is to connect oil to more than one currency, like the dollar, the euro and the yen. And it wouldn't even be a bad idea. This not only would act as a cushion for them, but could also act as a help to globally stabilize oil prices.

Nay

Man. Denial is a wonderful thing. especially when it comes to the "mighty american dollar".

Face it, the dollar is washed up. You can thank american businessmen for that. Global economy. Export of jobs over seas, all for the bottom line. Oil allowed to be traded as a common commodity on the common market. Mega bank mergers. Fiscal spending way out of control. And lets not forget, massive fore-closures through out the country, and massive sell offs of american dollars over seas, devaluing the dollar so much, it is about as worthless as toilet paper. And, lets not forget the massively bloated stock market, propped up by a massive american debt for both consumers and companies alike.

We had a chance about 8 years ago to turn the massive debt around and get the country solvent again. But, our inept leaders blew that plan out of the water...massive tax cuts, and not thinking where are they going to get the money for the wars that they so willingly agreed too.

Yes, denial is a wonderful thing. Especially if you are an american.

[8thidpathfinderpower]

The easiest way to pull the teeth of these "clowns" is to find alternate (non oil based) source of fuel I can tell you they won't be smiling when that happens.

Yeah, that would be nice, but too bad the industrialized nations depend on that clownish oil...nations like Austrailia, and the united states...maybe, we need to put exxon and accidental petroleum in their places, and start investing less in rhetoric, and more in alternative energy.

[Ordie]

maybe, we need to put exxon and accidental petroleum in their places, and start investing less in rhetoric, and more in alternative energy.

Private oil companies are now price takers than price setters.

77% of all oil reserves are in nationalized hands. (Iran, Saudi, Mexico, Russia, Venezuela etc...)

To change dependency is to improve standards for consumption and encourage mixed use high density transit oriented development.

[Bitogno]

Iran and Venezuella are not the only ones to rethink their relation to US $ :

Wealthy Nations In Gulf Rethink Peg to Dollar

For many years, oil-rich Persian Gulf states have pegged their currencies to the dollar. Now that link is stoking a bad bout of inflation in their red-hot economies and putting policy makers in a dilemma: Break the dollar peg and risk undermining the U.S. currency, or keep it and face growing local discontent.
The dollar peg has "served the economy...very well in the past," said Sultan Nasser al-Suweidi, the governor of the United Arab Emirates' central bank, last week. "However, we have reached a crossroads."
...

http://online.wsj.com/article/SB119552599363898773.html?mod=hps_us_whats_news

[naymeria]

Man. Denial is a wonderful thing. especially when it comes to the "mighty american dollar".

Face it, the dollar is washed up. You can thank american businessmen for that. Global economy. Export of jobs over seas, all for the bottom line. Oil allowed to be traded as a common commodity on the common market. Mega bank mergers. Fiscal spending way out of control. And lets not forget, massive fore-closures through out the country, and massive sell offs of american dollars over seas, devaluing the dollar so much, it is about as worthless as toilet paper. And, lets not forget the massively bloated stock market, propped up by a massive american debt for both consumers and companies alike.

We had a chance about 8 years ago to turn the massive debt around and get the country solvent again. But, our inept leaders blew that plan out of the water...massive tax cuts, and not thinking where are they going to get the money for the wars that they so willingly agreed too.

Yes, denial is a wonderful thing. Especially if you are an american.


I understand the anger under your outburst, but may i only point out some things to you?

1) I'm not a man.

2) I'm not american. Nor a blind fan of the USA. And certain my opinions could be rather unpleasant. The world however not only isn't a black or white creature, but it's also based on facts.

3) Don't extrapolate my statements from the context in which they are made. My arguments are referring to this particular event regarding chavez and opec. In other words, i'm not saying that something couldn't happen which would make the diollar collapse. I'm saying that it won't occur due to opec wanting to completely disconnect oil from it and giving the reasons why.

4) And here's the main point. It's not the “mighty american dollar” effect. It's the “american dollar all over the place” effect, which is different and is a truth. The US dollar still is, by the major, the world currency.
What i am saying is not that the american currency is mighty because of this, nor am i trying to deny a very critical financial status of the USA. The currency is actually in my opinion very fragile and potentially unstable, other than weak. And many economists assert that it is even still over-evaluated. How much of the over-evaluation is substained domestically and how much it is instead by the world, i wouldn't know, but it's reasonable to think that both are involved. It still remains a fact that if a negative trend can be bad, even very bad, it will still never equate the deleterious effects a sudden big devaluation would bring. The fisrt can be cushioned and counteracted upon, both globally and within america itself, the second might not.
How the dollar got into this status, why it is fragile and can it have a 'happy or sad ending' is beyond the aim of this thread. And i don't wish to give it a political stance, which couldn't be neglected in this case.

Some of the same things, however, you are complaining about, like outsourcing of the currency and of industrial productions, are actually those which today safeguards the dollar from foreign economic maneuvres politically driven and aimed to make it collapse abruptly.

Why?
Because market funds, made up of stocks, bonds, whatever, even of other funds, on the emerging markets are quoted in usd. They were esplicitly linked to a healthy (healthy, at the time they were issued) currency as a guarantee against a risky market and as a protection against local currency volatility, for one as an example. The volume of businesses and exchanges in these markets is huge. The dollar drops, the markets burn billions.

Other: many countries have their reserves, backing up the buying power of their currency, in dollars.

Many countries trade buying and selling in dollars, because their currency is considered too volatile and is not accepted, for another.

Direct investments, and not only ones by american financers, in many countries have been made in dollars to give solidity to the investments, as for still another.

Still another: Stock markets are all linked one to each other, because investors in them are not anymore only locals, but are from all over the world. If one market shakes, the others will feel its effects. We are in the situation, famous for being the definition in words of what mathematically chaotic dynamic systems are, as “the fluttering of the wings of a butterfly in tokyo, can provoke a hurricane in New York”.

If you put all these together, you have the picture of the possible worldwide consequences if the dollar would abruptly drop, without giving countries and investments the possibility to take beforehand countermeasures to cushion the effects and not provoking the crisis while doing it. Its something noone wants. And they are the same reasons, only critically enhanced in the former, for which noone likes the status of the dollar.

What will probably happen, this is just my guess, is to slowly substitute globally the dollar with other strong currencies, without however abandoning it. Namely linking global business and countries to a basket of currencies, which will include the dollar. This would not only safeguard against the present unhappy situation of the dollar itself, but also limit local damages in future economy, due to eventual future weakening of other strong currencies. It would also stabilize prices, regulate import/exports, limit speculation and reduce risks of building up bubbles. Namely it would increase the solidity of investments.
Inclusion of the dollar in is a must. First because you wouldn't want to provoke the crisis during the transition. Second it will help the currency itself to try to get it over the period without plumetting into the worse (there are bounded foreign investments in the usa. Its markets are global too). Third not only the currency is still far from being worthless, but also structurally, at a economic ground level, the usa is a healthy country. It may not be my ideal of an social-economic structure, but regarding capitals, it is healthy as a ground structure. And once this sad period will finish, its economic strength will grow.

That something might happen which could make the dollar suddenly precipitate, provoking with it a world crisis, I wouldn't exclude it at all, but the original cause for the collapse won't come from the foreign economic world, because your crisis would be the rest of the world's too.

Btw, if you wish to hear from me that we are assisting the fall of a dominating financial power, my opinion is yes. But only a psychotic maniac could wish it the worst, and masochistically gloat on it too.

Nay

[LRPV]

Saudi Arabia and, expecially, China will not be happy too. Those two (and many other countries and entities) are hoarding tons of dollars.

As far as China goes...I wouldn't be too sure. China can afford to lose billions of US dollars. The question is strategic worth, is the damage to the US economy and it's global ramifications predictable and in Chinas strategic interests?

[Satellite Weapon]

With the dollar being what it is, and promising to sink even lower in the future, any head of state that continues to take payments exclusively in dollars is guilty of virtually criminal negligence. Chavez and Ahmadinejad are using this opportunity for political grandstanding, but from an economic point of the view they're absolutely right.


more news
http://www.forbes.com/markets/feeds/afx/2007/11/22/afx4367422.html
"The US dollar plunged to a record low against the euro and sank to its lowest level in more than two years against the yen in late morning Asian trade Friday, as investors bet on another Fed rate cut next month. 'The US economic situation is turning (from bad) to worse and there is now a greater possibility that the Federal Reserve will do another rate cut,' said Daniel Chan, senior investment strategist at DBS Bank.
"