How far will the U.S. go in preventing further OPEC momentum towards the euro as an oil transaction currency standard? Remember in 2000 Saddam sealed his fate when he announced that Iraq was no longer going to accept dollars for oil being sold under the UN’s Oil-for-Food program, and decided to switch to the euro as Iraq’s oil export currency. In 2003 the U.S switched the transaction back to dollars (the international currency of oil sales) despite the fact the the euro was valued approx. 13% higher than the dollar, and thus significantly impacted the ability of future oil proceeds to rebuild Iraq’s infrastructure.
Come July 2006 the Tehran government has plans to begin competing with New York's NYMEX and London's IPE with respect to international oil trades – using a euro-based international oil-trading mechanism. This will introduce petrodollar versus petroeuro currency hedging, and fundamentally new dynamics to the biggest market in the world - global oil and gas trades.
In essence, the U.S. will no longer be able to effortlessly expand its debt-financing via issuance of U.S. Treasury bills, and the dollar’s international demand/liquidity value will fall.
Could this prompt overt or covert U.S. interventions – thereby signaling the second phase of petrodollar warfare in the Middle East?!? Read on here
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