monetary turmoil

The US dollar on reprieve – The Asian Development Bank warns of threatening monetary turmoil. The oil trade is uneasy about the increasing impossibility of reinvesting the petrodollars they are accumulating, whereas the bank world is pondering over the dollar’s real value. A downturn in trade has just begun on the stock exchanges of the Gulf, even as the Asian Development Bank was warning its members against a possible collapse of the US currency. What if the dollar was really no longer anything but fiat money? For several months a lively debate has been developing within international financial circles: is the dollar so overvalued as to be at risk of a brutal collapse, on the order of 15 to 40% depending on the commentator? The controversy is kept alive by a disputed rumour whereby some oil contracts might be on the verge of being converted from dollars into euros. This, in turn, would spawn a depreciation of the US currency … // … Oil traders are increasingly reluctant to entrust investment funds with their money.

They know that international accounting standards have been modified in such a manner that nowadays, both national states and multinational corporations have assets they do not own entered in their balance-sheets. The shares they hold are being posted in their accounting, not at the purchase price, but at the actual stock quotation. While this is of no consequence at times when markets are on the rise, it will prove fatal in the case of a stock market crash. From one day to the next, central banks and major corporations could find themselves completely ruined.

The Gulf countries, therefore, are trying as a matter of course to invest their money in Europe. This should lead them to converting their dollars into euros, to the USA’s great detriment. In this context, Sultan Al Suweidi, the governor of the Central Bank of the United Arab Emirates, has announced on March 22nd, 2006 that he was considering the conversion into euros of 10% of the bank’s dollar reserves, and his Saudi counterpart, Saud Al Sayyari, publicly condemned the decision of the US House of Representatives in the Dubai Ports World affair [3].

These decisions are being taken even as some of the oil-producing countries, with whom Washington has entered into a state of latent conflict, are in the process of diverting their capital flows to invest them outside of the dollar zone. This is the case of Syria, which has gradually been converting its reserves into euros during the past two years [4]. It is also the case of the recent rapprochement between Venezuela and the Vatican Bank for the purpose of exchanging the oil-producing country’s dollars, mainly into euros and Chinese yuan.

Above all, this could well be the case with Iran. As a matter of fact, rumours are multiplying that the Islamic Republic is about to open an oil exchange in euros [5]. This project, announced for March, has not yet seen the light of day, and has been called propaganda by numerous commentators. We have attempted to verify its existence with the authorities in Tehran. At first, they refused to either confirm or deny the information, but later, special advisor to Iran’s Oil Minister Mohammad Asemipur declared that the project would be brought to completion in spite of the typical delays when realizing this type of endeavour [6]. The Oil Bourse in euros will be established on Kish, a small island in the Persian Gulf turned by Iran into a free trade zone. Oil corporations TotalFinaElf (France) et Agip (Italy) have already set up their regional headquarters on Kish.

Be that as it may, the Bourse will only handle a small portion of Iran’s energy markets. Substantial contracts have already been signed between national states: with China for the sale of crude oil [7], and with Indonesia for oil refining [8] …
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