SYRIA - Iran's [euro]Oil Bourse Vs US$.

Speculations have begun regarding whether the proposed March 2006 launch of the Iranian Oil Bourse (IOB), will cause a blow to the US dollar. Iran is about to begin pricing its oil in euros. Just about everyone may benefit - except the US. It was said last week that, without some form of US intervention, the euro would have a firm foothold in international oil trade.

The US dollar has been the strongest currency of the world for more than half a century, with about 70% of all currency reserves. This could be an explanation for why the Shi'ite theocracy could be the US' next target. This is closely related to the fact that oil, the most important commodity traded in the world, has been priced in US dollars.

The majority of oil importers have to buy their oil in US dollars, which forces them to keep most of their foreign currency in dollars. A crippling US debt crisis makes the American economy mostly dependent on the high demand for its currency to remain afloat.

Tehran has confirmed its plan to have a euro-based exchange in oil - to compete with the London and New York dollar-denominated oil exchanges, both American-owned. If proved successful, the IOB would give the euro a foothold in world oil trade, solidifying its status as an alternative oil transaction currency - and a disaster for the US. The IOB will see crude oil, petrochemicals and other commodities traded in euros.

The question is what are Iran's motives behind such a move? According to local experts, Iran's move makes sense as the EU is Iran's biggest trading partner. Also it will deal a major blow to Iran's archfoe America: and, by hoping to make Iran the main hub for oil deals in the region, it will drive the theocracy forward in its quest for regional supremacy. George Perkovich, an Iran expert at the Carnegie Endowment for International Peace in Washington, has made it clear that the move is: "part of a very intelligent, creative Iranian strategy - to go on the offense in every way possible and mobilize other actors against the US" (Christian Science Monitor, Aug. 30, 2005).

According to Asia Times Online (ATO), "Oil in euros would benefit millions...in the EU and its trading partners.... And it would loosen the grip the US has on OPEC". An expert on the subject said: "One of the Federal Reserve's nightmares may begin to unfold in the spring of 2006, when it appears that international buyers will have a choice of a barrel for $60 on the NYMEX and IPE or a barrel for 45 to 50 via the Iranian bourse" (Global Politician, Sept. 2, 2005).

The IOB may accelerate a shift of foreign currency reserves from dollars to euros. Thus, "countries switching to euro reserves from dollar reserves would bring down the value of the US currency. Imports would start to cost Americans a lot more.... As countries and businesses converted their dollar assets into euros, US property and stock market bubbles would, without doubt, burst" (The Foundation for the Economics of Sustainability, Nov. 15, 2004). The impact of a reserve currency switch would be catastrophic for the US, says the Global Politician.

Aljazeera.com last week said: "The US 'would simply have to stop importing'. If Iran launched its IOB, the US dollar will weaken and the euro strengthen - helping speed up the economic decline of the US. Numerous economists have expressed optimism about Iran's ambitions, saying...the impact of the Iran oil bourse on the American dollar and US economy could be worse than Iran launching a 'direct nuclear attack'".