There are a couple of nice pieces out there debunking the idea that an Iranian oil bourse would hurt the dollar. See for instance Chris Cook, one of the advisors on the project, at atimes.com
In brief, the argument is that it doesn't matter a hoot what currency oil is traded in -- the only thing that matters is the currency in which the proceeds are subsequently invested.
The "hurt the dollar" argument has been based on the idea that traders keep large dollar reserves to buy oil. This really doesn't make much sense -- if a trader needs dollars, he can buy them whenever he wants to, with no need to keep large reserves.
Thoughts? Would someone care to make the argument that the currency oil is traded in is a big deal?
Kailash
Chris Cook's story:
My experience with Iran began four and a half years ago in June 2001 when, through my Iranian business partner, I wrote to the then governor of the Iranian central bank, Dr Mohsen Nourbakhsh. This letter was written on the basis of my experience as a formerdirector of the International Petroleum Exchange and in the aftermath of allegations I made in relation to market manipulation on the IPE the previous year, which were dismissed by a commissioner appointed by the exchange. I still regret that I used the description "systematic" rather than "systemic" of this alleged manipulation, but that is another story.
In this letter I pointed out that the structure of global oil markets massively favors intermediary traders and particularly investment banks, and that both consumers and producers such as Iran are adversely affected by this. I recommended that Iran consider as a matter of urgency the creation of a Middle Eastern energy exchange, and particularly a new Persian Gulf benchmark oil price.
It is therefore with wry amusement that I have seen a myth being widely propagated on the Internet that the genesis of this "Iran bourse" project is a wish to subvert the US dollar by denominating oil pricing in euros.
As anyone familiar with the Organization of Petroleum Exporting Countries will know, the denomination of oil sales in currencies other than the dollar is not a new subject, and as anyone familiar with economics will tell you, the denomination of oil sales is merely a transactional issue: what matters is in what assets (or, in the case of the United States, liabilities ) these proceeds are then invested. |
