Some Muslim Nations Advocate Dumping the Dollar for the Euro
By ROBERT BLOCK
Staff Reporter of THE WALL STREET JOURNAL
KANO, Nigeria -- In this sandswept Nigerian town on the edge of the Sahara Desert, a Muslim cleric, displaying anger about the U.S. war in Iraq, recently exhorted his followers to take action to inflict pain on the U.S. Namely, ditch the dollar and embrace the euro.
"European countries," preached Sheik Ibrahim Umar Kabo, the head of Nigeria's Council of Muslim Scholars, "have refused to be fooled by America" and support the war. "We should therefore encourage transactions with the euro and stop patronizing the American dollar."
The sheik's advice was met with cries of "Down with America." The enthusiasm spilled out into the streets with the faithful shouting, "Euro yes! Dollar no!"
The euro is the common currency for 12 European nations including war-dissenters France and Germany, but not Britain, which maintains its independent currency. Few, if any, of the Nigerian villagers chanting in favor of the euro have ever seen the currency. But the idea of tearing down America's financial might in favor of more Muslim-friendly Europeans became a rite of passion in Nigeria when the war was on -- just as it did in a swath of the Muslim world.
The effort has made little progress so far and may ultimately be merely symbolic -- especially if a positive outcome in a postwar Iraq serves to lower anti-American feelings. In fact, to date the campaign has meant little to governments of Muslim countries. Only Iraq and North Korea have embraced the euro and shunned the dollar, a move not expected to continue in post-Saddam Hussein Iraq.
[call for euros]
Still, the percolating calls to adopt the euro bear watching. Rumblings have been heard as far from Iraq as Indonesia, the world's most populous Muslim nation. Antiwar protestors there recently called on government and businesses to switch from the dollar to the euro for international transactions. In Tripoli, the Libyan government urged a suspension in dealings with U.S. and British companies along with a switch from dollar-dealing to euro transactions. In Lebanon, a self-appointed "boycott committee" of Muslim, Christian and political groups has urged countrymen to shun U.S. banks, as well as the dollar. Two Moroccan newspapers, L'Economiste and Assabah, are also waging a campaign for the euro over the dollar.
Suggestions by some U.S. officials that Washington plans to replace the Iraqi dinar with the dollar during its stewardship of Iraq have served to galvanize some Muslim sentiment against the greenback. According to Ibrahim Ado-Kurwa, an independent Nigerian Muslim scholar and writer from Kano, many Muslims think that the antidollar, pro-euro campaign must continue beyond the Iraq war. He argues that pressing for adoption of the euro is the only way ordinary people can fight the U.S. "Muslims, as we can see, don't have a fighting chance in a military campaign against America," said Mr. Ado-Kurwa. "So our fight must be economic and it will take time."
In the 1970s, Arab countries dealt a blow against the U.S. when the Organization of Arab Petroleum Exporting Countries stopped shipping oil to America. The effort ultimately collapsed amid a steady supply from non-Arab oil producing countries such as Iran and Venezuela. Later, Arab-led economic boycotts aimed at all sorts of U.S. products ran on to similar shoals, as Arabs and other Muslims realized the victims of their campaigns were often the local Muslim owners of U.S. franchises such as McDonald's or Coca-Cola bottlers.
For now, the idea of a dollar boycott seems to have gained legs more from its simplicity and symbolism than the likelihood it will hurt the U.S. Many advocates make no claims it will be effective. "The reason [to change dollars for euros] is not economics, and we would probably make little difference, either," the Jakarta Post in Indonesia recently reasoned. "It's more one of principle, especially given our opposition to the war."
[dollars are out]
The nascent movement may say more about the frustration felt by Muslims with the few nonviolent options for expressing opposition. "What else do they have at their disposal? Why shouldn't people say, 'Let's try the euro.' The truth is that these are words of desperation," said Maha Azzam, who studies trends in the Muslim world at the Royal Institute of International Affairs in London.
Desperation, however, doesn't mean a boycott couldn't eventually cause problems for the U.S., especially if the world's oil importers got behind it, a move that seems unlikely now.
For one thing, denying themselves greenbacks means boycotters could also be denying themselves goods and services offered by the world's largest and richest economy -- something many aren't willing to do.
Still, the common European currency has presented the first real competitor to the dollar in world markets since the modern system of international exchange was adopted in 1944. If the euro maintains its strength over time, big oil producers could begin denominating their sales in euros, or at least away from dollars toward a basket of other currencies, without suffering much, if any, economic pain, say some economists. Over the long term, "It would be a great mistake not to treat the threat seriously," said Robert Mundell, a Columbia University professor whose research provided much of the theoretical foundation for the establishment of the euro.
Sheik Ibrahim of Nigeria may not be familiar with Prof. Mundell's Nobel Prize-winning work. But the distant hope of inflicting economic damage on the U.S. infuses his campaign. He and his council are now organizing meetings with Muslim businessmen and traders throughout the country to press their argument.
The inspiration comes from Iraq's embrace of the euro. On Sept. 24, 2000, the regime of Saddam Hussein stunned the world after a routine cabinet meeting by announcing that it would no longer accept dollars for oil being sold under the U.N. oil-for-food program. All oil sales were to be paid for in euros. A government statement said the move was to confront the "daily American-Zionist aggression," an apparent reference to U.S. support for U.N. sanctions. The Iraqi move did little to hurt the U.S. economy. It paid off for Iraq when the euro appreciated by 30%.
The Iraqi move sparked more talk of dumping the dollar, as discussions and analysis of the topic suddenly sprouted on the Internet. These musings were noted by several media sources, including the Arab-language broadcaster al-Jazeera. This is where Sheik Ibrahim seems to have first come across the idea, according to one of his assistants.
Sheik Ibrahim said that the dollar boycott was, in his opinion, "the most effective means of peaceful protest available to bring the U.S. back to its senses." He insisted that the ploy could slow down the American economy and "may even lead to its collapse."
The idea is being backed by Muslims scholars in other countries who have declared that economic jihad against America is incumbent upon all Muslims. "In light of the U.S.-led war against Iraq, boycotting products of the U.S. and its allies is a religious obligation," Sheik Abdel Khaliq Hasan Ash Shareef, a Muslim scholar from Egypt, wrote in a religious decree.
Monday's Market Activity
The dollar declined modestly in narrow ranges, surrendering early gains as apprehension over a new flare-up in the Middle East took hold among investors.
The unease in foreign-exchange markets reflected several statements by Bush administration officials directed at Syria. "The postwar dollar rally has not really appeared," said Lara Rhame, senior economist with Brown Brothers Harriman in New York.
Late Monday in New York, the dollar was trading at 120.38 yen, down from 120.41 yen late Friday in New York. The euro was trading at $1.0773, up from $1.0753 late Friday. During the New York morning, the common European currency briefly poked above key resistance at $1.0800 to a global session high at $1.0810, but failed to sustain those gains.
Against the Swiss franc -- a classic refuge currency in times of economic uncertainty -- the dollar was at 1.3895 francs, down from 1.3930 francs late Friday. Sterling was at $1.5734, up compared with $1.5715 Friday.
Meanwhile, the Canadian dollar ended unchanged as market players awaited the Bank of Canada's interest-rate announcement scheduled for this morning. The U.S. dollar was trading at C$1.4537, unchanged.
-- Michael Deibert contributed to this article.
Write to Robert Block at bobby.block@wsj.com1
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