TEHRAN, Iran (AP) — Iran, OPEC’s second-largest producer, has stopped conducting oil transactions in U.S. dollars, a top Oil Ministry official said Wednesday, in a concerted attempt to reduce reliance on Washington at a time of tension over Tehran’s nuclear program and suspected involvement in Iraq. Iran has dramatically reduced dependence on the dollar over the past year in the face of increasing U.S. pressure on its financial system and the fall in the value of the American currency. Oil is priced in dollars on the world market, and the currency’s depreciation has concerned producers because it has contributed to rising crude prices and eroded the value of their dollar reserves.
“The dollar has totally been removed from Iran’s oil transactions,” Oil Ministry official Hojjatollah Ghanimifard told state-run television Wednesday. “We have agreed with all of our crude oil customers to do our transactions in non-dollar currencies.” Iranian President Mahmoud Ahmadinejad called the depreciating dollar a “worthless piece of paper” at a rare summit last year in Saudi Arabia attended by state leaders from OPEC countries. Iranian oil officials have said previously that they were shifting oil sales out of the dollar into other currencies, but Ghanimifard indicated Wednesday that all of Iran’s oil transactions were now conducted in either the euro or yen.
If the current administration is looking for an excuse to invade Iran, this may just be it.
Thanks Chris Vallee.
bobbo, I’m not advocating this behavior. I’m just trying to explain it.
#34–JPV==I agree, no advocacy on your part or mine.
I’ve been thinking for years that the exporting of manufacturing jobs would slowly erode our standard of living, and that is happening.
What I didn’t know (and still don’t because it is over my head) is how even during the observable decline, the USA economy is artificially proped up with money manipulations? That makes very good sense to me==sounds right.
So==as you posted==I can see if the money manipulations fall apart that the slow decline could flip overnight into a complete kiss-off of the USA leaving us with “what?” that would be sellable into the international market?
Food is the only large thing after that. We can also threaten use of military power==or start charging the nations we protect???
Anyway, slow decline (in opposition to what all our political leaders say) is a reality, but I am fearful now of “the flip.”
All about the tipping points.
Iran is a sovereign state, idiots.
They can choose any currency they want (or use carrots even) and its nobody else’s business.
All of you just keep buying China-made cheap good, Mexican and Asian Cars, and we’ll see how low our dollar can sunk (it hasn’t hit the bottom yet).
All of you greatly participate in chasing all jobs and manufacturing plants away from this country, don’t blame some third world country for your own problems.
Less than 30% of United States GDP come from creating anything (manufacturing), vast majority of our GDP comes from *SERVICES*.
No country in the world can progress, or even sustain its economy, when all of its citizens do is just service.
When everybody only polish shoes to each other, everybody will get poorer the day they all will worn-off their shoes, while the shoemaker will prosper and flourish.
Thats exactly what China, India and others are doing.
Thats exactly what Americans are not doing.
Having great Army won’t help, wake up. Soviet Union was #2 power in the world, and it collapsed when its economy collapsed.
If it weren’t for the fact that the Bill O’Reilly column linked below was from last week (4/24) I’d think this was one of the reasons he wrote such an uncharacteristic rant. Probably an oil company pulled their sponsorship.
http://www.billoreilly.com/column?pid=23338
J/P=?
WELL,JUST TRY TO BUY SOMETHING WITH iranian MONEY NEXT TIME YOU TRAVEL ABROAD.
#34
I thought we were off the gold standard since the introduction of the Federal Reserve, which was long before Nixon, like when Wilson was president. Right?
And if gas prices are so high because of high oil costs per barrel, and a weak US dollar, and all the taxes put on gasoline all go to the fed and state governments, why the FUCK are oil companies making billions of profits this past year?
Apparently it doesn’t cost much to refine oil into gasoline, so what is exactly marking up the price of gasoline?
Even long before all this crap; before the Bush admin, gasoline prices would change at the change of a hat, to what seems to us to be no apparent, reason.
If there’s even a HINT as to a change in gasoline’s supply and demand numbers, the price of gas would have already gone up YESTERDAY.
In fact it seems the law of “supply and demand” go out the door when it comes to gasoline prices. Regardless these oil companies make zillions of profits every quarter.
None of this makes any sense, and I really think these oil companies need to be audited by a 3rd party (I don’t mean IRS audit, but that info might help too!) but I mean a true audit in the sense of seeing exactly how much money is spent in the entire oil refinery process, to justify such high profit numbers. Considering people/business are buying less gas due to high prices, and vehicles that rely less (or none) on gasoline.
This is huge. I’ve raised this issue several times on this blog in the past couple of years and nobody seemed at all interested.
There is talk in OPEC of replacing the petro-dollar with the petro-euro.
This is a really big deal and nobody I know seems to care.
Money masters, this one started me on a trip:
http://tinyurl.com/37txmd
Then i found this one:
http://youtube.com/watch?v=gAcxGD6-c-E
Every once in a while a miracle occurs, and in this case it is Bill O’Reilly saying something that makes sense. See #37 above.
We’ve got problems.
JVP (#31) and bobyrne (#18 & #27) have it right.
Some years ago I used to work at the Trade Department of a Bank dealing with Documentary Credits for the purchase of oil (my dept. was dealing with Russian oil but the way oil trading works applies to Iran oil as well).
When a European firm wants to buy oil, it contracts at the current world markets price which is expressed in USD. Then, to cover itself against exchange risk exposure, it takes out a foreign exchange contract or option. Basically it agrees now, what price it will pay in Euro for a set amount of USD at a future date. (Other options such as swaps exists but are too complex to analyze here).
If they can agree the purchase of oil in Euro directly with the seller, then (a) they save the exchange commissions and (b) the save the forward contract/option fees. Furthermore, they have no exposure to any adverse foreign exchange movements.
Basically this means that oil will be slightly cheaper for European oil trading companies (although I doubt that the savings will truly reach the consumers).
Trading oil is a very complex procedure. Oil may be loaded in a tanker bound for Europe, but the ownership of the oil might change multiple times (10-12 is not uncommon) during the voyage.
USA does not buy oil from Iran and very little of the Arab oil reaches the US. USA buys oil from countries like Nigeria and Canada which have an advantage in transport costs.
Arab oil is mainly exported to Europe and Asia (think China and Japan).
What matters is that the price of oil is set globally; if the price of Arab oil gets higher, Nigeria and Canada will increase their price in step with the global market.
If a domino effect takes place and more countries demand Euros in exchange for oil, this will spell trouble for the US economy.
At the same time this is not so good for the European economy; it will lead to the Euro becoming a harder currency, which will create additional inflationary pressures.
Control of inflation and price stability is the main purpose of the European Central Bank; I doubt if AT THIS MOMENT, with the USD trading so low, they would welcome the switching of the oil trading from USD to EUR. If USD was trading higher I do not doubt that they would welcome such a move.
I don’t care at all about rising gas prices. I’ve been buying my gas at the same price for years. I always just stop filling my tank when the meter shows 40 Euros. It’s as simple as that!
ok, ok, Iran blah,blah,blah. What I did notice is that Iran advocated a ‘basket of currencies’ for pricing instead of another single currency. I would have expected the Euro. Apparently this idea didn’t get much support in OPEC.
I have no doubt Iran will do anything it can to mess with the U.S. There is no love lost between our governments. Especially since he’s the same age as the students that took over the Embassy. Can you imagine that happening today???
If there was going to be a war with Iran, it would have happened already. They could have used the military involvement as an excuse. Instead, they appear to be capitulating on nuclear power.
But go ahead and keep predicting a war with Iran every few months. Maybe someday you’ll be right.
Hey, I thought we were going to war with Venezuela for dropping the dollar?
And now Drudge has a report that Kuwait might drop the dollar with the rest of the gulf states. I guess war is on with Kuwait then?
#40, please explain why I should care. It’s not like oil prices are a fixed number of dollars, in which case we would have an advantage.
Hey they are a business, and they are playing hardball with their customers. this country shoudl be familiar with that, it lets companies wreck havoc with it’s consumers. I am just glad I fixed my vespa earlier tonight. Hello 70 mpg
#48, MikeN
You should care because the dollar’s status as a reserve currency is a huge benefit to the US economy.
Consider: whenever anyone in Europe wants to buy oil, they are effectively selling Euro to buy Dollar with which to buy the oil. That is a constant flow of value from the Euro to the Dollar. (and the same goes for almost every currency in the world).
If that flow were to be interrupted, by European companies and countries buying oil in Euro, that would adversely affect the exchange rate between those two currencies. The value of the dollar would fall relative to the Euro. (and again, the same goes for any other currency that can bypass the exchange to dollar to buy oil).
As the value of the dollar falls the cost of all imports rises, the trade deficit worsens, and the US economy as a whole suffers.
So they get dollars, and our treasury is filled with Euros. These currencies are units of measurement. The dollar falls when the government prints too many.
this is a very bold step taken by the Irani president Ahmadinejad, hes our hero! to hell with dollar and USA!!
#51–Muslim==this item is 8 months old. So your assessment should be in by now. How’d that go for yah? ((Don’t care enough to find out if he “actually” did it.))
Iraq Oil Trade will enable the dinar to become a widely traded currency. As more and more foreign countries buy oil from Iraq, more and more dinars will be in demand.
Iraq must protect its oil trade. It affects everything.