In June of 2004 Iran declared its intention of setting up an international oil exchange (a bourse) denominated in the Euro currency. Many oil-producing as well as oil-consuming countries had expressed their welcome to such a petroeuro bourse. The Iranian reports had stated that this bourse might start its trade with the beginning of 2006. Naturally such an oil bourse would compete against London's International Petroleum Exchange (IPE), as well as against the New York Mercantile Exchange (NYMEX), both owned by American corporations.

Oil-consuming countries have no choice but to use the American Dollar to purchase their oil, since the Dollar has so far been the global standard monetary fund for oil exchange. This necessitates these countries keeping the Dollar in their central banks as their reserve fund, thus strengthening the American economy. But if Iran — followed by the other oil-producing countries — offered to accept the Euro as another choice for oil exchange the American economy would suffer a real crisis. We could witness this crisis at the end of 2005 and beginning of 2006 when oil investors would have the choice to pay $57 a barrel of oil at the American (NYMEX) and at London's (IPE) or pay 37 Euros a barrel at the Iranian oil bourse. Such choice would reduce trade volumes at both the Dollar-dependent (NYMEX) and at the (IPE).

Many countries had studied the conversion from the ever weakening petrodollar to the gradually strengthening petroeuro system. The devaluation of the Dollar was caused by the American economy shying away from manufacturing local products — except those of the military — by outsourcing American jobs to the cheaper third world countries and depending only on the general service sector, and by the huge cost of two major wars that are still going on. Foreign investors started withdrawing their money from the shaky American market, causing further devaluation of the Dollar.

Nuclear bomb or the Euro?

The keen observer of the money market could have noticed that the devaluation of the American Dollar had started since November 2002, while the purchasing power of the European Euro had crept upward to reach nowadays $1.34. Compared to the Japanese Yen the Dollar had dropped from 104.45 to 103.90 yen. The British pound climbed another notch from $1.9122 to $1.9272.

Economic reports published at the beginning of this month (March 2005) had pointed towards the deep dive of the American economy and to the quick rise of the deficit up to $665.90 billion at the end of 2004. The worst is still to come. These numbers worried the international banks, which had sent some warnings to the Bush administration.

In its economic war Iran is treading the same path Saddam Hussein started when he, in 2000, converted all his reserves from the Dollar to the Euro, and demanded payments in Euro for Iraqi oil. Many economists then mocked Saddam because he lost a lot of money in this conversion. Yet they were very surprised when he recouped his losses within less than a year due to the upward revaluation of the Euro. The American administration became aware of the threat when central banks of many countries started keeping Euros alongside of Dollars as their monetary reserve and as an exchange fund for oil (Russian and Chinese central banks in 2003). To avoid economic collapse the Bush administration hastened to invade and to destroy Iraq under false excuses to make it an example to any country who might contemplate dropping the Dollar, and to manipulate OPEC's decisions by controlling the second largest oil resource. Iraqi oil sale was reverted back to the petrodollar standard.

There is only one technical obstacle to the use of a euro-based oil exchange system, which is the lack of a euro-denominated oil pricing standard, or oil 'marker' as it is referred to in the industry. The three current oil markers are U.S.-dollar-denominated: West Texas Intermediate crude (WTI), Norway Brent crude, and UAE Dubai crude. Yet this did not stop Iran from requiring payments in the euro currency for its European and Asian oil exports since spring 2003.

Iran's determination to use the petroeuro is inviting to other countries such as Russia and the Latin American countries, and even some Saudi investors, especially since Saudi/American relations have weakened lately. This determination had also invited an aggressive American