New threat to Petrodollar

New threat to Petrodollar

The U.S. dollar is not only threatened by the Iranian Oil Bourse


It seems that the U.S. dollar is not only threatened by the Iranian oil bourse but also by Russian plans expected to deal a similar blow to the American currency.

The Russian President Vladimir Putin has announced recently that a Russian bourse would be trading oil and gas in Roubles which will threaten the stability of the U.S. Dollar and deal a worse blow than what the Iranian Oil bourse would do, according to Global Research.

According to Novosti, the Russian President announced on 10 May 2006, during his annual State of the Nation speech to both houses of parliament, that work on making the Rouble an internationally convertible currency would be completed by the first of next month.

He also announced that an oil and gas stock exchange will be created in Russia that would trade in Roubles, a move similar to that expected to be launched by Iran, and expected to give a great boost to the Russian currency.

"The rouble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for in roubles," Putin was quoted as saying.

Russian oil exports make up 15.2% of the world's export trade in oil, and that?s why such a move by Russia would prove more damaging to the U.S. economy that Iran, with only 5.8% of export volumes.

Also Russia produces 25.8% of the world's total gas exports, whereas Iran is still only entering this market as an exporter.

But the Russians won't need much time to take such a move. Unlike Iran, Russians could have their oil market up once their currency market is ready to take on the work load, which is a few months away.

Experts suggest the U.S. Dollar wouldn?t be very much affected because "the greenback is used for all sorts of trade, not just oil, so 5.8% of the international oil trade is really only a small part of the bigger picture," the editorial on Global research further stated.

But this suggestion doesn?t sound very much reasonable if both Russia and Iran will be lowering the demand for Dollars to buy oil and gas.

Putin?s announcement came at a time of heated tension between Washington and Moscow. Putin made his speech less than a week after U.S. Vice President Dick Cheney's address to a conference in Vilnius, Lithuania, in which he accused Russia of energy supply 'blackmail'.

"Russia has a choice to make," Cheney told Baltic leaders during a summit in Vilnius. "No legitimate interest is served when oil and gas become tools of intimidation or blackmail, either by supply manipulation or attempts to monopolize transportation."

The U.S. Vice President was referring to a recent decision by the Russian government to cut gas exports to Ukraine.

The vice-president's comments provoked an instant reaction from Moscow. A day after Cheney?s speech, Russian Foreign Minister Sergei Lavrov fired back, saying;

"The U.S. vice president should be informed that for the last 40 years neither the U.S.S.R. nor the Russian Federation has ever broken a single contract for oil and gas supplies abroad."

Also Kremlin's deputy spokesperson, Dmitri Peskov, voiced his anger over Cheney?s remarks, saying;

"The speech of Mr Cheney in our opinion is full of a subjective evaluation of us and of the processes that are going on in Russia. The remarks ... are completely incomprehensible for us."

Not only that.

When Lavrov met U.S. Secretary of State Condoleezza Rice at a foreign ministers' summit in New York on Iran's nuclear programme, he slammed Cheney for his accusations, as well as Rice's number three, Nicholas Burns, for his criticism of Russia's insistence to assist Iran in its nuclear program.

U.S. hegemony, ever since it emerged as the dominant global superpower at the end of the World War II, relied on three bases; military superiority, the superiority of American production methods and the relative strength of the U.S. economy, as well as control over global economic markets, with its currency acting as the global reserve currency.

Time proved that the role of the dollar is the greatest among equals.

With its currency used as the world's reserve currency, America today borrows from the entire world without keeping the reserves of any other currency.

The U.S. dollar accounts for approximately two-thirds of all official exchange reserves, and thus the U.S. does not have to compete with other currencies in interest rates, and even at low interest rates capital flies to the dollar. But now the U.S. dollar seems trapped between two powerful states' decisions that would end this currency prestige globally and for good.

Source: Aljazeera

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