28east

Politics, religion, and culture where East meets West

The currency war in Iran

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To reinforce my claims in a prior post, here is William Clark on “The Real Reasons Why Iran is the Next Target”—from 2004:

The Iranians are about to commit an ‘offense’ far greater than Saddam Hussein’s conversion to the euro of Iraq’s oil exports in the fall of 2000. Numerous articles have revealed Pentagon planning for operations against Iran as early as 2005. While the publicly stated reasons will be over Iran’s nuclear ambitions, there are unspoken macroeconomic drivers explaining the Real Reasons regarding the 2nd stage of petrodollar warfare – Iran’s upcoming euro-based oil Bourse.

Candidly stated, ‘Operation Iraqi Freedom’ was a war designed to install a pro-U.S. puppet in Iraq, establish multiple U.S military bases before the onset of Peak Oil, and to reconvert Iraq back to petrodollars while hoping to thwart further OPEC momentum towards the euro as an alternative oil transaction currency.

Similar to the Iraq war, upcoming operations against Iran relate to the macroeconomics of the `petrodollar recycling’ and the unpublicized but real challenge to U.S. dollar supremacy from the euro as an alternative oil transaction currency.

But despite the fall from prominence of the Euro since the publication of the above article, Iran continues, to this day, to evade the dollar (Wikipedia outlines it well enough). For example, Iran is now “said to seek yen oil payments from India.”

Yet in the face of new sanctions, which include a ban on trading gold and silver with Iran (no surprise if this is a currency war), Iran has not yet dollarized. However, the rial’s ominous inflation rate does not bode well for its future. From Jeffrey Lewis, just yesterday (here):

Iranian President Mahmoud Ahmadinejad raised interest rates on Iranian bank deposits to up to 21 percent on January 23rd, according to the official Iranian news agency IRNA. Iran’s central bank also urged Iranians to buy U.S. Dollars only if they were traveling abroad and not to hoard them as a hedge against economic uncertainty.

The move by the Iranian central bank exacerbated the already steep plunge in the Iranian Rial, which has lost more than 50 percent of its value against the price of U.S. Dollars in the open market over the last month.

The ominous slide in the Rial began in April when the Iranian central bank decided to cut rates to a range of between 12.5 to 15.5 percent in April, prompting people to put their money in safe havens like precious metals and the U.S. Dollar. Inflation in Iran is currently running at 20 percent.

For more on the dollarization of Iran in its current context, see here.

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Written by M. James

February 3, 2012 at 5:06 pm

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