Department

Ranticles: “Lunch Rants: The Real Threat of Iran”

By Canticle

The real threat from Iran is not nuclear capacity. Pakistan has it and has already disseminated that knowledge throughout the criminal underworld via Abdul Qadeer Khan Khan, who has been pardoned for this blatant act of nuclear proliferation. After all, Pakistan is a US ally. India has the capacity, and no one can argue that the many apocalyptic parties that comprise Indian democracy are any more or less likely to wield nuclear weapons like a cudgel than Iran. Israel has the capacity, though they deny it, and the world turns a blind eye.

The real threat represented to the United States by Iran takes place in March 2006, and involves no conventional, chemical, or nuclear weapons capacity. It involves oil.

More specifically, it involves Iran's opening of a Euro based Oil Bourse.

Currently, the power of the US dollar rests on the fact that it acts as the reserve currency of choice for the world. One of the reasons for this is the fact that oil, the resource all modern nations require in quantity, is sold only for US dollars. When Saudi Arabians sell a barrel of oil, they accept payment only in US dollars. When Iran sells oil, payment is accepted only in US dollars. Venezuelan oil? Purchased with US dollars.

As a result, nations require a reserve of US dollars with which they can purchase oil. This guarantees a steady demand from the US treasury for US denominated currency. This is also one reason that while the Euro has blunted US dominance in the reserve currency market, it has not defeated it. Nations, if they wish to purchase oil, must maintain at least some of their reserves in US dollars.

To date, the only nation that attempted to get around this was Iraq under Saddam Hussein. After the Oil for Food program was launched, he announced that Iraqi oil would be sold only for Euros, not for US dollars. Not a wise move on his part.

The Iranian Euro Oil Bourse would change that. Now, nations could purchase oil on the Iranian bourse for Euros. Nations like China, Japan and Russia, with large dollar reserves and a desire to diversify, would leap at the opportunity, unloading billions of dollars in US reserves to accumulate Euros, in the process flooding the market with unwanted US dollars. Venezuela is an advocate of the bourse and would leap at it as well. It wouldn't be long before billions in US reserves were no longer wanted or desired.

Of course, this flood of US dollars would result in a swift devaluation of the US currency, further pushing people to buy solid reserve currencies, accelerating the US dollar decline. The dollar itself, worth less, would purchase even less on the world markets, and in the United States itself, imports would quickly be outside the reach of the average consumer in the face of massive inflation. Raw materials for manufacturing would increase in price for the United States, subsequently raising the price of finished goods in the US as well.

And that is the real immediate threat faced by the United States.

The US should be thankful that a clearly unbalanced individual with messianic tendencies is now in charge in Iran. If it had been anyone remotely capable, the Iran Oil Bourse would launch without a hitch in March of 2006, and the US would face a true economic crisis. So long as this crazed little man is President, though, the success of the Iran Oil Bourse is hardly a sure thing, and it's entirely possible that even those who want to see a Euro Oil Bourse will ignore it, as much as they desire it.

Canticle on January 19, 2006.