The bottom line

Iran's oil bourse and the decline of the Dollar


by Ardeshir Ommani

On Wall Street as well as on Main Street, it is increasingly becoming common knowledge that since 2001 the United States’ once almighty dollar has lost more than half its purchasing power against the euro and inescapably is fast turning into the “new American peso.” If six years ago a euro could be purchased for 86 cents, today it costs $1.40 to obtain the same euro. But it is not just against the euro that the dollar is losing ground - it has depreciated in value against a host of other major international currencies and even minor ones like the peso of the Philippines.

The downward direction of the value of the U.S. dollar among most of the international currencies could be theoretically the result of many economic factors such as a lower rate of labor productivity, a lower interest rate or the arbitrary political hurdles raised in the way of foreign capital to purchase a commanding share of U.S. equities. But aside from the above probable causes, the overwhelming pressure on the U.S. dollar comes from the U.S.’s tremendously huge foreign debt. There is an inverse relationship between the quantity borrowed by the U.S. from foreign sources and the value of the U.S. currency: the more the U.S. borrows, the lower the value of the U.S. dollar tends.

Last year, the U.S. ran a current account deficit of $811 billion, or 6% of the Gross Domestic Product (G.D.P.), which brought the U.S. net foreign debt to $2.5 trillion or close to 20% of the G.D.P. Presently foreign investors own a record 80 percent of the Treasury notes due in 3 to 10 years. To show the depth of U.S. dependency on foreign financing, it is crucial to note that international investors own $672 billion of the $835.4 billion Treasury securities, according to Lawrence Dyer, a strategist at HSBC Securities USA in New York.

Without an exaggeration, the U.S. is the world’s largest debtor, caused by disproportionately consuming other nation’s goods and resources. This trend has practically become irreversible. It is absolutely clear that the U.S. has been living beyond its means, along with the heavy burden of the wars on its economy and financial system.

In the current situation, as the dollar drops in value, foreign investors like Japan, China and the Persian Gulf states could be less willing to purchase U.S. government-issued notes and treasury bonds. This time around the U.S. could be denied the foreign capital flow needed to cover its current account deficit, expected to reach $850 billion this year.

U.S. Taxes the World
The ever-shrinking purchasing power of the dollar for the Organization of the Petroleum Exporting Countries (OPEC) who were led to accept only the U.S. dollar for the export of their oil and other strategic resources, and for all those countries that had to convert their own currencies into U.S. dollars in order to be able to purchase their needed oil results in two-tier losses.

The first category of loss is incurred by the oil purchasing countries which have been forced to convert their national currencies into the U.S. dollar in order to be able to purchase their needed oil from the highly centralized energy markets of New York and London. Oil exchange as an on-going process coupled with ever-increasing demand and rise in prices has led into an ever-increasing support for the value of the dollar and in turn a downward pull on the currencies of the oil-purchasing nations.

The second category of loss is incurred by the oil-exporting countries through the constant depreciation of the U.S. dollar. Accepting the idea of the U.S. dollar as the world’s sole reserve currency, many oil-exporting countries kept their oil income in the form of the dollar for a long time which has resulted in a heavy loss in its purchasing power vis-à-vis other commodities.

On the world scale, the gain for the U.S. and a gigantic loss for the rest of the world have been nothing less than two-tier taxation by the United States levied against the rest of the world. Yes, an empire was born that taxed the rest of the world through making the dollar be the world reserve currency.

In his “Economics of Empires” article, Krassimir Petrov wrote:

“A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations…one part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes.”(1)

US-Saudi Shady Deal
In the case of the U.S., indirect taxes were imposed on the rest of the world when in 1972-73 Washington made an iron-clad arrangement with the King of Saudi Arabia to the effect that the U.S. government under all circumstances would keep the House of Saud in power in exchange for accepting only U.S. dollars for its oil.

Given the U.S. heavy dominance over the decision-making process of the central governments of the oil-producing countries in the Middle East, the rest of the members of Organization of the Petroleum Exporting Countries followed suit. From then on until recently, oil in the world replaced the gold which was agreed to be the backing of the dollar under the Bretton Woods Agreement signed by the victorious powers of WWII in 1945.

In the last half a century if any oil-producing country around the world demanded a currency other than the U.S. dollar for its oil, the U.S. Central Intelligence Agency (CIA) made sure that the head of such government would learn either through political pressure or military intervention, to change his mind. This is precisely what the U.S. did to Iraq and Saddam Hussein when he decided to demand euro in place of the U.S. dollar.

Given the massive trade and budget deficit, the U.S. has become increasingly dependent on the status of the dollar to remain the world reserve currency. In June of 2006 the U.S. currency accounted for two-thirds of all central bank reserves worldwide. This reserve status means that the dollar is constantly in demand, regardless of the underlying weakness of the U.S. economy. This status has been increasingly a target of criticism by the governments of other major currencies.

In his annual State of the Nation address to both houses of parliament on May 10, 2006, President Putin said, “The ruble 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 rubles.”(2)

Russia’s share of the world’s trade in oil export is 15.2%, Iran’s 5.8% and Venezuela’s 5.4%. Iran has the world’s largest proven oil reserves after Saudi Arabia and the world’s second largest gas reserves after Russia. Iran’s geo-strategic position in the Persian Gulf and its already-existing vast network of pipelines makes it one of the major players in the energy world.

Iran’s Oil Bourse
Over two years ago, Iran announced that it plans to create an oil market, Iran Oil Bourse (IOB) which would trade for oil in euro instead of the U.S. dollar. It goes without saying that if such a market for oil and gas materializes in a reasonable time period; it will compete against New York’s Energy Market (NYMEX) and London’s International Petroleum Exchange (IPE). But more importantly the exchange of oil for euro becomes a serious challenge to the hegemony of the dollar as a world reserve currency and could spell a beginning of an end to the American empire.

Finally, on October 2, 2007, Mohammad-Ali Khatibi, deputy head of the National Iranian Oil Company (NIOC), in charge of the marketing announced that Iran has drastically lowered the use of the U.S. dollar in payment for its oil export by 15%. Khatibi was reported as saying that “Iran is selling about 85% of its oil in the non-dollar currencies,” nearly 65% in euro and soon 20% in yen. In July, the NIOC requested from its customers in Japan who import over 300,000 barrels per day (bpd) of Iranian oil, to pay in yen.

A switch in currency by Nippon Oil and other Japanese oil refiners to yen has helped Iran to achieve its goal of reducing its exposure to the dollar and as a result, in the period over the last two years it has avoided the loss emanating from the constant depreciation of the dollar. The switch from dollar to yen was not an easy decision for Japan to make, knowing that the U.S. applies all sorts of pressures on the world financial markets and threats against individual state apparatuses, wanting them to dump the idea and refrain from paying in currencies other than the dollar, although paying in their own national currency is naturally in their best interest.

It is not a secret to anyone that Iran is well-positioned with regard to its foreign currency reserves. Its total reserves held in foreign banks have risen by 37% over the past year to the level of $65 billion by the end of June 2007. Iran’s demand for currencies other than the dollar for its oil is another reason for the United States’ aggressive polices towards that country. But for many reasons, we all know that it can’t do to Iran what it did to Iraq.

(1) The Proposed Iranian Oil Bourse, by Krassimir Petrov
(2) The Collapse of the Petrodollars Looming, Dave Kimble

About the author

Ardeshir Ommani is a writer and an activist in the anti-war and anti-imperialist struggle for many years, including against the Vietnam War. Ardeshir is a co-founder of the American-Iranian Friendship Committee (AIFC) which strives to build a movement promoting peace and preventing a U.S.-led war on Iran. See , where news and analysis of U.S.-Iran’s relations can be found, along with observations of life in Iran based on recent visits to Iran. Ardeshir helped launch the successful campaign, the very first Iran internet anti-war campaign. In the 1960's, he was a co-founder of the Iranian Students Association (ISA), which contributed to the struggle against the Shah of Iran, a U.S. puppet. Two of his recent articles: “Emergence of a United Front Against Bush" can be viewed at and “U.S. Arms Sales – Source of Instability” at


Recently by Ardeshir OmmaniCommentsDate
The Great Heist
May 17, 2012
Mar 01, 2012
Can the U.S. Swallow Syria?
Feb 12, 2012
more from Ardeshir Ommani


by reply (not verified) on

What a bunch of long did it take you to come up with this crap? Makes nos sense whatsoever.


RE: Sure (to Anore)

by Uncle Irany (not verified) on

Mr or Mrs. "Anore"

If you had written your nice words in English, your Tel Avivian bosses would have given you a raise! How high, and how thick, I don't know. You would have to ask them! (or may be you have experience with them)!




by Anore (not verified) on

kir to koonet mr. ommani...kir to koseh madaret...kir too dahan khaharet...kir to jad o abadet...enjoy!


To: Really?

by Uncle Irany (not verified) on

Dear Really
You seem to be one of those Israeli agents who assumes whatever is inflicted on them as part of being a zionsit agent is also inflicted on normal human beings. You people live in stone age and that is where you belong. Please get out of Iranian domain. We don't want any one of you around here. Go stick it to Uncle Sam. Those poor souls buy your theories. You cannot see successful Iranins, and you cannot see their educated people such as Mr. Ommani express their opinions openly and freely. You cannot see that one day (hopefully soon) Iran will dominate the region and old glories of iranian Empire back. You belong to the management ranks of Gitmo and Abu Ghaoreib. Go learn torture techniques. Israelis do not belong to the civilized world.

Uncle Irany


RE: really

by Uncle Irany (not verified) on

Dear Really
You seem to be one of those Israeli agents who assumes whatever is inflicted to them as part of being a zionsit agent is also inflicted on notmal human beings. You people live in stone age and that is where you belong. Please get out of Iranian domain. We don't want any one of you around here. Go stick it to Uncle Sam. They buy your theories.

Uncle Irany



by of course (not verified) on

The author of this article was mentally and sexually abused by the Shah's police. He was forced to perform sexual favors for savak members. So have mercy on him. He still feels the pain...



by of course (not verified) on

The author of this article was mentally and sexually abused by the Shah's police. He was forced to perform sexual favors for savak members. So have mercy on him. He still feels the pain...


Now, this is an article to read! Awesome!

by Mehdi on

I would like to add that I think that the same is actually the reason Shah was taken out. People, please realize that it is not Shah or Mullahs or anything. It is the inevitable fact that Iran's government keeps reaching a point where it realizes how it is being taken advantage of by, let's call them imperialists (oil companies+CIA+FBI+...), and decides to do something about it and that is when the "US," or better said, the puppet government of US uses American people's resources and essentially stops any forward progress. Be it by creating a revolution or tactical boming of the country, whatever. They have been so good at it that they even deceived the communists and "revolutionaries" in Iran when they gave rise to a fake "revolution." They brought in the mullahs partly because they knew these idiots knew nothing about government or international economy, etc., and partly because they knew the fabric of iranian demographics with its very religious bonds. Now even the dumb mullahs have started to realize what is really going on. Keep in mind that it isn't so much Ahmadinejad or Khameneiee who have realized it but the thousands of educated individuals who work in the background. So in short we can get through this mess by NOT destabilizing the current government, no matter how disgusting the mullahs are! Yes, I said it, let's not destabilize this regime, not because they are so good, but because we are making progress! In 10, 20, 30, 40 years, things will be very very different, IF we have not allowed a "revolution" take everything down again! Let's remember that although a "revolution" seems so nice and maybe even doable, it is only because the powers that be are making it look easy and desireable and doable - just like they did when they had decided that Shah must go!!! Only days after the new regime took over from Shah's, the curtains fell again!!! Please, let's not allow another "revolution" to be staged by the criminal CIA!!!


Good Article

by Anon-2 (not verified) on

Dollar hegemony enforced by oil business is very serious, yet quiet issue. Very few people in north America have even heard of the term, let alone knowing anything about it.
The author of this piece is very well-informed. Those individuals who are thrashing him simply do not understand anything about the topic and should be busy watching blonde persian dancers on Iranian channels.


Tombani + Al Foad + Qumars = 0

by Bademjoon (not verified) on

The value of the leftover commies!



by Iraq (not verified) on

Saddam hossain coverted about 10 Billion reserve it had under oil-for-food program with UN, to euro in December 2000. The week after US and UK conducted a week-long heavy bombing of Iraq! Many high-level experts have this opinion that the decision to remove him was made then and there. The amount he converted was not much, but its symbolic aspect would have been quite a signal to others in Middle East. This news NEVER was reported in US mass media :)


Israel's Invasion of IRAN

by gol-dust on

Couple of years ago when i heard that iran was going to have bourse for oil, and would accept euro instaead of $, i knew we were going to be invaded, or the government would be overthrown by isaeli, american coaltion. if you recall that's exactly saddam did before  the invasion! remember? you see iranians are too smart of businessmen for their own good, and israel and US who want to control the region cannot let that happen! well, that's imperialism 4 you! May they go to hell with mollahs!


"Ardeshir Ommani is a writer

by Zafaran (not verified) on

"Ardeshir Ommani is a writer and an activist in the anti-war and anti-imperialist struggle for many years, including against the Vietnam War."

What else is new, my friend. Did Allen Wittle just join Persepolis and it is going to play its first game in Azadi (Aryamehr) stadium, or antar Ahmaghinejad has become the new abarmarde zedeimperialist in your bloc?

Aziz jaan, those illiterate mullahs cannot run a baghali, now a dreamer of shabe sheri like you thinks that the stupid mullahs can bring down American economy to its knees?

As the saying goes: Shahnameh akharash khoshe. Let's first see how the mullahs manage Iranian economy with 90 USD/B of oil.


savaki the idiot

by Cyrus- (not verified) on

To the editor of this site;
what did the readers gain by you printing the comment by savak ???
can you explain to us what were the positive points in his 3 lines comment??


Thank You Ardeshir. You are a great educator

by ahmad_bahai (not verified) on

We are proud of you and thanks for this good doze of education. Keep up the good work. And, please igore the "nay" sayers on this site. Some of these people are Israelis who pretend to be Iranian and their job is to fool and discourage. They are doing the task that their masters in tel aviv have paid them to do.

Thanks again and regards,


Lack of stability

by Jalileh M (not verified) on

One of the fundamental rule of any markets is that it needs to operate under stable conditions. This does not exist in Iran and will not soon. Unfortunately, a lot of the industrialized countries do not have a good relationship with Iran. Also Iran's nuclear issue is a huge cloud that further reduces stability. All the talk and speculation of the upcoming pre-emptive attack of Israel and USA on key targets is also eroding any confidence.


This person is getting paid

by not true... (not verified) on

This person is getting paid by the mullahs in Iran to write this nonsense. Who, in the right mind, will belive that a bunch of uneducated mullahs and their butt kissing servants are capable of making such elaborate economic policy making to offset the world economy. After all, just look at their own situation: no jobs, no food, no fuel, no economic hope. As the famous saying goes, "kal gar tabib boody, sar kachal khod dava nemoodi". Get a life man. Write something that is at least half logical.

What promisses have you received from your masters in Iran?


Respect Limo Ommani

by mama (not verified) on

I like limo ommani. Please don’t use it in an unseemly tone.

He is doing analysis and expressing an opinion for Israeli’s sake. Just read it and tell us why you disagree with those analyses.
Which points are illogical and don’t make sense.
Offer an alternative analysis that refutes his.
Tell us your references just like mentions them.


What magic mushrooms are you on?

by Hamid (not verified) on

Oil Bourse in Mollahland that cannot open its economy to something as simple as credit cards?

Also if you want to write oil learn something about it first, IPE has not existed for a few years now, it is called ICE.


hey limoo ommani

by crap hater (not verified) on

stop writing nonesense dude...give at leat one proof that is verifed independently. You bring up lots of points but no verification.


A new perspective

by Sera (not verified) on

Very informative. At very least provides a different perspective. Thanks Ardeshir



by Bavafa on

Hallelujah to the last poster, exactly my question….. But I don't bother to pay much attention to the pointless/baseless criticism that comes from fanatic IRI haters or lovers.

I am also grateful for a well written/argued article by Ardeshir Ommani.

Thank you



Which one?

by mama (not verified) on

Last poster,

Exactly which one of the points he is making are incorrect?


Here we go again...the so

by yeah ...sure.. (not verified) on

Here we go again...the so called expert has spoken...yes! the mighty akhoonds will bring down america...yes the mighty idiots will create world economy to cruush USA...come on! Do you honestly belive in this crap that you write? If you do, then there is a very bright futute for you in the financial district of Quom!



by Foad on

I am grateful that an enlightened Iranian, Ardeshir Ommani, have written this well documented paper. Thanks. Foad