Sunday, November 18, 2007

Another step towards a petro-basket of currencies

Venezuela and Iran Press OPEC To Consider Impact of Falling Dollar by Adam Smallman and Natalie Obiko Pearson

"A single change Sunday to the text of the final communique at an OPEC heads of state summit [in Riyadh] appears to have met pressure from Iran, Venezuela and their allies in the oil-producer group to focus attention on the anemic dollar.

Coinciding with calls by Venezuelan President Hugo Chavez and Ecuadorian President Rafael Correa that the Organization of Petroleum Exporting Countries should start to flex its political muscles, ministers have agreed to create a committee to study how a currency basket for crude, currently priced in dollars, might work.


'The U.S. dollar has no economic value,' Mr. Ahmadinejad said at a news conference, claiming that Mr. Bush's policies are resulting in inflation in other countries.

His oil minister, Gholam Hussein Nozari, told Dow Jones Newswires: 'We have agreed to set up a committee consisting of oil and finance ministers from OPEC countries to study the impact of the dollar on oil prices.'

Iraq's Oil Minister Hussein al-Shahristani told reporters: 'The committee is to submit to OPEC its recommendation on a basket of currencies that OPEC members will deal with.'


Iran had teamed up with Venezuela to push for a debate on the dollar and to insert a paragraph on it into the final communique.

The communique doesn't contain an explicit mention of the dollar, but, reading from it, Secretary General Abdalla Salem el-Badri said OPEC sought to 'study ways and means of enhancing financial cooperation among OPEC ... including proposals by some of the heads of state and governments in their statements to the summit.'

This is a change from the original draft of the communique, reviewed by Dow Jones Newswires Friday, which read that the group sought to 'encourage great economic and financial cooperation among member countries.'

Friday, Saudi Arabia's Foreign Minister Prince Saud al-Faisal Friday advised ministers from OPEC not to mention the dollar in their final communique, saying it could further weaken the already-battered currency.

In comments broadcast by mistake on a live television feed from a closed-session meeting of foreign, oil and finance ministers from OPEC member countries, Prince Faisal said: 'We shouldn't mention the dollar because that would only endanger it more and aid its collapse.'

Prince Faisal changed his tune Sunday, saying at a press conference that OPEC wants to maximize its oil revenues and study the implications of 'the economic developments in the global economy today'.

The dollar further weakened Friday on slowing U.S. industrial production. The dollar, which recently hit a 26-year low versus sterling and an all-time low against the euro, has declined in recent months as the U.S. economy has gotten hit by housing and subprime woes.

Ecuador's President Correa said of OPEC's crude: 'We have to trade in a strong currency,' arguing that to stick with the dollar means oil-producing countries are handing off value to richer countries.


[Venezuelan President Hugo Chavez said that] OPEC is 'stronger than it's ever been in its history' and it must 'become a stronger player in the geopolitical domains' and play a role in battling poverty and assisting development.

Mr. Correa said; 'I agree completely ... OPEC needs a political vision to manage a strategic resource.

With its near-9 million barrels a day of production, the organization's linchpin, Saudi Arabia, holds enormous sway in the group, but King Abdullah may have sensed a shift in the group's center of gravity.


[Voicing his disagreement with Messrs. Correa and Chavez, and without any apparent sense of irony, U.S.-ally Abdullah said] 'Oil shouldn't be a tool for conflict; it should be a tool for development.'

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