Whoever wins the US election has no choice… they have to bomb Iran. We’ve all seen US policy on oil acquisition… they’re not squeamish! This time however… it’s all going to be about the dollar - says Smart Commodities UK Editor Garry White
This is not my attempt at humour. This is what’s going to happen. And like all good wars this one started long ago between two opposing countries’ propaganda and PR departments.
Public Relations is a dark and dangerous art, so I am always careful in the presence of a PR person… they always have an agenda.
I get tonnes of PR flannel thrown at me every day via email, through the post and by phone. Most of it I ignore, but sometimes it offers a real insight into what is actually going on in the world.
Comments from an official from Iran’s Oil Ministry on Iranian TV overnight confirmed to me that the Arab economic war with the US was well underway – and stage two is not far behind.
The Ministry official said:
“The dollar has completely been removed from our oil trade... Crude oil customers have agreed with us to use other currencies."
This statement has been reported by many agencies today as “news.” That is lazy journalism. These people are being manipulated by a specific form of PR: War propaganda.
I’ve heard this “news” before
The fact that Iran does not accept dollars for its oil anymore is in no way a new revelation. The first time a government official made this statement was on 8 December last year; and Iran has been moving in this direction for years. Neighbour Iraq started to price its oil exports in euros in 2000 and Iran followed suit shortly after. This statement is just another attack on US dollar hegemony. Iran is telling the world that its bourse is a success and that it is open for business.
Talking with my colleague Manraaj Singh of Profit Hunter this morning, he believes the comments are part of Opec’s strategy of talking up the oil price to maximise its own profits.
I reckon he’s partly right, but I think that the main motivation for this statement is malice. Iran has declared economic war on the US and these comments were the latest sortie in the battle.
The end of US dollar hegemony in oil markets would cause the currency to collapse – and plunge the US even further into an economic crisis. This would please the Arabs, but it would destroy the US economy. For Arabic enemies of the US, of course this would be manna from heaven.
The alternative is here
On 17 February, Iran opened the International Oil Bourse (IOB) on the Island of Kish in the Persian Gulf. The IOB is a bourse trading in petroleum, petrochemicals and gas, for which payment is accepted in virtually any currency but the dollar. It makes sense therefore that no more Iranian oil is to be sold in dollars.
Some of the major oil-producing countries such as Venezuela and a few of the larger oil consuming countries, most notably China and India, have already announced their support for the IOB. All it needs in stage two is for oil producers from countries such as Russia to agree to pricing in other currencies and the death of the dollar would be almost complete.
The problem for Ahmadinejad is that this has to happen quickly.
Iran has one of the cheapest gas petrol prices in the world. It stands at the staggeringly cheap price of 8 cents per litre (bottled water costs 13 cents a litre). The reason it is so cheap is that the government massively subsidises the price of all commodities.
This policy is crippling the governments finances… the subsidies cost the country a staggering $100bn a year. That’s because the give-away price of petrol means that Iranians consume, consume and consume some more.
In 2006, the country spent $7bn importing refined petrol to meet this demand – and the people will not allow the subsidies to be cut. When the subsidies were reduced last year it led to rioting across the country.
So, if Iran is going to win the current economic war with the US and end dollar hegemony, it has to be done fast. Ahmadinejad knows this and the hawks in Washington do too.
Iran is not going to back down. I reckon US targeted bombs are likely to be seen over Kish Island sooner rather than later. The war in Iraq was mostly about oil…. The war in Iran will be mostly about the dollar.
Oh – and when the invasion does happen, expect the oil price to go through the roof…
Now unfortunately there are no niceties when it comes to investing. And for some time I’ve had my readers positioned in a stock that should do remarkably well when this happens (in actual fact I believe it’s going to do remarkably well anyway… but war is going to push it through the roof). What do I do – tell people to sell their positions now - because otherwise they might profit from war?
That would make me a great person… but a rubbish analyst… I am however making them aware of what is going to happen so they can make up their own minds on the influx of cash they could receive.
Become one of my readers and you too can receive all the latest news, opinion and investment advice on the most powerful investment trends there are. This will give you access to all the current shares in our portfolio… I leave it up to you to decide if this particularly well placed (horrible term) oil stock is something you can stomach.
Regards,
Garry White
Editor
Smart Commodities UK
