They can demand anything they want to, but if they aspire to sell their shit to America, they will have to accept the greenback in lieu of payment. Period. Once foreigners acquire american dollars, they have no choice but to either invest in America, or buy US-made goods and services. Since much of Iran's imports come from Europe (Germany 11.5%, France 9%, China 8.8%, Italy 8.5%, Switzerland 7.1%, UAE 7.1%, Russia 4.6%, Japan 4.3% (2003) http://www.indexmundi.com/iran/imports_partners.html) , it makes sense for them to get paid in euros. For the same reason, the new exchange will have no perceptible impact on the U.S. economy. So much for petrodollar conspiracy theories.
FWIW... The UN is soon to issue massive embargoes against Iran, this exchange will be dead in the water.
mhashe, you seem to ignore the fact that sawdust is a medium of exchange and for the sellers of oil to receive/buy anything in return for it, they would have to sell saw dust. You don't need to sweep up sawdust off lumberyards. All you need is something that represents 'sawdust', even a piece of paper (hint, hint: that's what all fiat currency is after all, something that represents value). Those that want to buy oil, demand sawdust. Those that sell oil, supply sawdust. It evens out. Or do you somehow think that Iran will receive Euros but never, ever, spend them or convert them to anything else? lol They have a living breathing economy to support. And goods/services to buy from the rest of the world. Again, if you live near a college or university, just drop by a profs office for a chat. They love to explain rudimentary stuff like this. Give an old crumudgeon his 15 min of joy
Babak, I think you touch on the right point but don't take it in. Most of the money that the oil cartel has taken in is simply invested in US stock, treasuries, and agency debt and not spent. The cartel has an enormous surplus that just keeps growing. The Saudi's alone have a $ Trillion invested in the US market. That purchasing of financial assets is all that keeps the US economy afloat -- a similar problem exists with China and the external trade deficit. If they choose to store that excess capital in Euro denominated assets then the US would face a) a huge decline in asset values and b) a shortfall in Govt sector funding. The part your argument seem to ignore is that the huge surplus could be invested anywhere - not necessarily in US assets.
and the saudis know there is only one country on the face of the earth they will ever trust to defend them {for whatever reason} ---- who might that be and thus where will they hold/invest their surpluses. i do not think you will ever see saudi arabia {with the current government in place} invest their surpluses with a france or a germany --- nothing tangible to receive in return for their investments {no credible protection capabilities from these types of countries}.
We're shifting topic here a bit but I think it is a fine line as to who owns who at some point... Having said that, the Saudi's account for what 25% of world oil production??? There's a lot of petro-cash that could move away from the dollar.
yes but who else could they trust for their protection??? if you were loaded and had a huge mansion with tons of hot chicks out at your backlawn pool ---- who would you hire/make arrangements with to keep you protected? they will always keep their monies where their protection is ---- that is the arrangement.
Sorry, I think I was unclear. 75% of the world's oil production [less US production of course] could be converted to non-dollar transactions.
Exactly Babak! I'm going to PUKE at some of the insane rants on this thread. Oil is quoted in dollars, That certainly doesn't mean that OPEC only accepts payment in dollars. LOL. Jeez, you guy's think it's like that Visa commercial where trying to pay in Yen would be like using an AMEX card. Most of the world would prefer paying in dollars because vis a vis our trade deficit (i.e. big oil importers Japan and China) are awash in greenbacks and dollar denominated commodity purchases are a way to lighten up on our currency. Given that the U.S. employs santions against Iran I suppose it galls them to see oil quoted in dollars as they see no dollars. Further, the payment medium really isn't that important. Since Europe and Japan have even WORSE debt problems (as measured by % of GDP) than the U.S., I'm not worried that the dollar will become wallpaper.