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Syria Dumps Dollar for Euro
A Defensive or Offensive Manoeuvre?
February 13, 2006
(VizReport) We've been talking about a pending shift in world reserve currencies for some time now, but today's move by Syria brings this scenario another step closer to manifest reality.
By converting its foreign reserves completely out of US dollars and into Euros, the regime of Bashar Al-Assad seems to be making a statement about its feelings for America, but it's also making these assets more difficult to seize in the event that the United States acts to freeze Syria's foreign accounts.
It would be an understatement to say that Syria has been squirming under the relentless focus of a United Nations investigation into its possible complicity in the murder of a former Lebanese Prime Minister. But lately, president Assad has--at least outwardly--seemed less concerned with how his country is perceived by the community of nations.
Perhaps he has resigned himself to the prospect that the United Nations' special investigator will issue a stinging indictment against numerous high-level Syrian officials, possibly even including Assad himself.
Or maybe he ordered the multi-billion dollar conversion in preparation for the opening of the Teheran Oil Bourse which is slated to begin operations on March 20th, and which will trade exclusively in euros. Iran, which will be hosting the new exchange, denied reports last month that it had made a similar transition from dollars to euros.
In November of 2005, the central bank of Venezuela, an avowed ally of Iran, moved more than $20 billion of U.S. holdings to a euro-account at a Swiss bank. Curiously, that happened on the same day that Iran revised its projected March 2006 cash position upwards by more than that amount due to an unanticipated windfall. This would suggest that Venezuela, a major oil & gas exporter (and a fellow OPEC member) may be a key underwriter of the Teheran Oil Bourse project.
Saddam Hussein, former president of Iraq, began trading oil in euros as far back as 1999, but he's not the only one with a plan to do so. When he took office in 1999, Russian president Vladimir Putin promised to table his own comprehensive initiative.
The entire world market currently purchases oil in "greenbacks" by using any one of the three current "markers", all of which are denominated in U.S. dollars. If Iran is successful in establishing this new marker, it will be the only one not based on the buck.
International pressure on Iran is increasing rapidly due to the pending review of its nuclear dossier by the UN Security Council in early March.
Iranian president Mahmoud Ahmadi-Nezhad had promised that the West would pay dearly for driving the International Atomic Energy Agency to report his country to the Security Council for possible sanctions. Strong hints have been made by the president and other high officials that some of this retribution would be economic in nature. This may mean that Iran will press ahead with plans to sell its oil only in euros starting on March 20th, the Iranian New Year, despite a lack of European support for the initiative.
Normally, such a project would necessitate cooperation with the EU as its monetary supply would have to be increased in order to accommodate even a moderate trading level on the Teheran Bourse.
In this light, Syria's move to liquidate its U.S. foreign reserves can be seen as them taking a defensive posture with respect to the UN investigation into the assassination of Rafiq Hariri, but it can also be viewed as supporting Iran's upcoming economic war against the almighty dollar.
More to come on this interesting topic.
Viz
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