Ahmadinejad: OPEC Members Interested in Converting Cash Reserves Into Non-Dollar Currency
Courtesy Sebastian Abbot, AP News
Nov 18, 2007 18:46 EST–Iranian President Mahmoud Ahmadinejad said Sunday that OPECâ€™s members have expressed interest in converting their cash reserves into a currency other than the depreciating U.S. dollar, which he called a â€œworthless piece of paper.â€
His comments at the end of a rare summit of OPEC heads of state exposed fissures within the 13-member cartel â€” especially after U.S. ally Saudi Arabia was reluctant to mention concerns about the falling dollar in the summitâ€™s final declaration.
The hardline Iranian leaderâ€™s comments also highlighted the growing challenge that Saudi Arabia, the worldâ€™s largest oil producer, faces from Iran and its ally Venezuela within the Organization of Petroleum Exporting Countries.
â€œThey get our oil and give us a worthless piece of paper,â€ Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh. He blamed U.S. President George W. Bushâ€™s policies for the decline of the dollar and its negative effect on other countries.
Oil is priced in U.S. dollars on the world market, and the currencyâ€™s depreciation has concerned oil producers because it has contributed to rising crude prices and has eroded the value of their dollar reserves.
â€œAll participating leaders showed an interest in changing their hard currency reserves to a credible hard currency,â€ Ahmadinejad said. â€œSome said producing countries should designate a single hard currency aside from the U.S. dollar … to form the basis of our oil trade.â€
Venezuelan President Hugo Chavez echoed this sentiment Sunday on the sidelines of the summit, saying â€œthe empire of the dollar has to end.â€
â€œDonâ€™t you see how the dollar has been in free-fall without a parachute?â€ Chavez said, calling the euro a better option.
Saudi Arabiaâ€™s King Abdullah had tried to direct the focus of the summit toward studying the effect of the oil industry on the environment, but he continuously faced challenges from Ahmadinejad and Chavez.
Iran and Venezuela have proposed trading oil in a basket of currencies to replace the historic link to the dollar, but they had not been able to generate support from enough fellow OPEC members â€” many of whom, including Saudi Arabia, are staunch U.S. allies.
Both Iran and Venezuela have antagonistic relationships with the U.S., suggesting their proposals may have a political motivation as well. While Tehran has been in a standoff with Washington over its nuclear program, left-wing Chavez is a bitter antagonist of Bush. U.S. sanctions on Iran also have made it increasingly difficult for the country to do business in dollars.
During Chavezâ€™s opening address to the summit on Saturday, the Venezuelan leader said OPEC should â€œassert itself as an active political agent.â€ But Abdullah appeared to distance himself from Chavezâ€™s comments, saying OPEC always acted moderately and wisely.
A day earlier, Saudi Arabia opposed a move by Iran on Friday to have OPEC include concerns over the falling dollar included in the summitâ€™s closing statement after the weekend meeting. Saudi Arabiaâ€™s foreign minister even warned that even talking publicly about the currencyâ€™s decline could further hurt its value.
But by Sunday, it appeared that Saudi Arabia had compromised. Though the final declaration delivered Sunday did not specifically mention concern over the weak dollar, the organization directed its finance ministers to study the issue.
OPEC will â€œstudy 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,â€ OPEC Secretary General Abdalla Salem el-Badri said, reading the statement.
Iranâ€™s oil minister went a step further and said OPEC will form a committee to study the dollarâ€™s affect on oil prices and investigate the possibility of a currency basket.
â€œWe 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,â€ Gholam Hussein Nozari told Dow Jones Newswires.
Iraqi Oil Minister Hussein al-Shahristani said the committee would â€œsubmit to OPEC its recommendation on a basket of currencies that OPEC members will deal with.â€ He did not say when.
The meeting in Riyadh, with heads of states and delegates from 13 of the worldâ€™s biggest oil-producing nations, was the third full OPEC summit since the organization was created in 1960.
Abdullah tried to take the focus off the dollar debate, announcing the donation of $300 million to set up a program to study the effect of the oil industry on the environment. Kuwait, Qatar and the United Arab Emirates also agreed to donate $150 million each to the fund, Prince Saud Al-Faisal, Saudi Arabiaâ€™s foreign minister, said Sunday.
The run-up to the meeting was dominated by speculation over whether OPEC would raise production following recent oil price increases that have approached $100. But cartel officials have resisted pressure to increase oil production and said they will hold off any decision until the group meets next month in Abu Dhabi, United Arab Emirates.
They have also cast doubt on the effect any output hike would have on oil prices, saying the recent rise has been driven by the falling dollar and financial speculation by investment funds rather than a supply shortage.
During his final remarks, el-Badri stressed he was committed to supplyâ€”but did not mention changing oil outputs.
â€œWe affirm our commitment … to continue providing adequate, timely, efficient, economic and reliable petroleum supplies to the world market,â€ he said.