OPEC Prepares To Dump US Dollar As Primary Oil Pricing Currency

Iranian Oil Bourse Set To Trade In Euros

Saddam Hussein decided the Euro was a better currency than the US Dollar for selling Iraq's oil, but then Iraq was invaded. Within three months of the start of the War On Iraq, in March, 2003, Iraq was back selling its oil in American dollars.

If OPEC backs the move by Iran and Venezuela to do away with the US Dollar, it will be grim news indeed for the American economy, and will add to the momentum that is already peeling away the remaining value of the US Dollar as a stable world currency.

From PressTV :

Organization of Petroleum Exporting Countries plans to discuss a proposal by Iran and Venezuela to price oil in non-dollar currencies.

Finance minister of the group, which supplies 40 percent of the global crude demand, will meet to study the proposal, the organization's President Chakib Khelil said.

Khalil, however, did not say when the ministers are scheduled to discuss the proposal amid the ongoing depreciation of the dollar.

The idea floated by Tehran and Caracas since the dwindling dollar fallen 16.2 percent against a basket of major currencies since two years ago.

Iran, the OPEC's second largest exporter, has already cut all of its ties with the greenback with respect to oil transactions.

Qatari Prime Minister Sheikh Hamad bin Jassim Al Thani had also said earlier that amid concerns about the weakness of the US dollar in recent months, the oil-rich Persian Gulf littoral state would shift Qatari riyal from the US currency over the next six months.

"The dollar lost a lot of value and energy worldwide is priced in the dollar, so all the producers are affected by the development on the dollar. This is a cycle so we have to live with it," Abdullah Bin Hamad Al-Attiyah said.

The UAE is also likely to follow the lead, as Kuwait did last May.

From the Associated Press :

Iran has already registered for another oil bourse, in which it has said it hopes to trade oil in Euros instead of dollars, to reduce any American influence over the Islamic Republic's economy. A bourse official, Mahdi Karbasian, told the IRNA official news agency that such an oil market would begin operating within the next year.

While most oil markets are traded in U.S. dollars, Iran first floated the idea of trading oil in Euros in the early 2000s during the tenure of reformist president Mohammad Khatami.
It gained new life after the nationalist Mahmoud Ahmadinejad was elected in 2005.

As the fourth largest oil producer in the world, Iran has a measure of influence over international oil markets. The country ranks second for output among OPEC Countries, and controls about 5 percent of the global oil supply.

Tehran also partially controls the Persian Gulf's Strait of Hormuz, through which much of the world's oil supply must pass. Iran has sought to wield its oil resources as a bargaining tool in its ongoing standoff with the West over its nuclear program.

Expect BushCo. to retaliate.

Iraq Oil Flows, Western Energy Corps Lick Their Lips

News that Iraq's oil is now beginning to flow again at pre-war levels is good news for Iraqis. Whether or not it is really good news depends on how much of the profits from a new boom in Iraqi oil stay within Iraq and are poured into rebuilding the country and the economy :

Buried beneath the surface are the pipelines that carry Iraq’s liquid gold – crude oil – from Kirkuk’s giant oil-fields 50 miles (80km) down to Baiji, and then up to Turkey for export to the energy-hungry West.

The US Army Corps of Engineers began building this $30 million (£15 million) Pipeline Exclusion Zone (PEZ) between Kirkuk and Baiji last July, and will finish it next month. It has already reduced dramatically the number of attacks by those Sunni insurgents who have been waging a second, less-noticed war over the past four years – not against US troops or Shias but against the oil industry on which Iraq’s entire economy depends.

As a result, that industry is displaying unmistakable signs of recovery for the first time since the US invasion of 2003. Exports have risen almost to prewar levels, and with Iraq sitting on 113 billion barrels of proven reserves – the third largest in the world – that is welcome news not just for Baghdad but for a world reeling from record oil prices.

The PEZ is only one measure taken by the US and Iraqi authorities to secure the Kirkuk to Baiji pipelines. They have also replaced Sunni and Shia soldiers with more aggressive, trustworthy Kurds such as Private Mustafa, and removed the 3rd Strategic Infantry Battalion which was, say US army officers, “deeply corrupt”. Its locally recruited members were almost certainly working with the insurgents – telling them when the oil was flowing, helping them to steal it, even staging fake assaults on their own positions to conceal their duplicity.

The huge 46-inch wide pipeline that carries the crude 180 miles north from Baiji to the Turkish border is too long for a PEZ and a little less secure – 14 guards have been killed since September. But even there attacks have been greatly reduced, largely through coopting local tribes by giving their young men jobs in the Oil Police, the revamped, 31,000-strong mini-army that protects Iraq’s oil infrastructure.

The results of this improved security are startling. The pipeline to Turkey was operational just 17 days in the first seven months of last year, and every day but five in the last quarter. Two-thirds of the 48 million barrels of oil exported from Kirkuk last year were exported in those last three months alone. A second $100 million PEZ will be constructed this year to protect the 130-mile line from Baiji to Baghdad.

Kirkuk accounts for roughly a third of Iraq’s oil production. Fuelled by its recovery, Iraq is producing an average of 2.4 million barrels a day – just below its prewar level of 2.6 million – with the Oil Ministry confidently predicting an output of 3.5 million by next year. That would match the level Iraq last achieved in 1979, just before the Iran-Iraq War. “It’s an ambitious goal, but it’s possible,” said a US official closely involved with the industry.

Thanks to rising oil production, the International Monetary Fund believes that Iraq’s battered economy will grow 7 per cent this year. And with oil prices near record highs, the US Special Inspector for Iraq this week forecast a $15 billion windfall for a country whose $48 billion budget for 2008 was calculated when oil, which accounts for 90 per cent of its revenues, fetched a mere $55 a barrel.

US officials say the Iraqi Government now has far more money than it has the capacity to spend. In 2006, for example, the Oil Ministry spent just 3 per cent of the $3.5 billion it was allocated for oil reconstruction projects.

The tragedy is that the recovery has taken so long. At the time of the US invasion, Vice-President Dick Cheney and other senior US officials boldly predicted that production would exceed three million barrels a day within eight months, generating more than enough money to rebuild Iraq.

The Bush Administration also failed to foresee the virulence of the insurgency. The website Iraq Pipeline Watch records 466 attacks on oil infrastructure or employees since 2003, and that is probably a fraction of the real total. US officials reckon as many as half the industry’s most skilled workers fled Iraq, or were killed, as Iraq descended into mayhem. The insurgents have used the oil that was supposed to finance the country’s reconstruction to fund their efforts to destroy it.

Stats from the London Times on Iraq's oil :

113bn Barrels of proven oil reserves in Iraq, the third highest after Saudi Arabia and Iran. Experts say the real figure may be nearly double that as so little of the country has been properly explored

2.4m Barrels of oil a day now being produced, below the record of 3.5 million in 1979, the year before the Iran-Iraq war began, but nearly back to the 2.6 million before the US invasion of 2003

$39bn Amount earned by Iraq’s oil exports last year, up 31 per cent. The daily average exported was 1.6 million barrels, up 9 per cent

90% Oil accounts for 90 per cent of the country’s revenues

60% Despite its sea of oil, Iraq imports nearly 60 per cent of its petrol and other oil products because its refineries cannot produce enough

The Three Wars Of Iraq

US Loses Sight Of 'Enemy' As Confusion Reigns About Alliances And Tribal Loyalties

Patrick Cockburn provides yet another insightful, detailed portrait of Baghdad almost five years after the US occupation of Iraq began :

Iraq is less violent than a year ago, but the country is still the most dangerous in the world. So it was no surprise to anyone in Baghdad, where people have long dreaded a renewal of al-Qa'ida's savage bombing campaign directed at Shia civilians, that there should be suicide attacks on two bird markets, killing 92 people on Friday.

For all President George Bush's claims of progress, cited in his final State of the Union address last week, Baghdad looks like a city out of the Middle Ages, divided into hostile townships. Districts have been turned into fortresses, encircled by walls made out of concrete slabs. Police and soldiers check all identities at the entrances and exits.

"People say things are better than they were," says Zainab Jafar, a well-educated Shia woman, "but what they mean is that they are better than the bloodbath of 2006. The situation is still terrible."

There are checkpoints everywhere. I counted 27 on the road from central Baghdad to Fallujah, 30 miles west of the capital. These guard posts provide protection, but they are also a threat because there are so many of them that it is easy for kidnappers, criminals and militiamen to set up their own checkpoints in order to select likely victims.

Meanwhile, US troops are trying to cope with widespread confusion about which Iraqis, and Iraqi police and army personnel, are their allies and which are their enemies. Some of this confusion is due to American recruitment of Sunni insurgents to their side, where they are paid, armed and trained to not only patrol their neighbourhoods and keep track of who comes and goes, but also how to fight Al Qaeda. Many former Sunni insurgents have allied themselves to the Americans because of the brutality and horror of Al Qaeda attacks on civilians, and growing fears that the Shiites have taken almost total control of the Iraq government and parliament.

From the Washington Post :

Three separate but related wars are being waged in this country now, and the third one, against Shiite extremists, is the most worrisome, according to the commander and senior staff of the U.S. Army division patrolling Baghdad.

The first, against al-Qaeda in Iraq, a Sunni group that U.S. officials believe is foreign-led, is going well despite occasional spikes in violence, such as Friday's dual bombings of Baghdad marketplaces. Al-Qaeda in Iraq is "frustrated" but "not defeated," Maj. Gen. Jeffrey W. Hammond, commander of the 4th Infantry Division, said in an interview last week.

The second fight, against the domestic Sunni insurgency, has become dormant in many places in the past year, as about 80,000 armed men, many of them former insurgents, switched sides and came onto the U.S. payroll with groups that officers here call "Concerned Local Citizens."

The third conflict, and perhaps the most vexing for U.S. commanders, is with Shiite extremist militias. More than two-thirds of U.S. casualties are caused by roadside bombs, particularly by high-tech anti-armor devices, planted by those groups.

Overall, senior U.S. officers find the state of the wars unexpectedly good, and are allowing themselves to begin speaking optimistically. "A year ago, I didn't see any way it was going to work out to our advantage," said Col. James Rainey, the 4th Infantry Division's director of operations, who is on his third tour of duty in Iraq. The difference now, he said, is "remarkable."

A major reason for the change, he said, is the increased effectiveness of the Iraqi army and police, to which the U.S. military refers collectively as Iraqi security forces, or ISF. "The ISF, when I was over here last time, couldn't do anything," Rainey said. Now, he continued, they frequently show tactical competence. That's crucial for future security here, because as U.S. troop numbers drop by about 25,000 between now and midsummer, to roughly 130,000, Iraqi forces will be handed a greater share of the burden.

At the same time, the officers are conscious that the fighting here has morphed several times over the past five years, as adversaries have adjusted to changes in U.S. tactics. Some officers worry that various factions, taken aback by how effective U.S. operations proved in the past year after several years of frequent counterproductive effect, are lying low as they try to devise new ways to attack.

For example, as measures such as checkpoints outside marketplaces have made car bombs less effective in inflicting mass casualties, said Maj. Jeff Jones, the division's deputy chief of intelligence, al-Qaeda in Iraq has begun to turn more to suicide bombers.

Lately, Jones said, al-Qaeda in Iraq has begun to attack local armed groups who are cooperating with U.S. forces. The majority of those groups are Sunni, and the attacks now mean that al-Qaeda in Iraq is "the single largest killer of Sunnis in Iraq," he said.

The most challenging part of the war in early 2008 appears to be roadside bombs planted by Shiite extremist groups.

The U.S. military calls those organizations "special groups," to distinguish them from other Islamic fighters under the sway of the radical Shiite cleric Moqtada al-Sadr. U.S. officials hope Sadr will give up violence as a political tool altogether, rather than declare a six-month cease-fire, as he did in August.

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Afghanistan : Taliban Turn Back From Pakistan To Fight NATO

Preparing For New Spring Offensive

According to this story from the Asia Times, the Taliban are preparing for their spring offensive against NATO troops in Afghanistan, following months of heavy conflict against Pakistan security forces the tribal regions of Pakistan :

...Taliban leader Mullah Omar has put his foot down and reset the goals for the Taliban: their primary task is the struggle in Afghanistan, not against the Pakistan state.

Mullah Omar has sacked his own appointed leader of the Pakistani Taliban, Baitullah Mehsud, the main architect of the fight against Pakistani security forces, and urged all Taliba commanders to turn their venom against North Atlantic Treaty Organization (NATO) forces, highly placed contacts in the Taliban told Asia Times Online.

This major development occurred at a time when Pakistan was reaching out with an olive branch to the Pakistani Taliban. Main commanders, including Hafiz Gul Bahadur and the main Afghan Taliban based in Pakistan, Sirajuddin Haqqani, signed peace agreements. But al-Qaeda elements, including Tahir Yuldashev, chief of the Islamic Movement of Uzbekistan, undermined this initiative.

"We refused any peace agreement with the Pakistani security forces and urged the mujahideen fight for complete victory," Yuldashev said in a jihadi video message seen by Asia Times Online. Yuldashev's closest aide and disciple, Mehsud, last week carried out an attack on a Pakistani security post and then seized two forts in the South Waziristan tribal area.

As a result, Pakistan bombed South Waziristan and sent in heavy artillery and tanks for a major operation against Mehsud. Other important commanders are now in North Waziristan and they support the peace agreements with the Pakistani security forces.

Pakistan's strategic quarters maintain the planned operation in South Waziristan is aimed particularly at eliminating Mehsud.

According to Taliban quarters in Afghanistan that Asia Times Online spoke to recently, the Taliban have well-established pockets around Logar, Wardak and Ghazni, which are all gateways to the capital Kabul.

Many important districts in the southwestern provinces, including Zabul, Helmand, Urzgan and Kandahar, are also under the control of the Taliban. Similarly, districts in the northwestern, including Nimroz, Farah and Ghor, have fallen to the Taliban.

Certainly, the Taliban will be keen to advance from these positions, but they will also concentrate on destroying NATO's supply lines from Pakistan into Afghanistan. The Taliban launched their first attack in Pakistan's southwestern Balochistan province on Monday, destroying a convoy of oil tankers destined for NATO's Kandahar air field.

"If NATO's supply lines are shut down from Pakistan, NATO will sweat in Afghanistan," a member of a leading humanitarian organization in Kabul told Asia Times Online on condition of anonymity. "The only substitute would be air operations, but then NATO costs would sky-rocket."

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