New Delhi has done well to send foreign secretary S.S. Menon to Teheran to mend fences following sharp deterioration of ties as a result of India'svote against with the Islamic Republic at the International Atomic Energy Agency. With growing turmoil in the American economy following mounting foreign debts to the tune of $ five trillion and the inability to afford a new war in West Asia, the White House has produced a new intelligence report ?revealing? that Iran closed its nuclear weapons programme as far back as 2003!
The implications are ominous. One, it is inconceivable this report would not have been furnished to the White House in 2003 itself by the combined intelligence services. Hence, President George Bush'swar-mongering over the past few years that Iran was engaged in uranium enrichment for weapons grade uranium, was pure lies with a view to unilateral military action as in Iraq. Two, the strategy of a new war is now felt to be unviable in view of the increasing reluctance of American citizens to sacrifice their kith and kin in mercenary wars to batten the profits of the oil corporates. This is a serious indictment of American diplomacy and the credibility of its polity, which is unable to distinguish between national interests and corporate interests.
Iranian President Mahmoud Ahmadinejad showed great shrewdness and courage in withstanding American pressure and refusing to trade oil in the dollar. Oil minister G. Nozari justified the move as oil-exporting countries the world over are losing money as the dollar is falling in value. Others say the dollar as international trade standard has hitherto enabled the US to exert pressure on individual nations, and hence this is a necessary political corrective.
Indeed, this is why Iranian President Ahmadinejad and Venezuelan President Hugo Chavez are advocating a more reliable currency for trade in crude oil. So far, the pro-American OPEC nations have not openly supported this move, and Saudi Arabia last month blocked the Iran and Venezuela proposal to discuss refusal to sell crude for US dollars. Yet it is learnt that six Persian Gulf countries plan to reconsider the proposal of using other currencies in crude trade deals.
On its part, the Russian giant Gazprom plans potential sales of crude and natural gas for Russian roubles instead of dollars or euros. Russian oil companies claim they loose in long-term contracts as the dollar loses 15 per cent to 20 per cent value at its current rate of depreciation. From January 2007, the dollar lost nearly 10 per cent of its value, while the euro gained 12.5 per cent over the dollar.
The sinking dollar is an undeniable fact, as is the rising euro; and this has triggered off an international trend of diversification of currency transactions. Already the currency units of different nations are joining the pool of major reserve currencies: Canadian dollar, Japanese yen, and even pound sterling are becoming alternate currencies. The Council for Cooperation of the Persian Gulf countries that includes major Gulf oil exporters plan to create a ?Gulf dinar?, a single regional currency, over the next three years, with as high a value as that of the dollar and the euro.
Gulf financiers report that at least three Arab oil producing nations are about to refuse to tie their currencies with the weakening dollar. The United Arab Emirates may be one of them. These nations are likely to change the currency exchange rates even if the Council for the Cooperation of the Persian Gulf Arab countries fails to decide in favour of this issue. The Council members include the UAE, Saudi Arabia, Bahrain, Kuwait, Qatar and the Sultanate Oman.
China has taken a lead in dumping the dollar from its coffers. At present, the dollar share of Chinese hard currency reserves is $800 bln, mainly in the form of government obligations of the US Department of Treasury. By the end of 2007, China will own $ one trln worth of US debt obligations. China intends to increase its reserves of currency and securities of the European Union and neighbour states by reducing dollar component of hard currency reserves by at least 15 per cent. The dollar is expected to continue to fall in 2008 on account of growing US-China trade deficit, which is growing by $ five bln per week. The Chinese yuan has now become 9 per cent stronger in relation to the dollar.
A further change is expected in the oil market with seller countries attempting to reverse the situation in which fuel prices are fixed by a pool of buyer-countries. The evident weakening of the dollar and the growing hydrocarbon prices is expected to toughen attitudes of oil-producing countries on the lines of the ?gas OPEC? set up for natural gas in Doha in March 2007.
India needs to watch emerging international economic trends with care. The emerging international economic order is likely to favour Sovereign Resources of nations, rather than subordinate national economies to private corporate interests. As of now, however, the entire weight of the Indian political, economic and intellectual elite which has based its progeny in either the United States or Britain, and believes the future lies in the flight of capital to western shores, is in danger of being dragged down into a Euro-American meltdown. Before economic shocks or correctives come into play, our neo-liberal policies may have caused untold damage in terms of surrender of sovereignty, as almost all our mainstream political parties desire proximity with setting suns.