Opec summit ends in division as members debate the weak dollar - STWR

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Opec summit ends in division as members debate the weak dollar

19th November 07 - Robin Pagnamenta, The Times

The President of Iran claimed yesterday that the Organisation of Petroleum Exporting Countries (Opec) had considered pricing oil in currencies other than the dollar.

President Mahmoud Ahmadinejad said that the influential 13-member cartel of oil-producing countries had also discussed converting their cash reserves away from the sliding US dollar.

The President’s comments came at the close of the third summit of Opec in Riyadh. “They [the US] get our oil and give us a worthless piece of paper,” the Iranian leader told journalists at the end of the meeting.

“All participating leaders showed an interest in changing their hard currency reserves to a credible hard currency,” he added. “Some said producing countries should designate a single hard currency aside from the US dollar . . . to form the basis of our oil trade.” However, Saudi Arabia, the US ally, which is also Opec’s biggest producer country, had earlier halted a proposal backed by Iran and Venezuela to flag concerns about the falling dollar in the summit’s final declaration.

The faultlines within Opec, which supplies 40 per cent of the world’s oil, were all too apparent on Friday, when, during a closed-door session, officials were accidentally caught debating the dollar issue on camera – a blunder that seemed to give journalists watching the broadcast in an adjoining room a remarkable insight into Opec’s inner workings.

During the 30-minute broadcast, Saudi delegates refused to bow to the demands, which they said could lead to a “collapse” in the dollar. Organisers rushed in to unplug the broadcast, although there was some speculation later that it could have been stage-managed.

Oil is priced in the US currency on the global market and the currency’s steep fall has prompted concerns among oil exporters because it has undermined the value of both their earnings and of their foreign reserves.

Venezuela’s President Hugo Chávez had sought to use the summit to politicise the cartel, calling for the group to be “an Opec for geopolitics, an Opec for revolution”. He added that Opec “must stand up and act as a vanguard against poverty in the world”.

A communiqué issued by Opec yesterday contained no mention of Mr Chávez’s proposal to start selling oil at heavily discounted rates to poorer countries. Instead, the declaration contained only a vague call for more action on “eradicating poverty”.

There was no direct reference to the proposal to start pricing oil in currencies other than the dollar, although there was a suggestion that Opec would examine the possibility. It said that members would “study ways and means to enhance financial cooperation among member countries, including proposals by some of the heads of state”.

The final communiqué contained a more concrete expression of concern about global climate change.

Three Opec members – Kuwait, the United Arab Emirates and Qatar – said they would pledge $150 million (£73 million) towards research into climate change and the environment, while a fourth, Saudi Arabia, pledged $300 million.

In his speech, Mr Chávez also issued a blunt warning to America that oil prices could double to $200 if the US attacked Iran, the second largest Opec producer, or launched action against Venezuela.

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