Truth sucks Wally? Want to know the real reason for the Iraq invasion?
 
 
Iraq: Baghdad Moves To Euro
 
By Charles  Recknagel
 
                    November 01, 2000 
 
Baghdad's switch from the dollar to the euro for oil trading is  intended to rebuke Washington's hard-line on sanctions and to  encourage Europeans to challenge it. But the political message  will cost Iraq millions in lost revenue. RFE/RL correspondent  Charles Recknagel looks at what Baghdad will gain and lose,  and the impact of the decision to go with the European currency. 
 
Prague, 1 November 2000 (RFE/RL) -- Iraq is going ahead with its  plans to stop using the U.S. dollar in its oil business in spite of  warnings the move makes no financial sense.
 
Baghdad this week insisted on and received UN approval to sell  oil through the oil-for-food program for euros only after 6  November. Iraq had threatened to suspend all oil exports --  about 5 percent of the world's total -- if the body turned down  the request.
 
The move comes despite repeated cautions that Baghdad's  departure from the oil industry standard of the dollar will cost the  country millions in currency conversion fees. UN officials have  said Iraq will have to reduce the price of its crude oil by about 10 cents a barrel in order to compensate buyers for the additional  costs.
 
And the UN has said moving to the euro will mean Iraq earns  less interest on its oil revenues, which are held in a UN- monitored escrow account in New York.
 
The UN also has warned that Iraq's switch will create  cumbersome new administrative processes because Baghdad  says it wants to keep its existing deposits in dollars for now. That  means the oil-for-food program will have to maintain two  accounts -- one in dollars and one in euros -- for the time being.
 
With Iraq now set to begin oil transactions in euros as early as  next week, President Saddam Hussein has clearly made up his  mind that banning the dollar is worth flying in the face of financial  logic. The euro reached record lows last week as it traded at 82 cents to the dollar, down 30 percent since its launch in January last  year. Currency traders say they don't expect a rebound soon.
 
The calculation has set analysts scrambling to find where  Baghdad sees the payoff.
 
Pierre Shammas, a Middle East expert at the Cyprus-based  Arab Press Service, calls the move an emotional one impossible  to understand on economic grounds. 
 
"As long as the euro goes down, you don't switch to a currency  that goes down in value while the dollar goes up in value.  Saddam has not spelled out his plan in detail. These are  politicians talking. They are not experts, they are not central  bankers, they are not even oil men."
 
But he says Saddam may feel the strategy is worth the price  because it allows him to draw a clear line between what Iraq  sees as two camps in world opinion regarding the UN  sanctions. 
 
One camp, led by the U.S. and Britain -- a country also outside  the euro zone -- wants to maintain strict trade sanctions on Iraq  until Baghdad proves it has no more weapons of mass  destruction. 
 
The other camp, led by euro-user France -- along with Russia  and China -- favors easing the sanctions on humanitarian  grounds while still pursuing disarmament. 
 
Baghdad appears to be trying now to deepen that divide by  rebuffing Washington as it takes a small part of the world's oil  trade off the dollar. And it appears to want to encourage ties with  states like France and Italy, which it sees as sympathetic, by  embracing the euro. 
 
But analysts say the political message Baghdad is sending is  largely symbolic because the currency switch offers no gains or  losses for any of the states involved except Iraq.
 
That is because the currency switch merely formalizes what is  already a standard Iraqi practice of purchasing goods under the  oil-for-food program exclusively from nations it views as potential  allies. Baghdad currently buys a significant share of its  humanitarian supplies from the euro zone, as well as from  several Arab countries and China.
 
Shammas says Saddam may also feel that rejecting the dollar  is worth paying a financial price because he calculates the price  as far lower than the UN does. 
 
Iraq has long complained that the oil-for-food program allows it  to use only about a half of the money it earns from oil sales to  purchase humanitarian goods. The rest of the money is used to  pay for the UN's administrative expenses connected with the  program and for war reparations in the wake of Baghdad's 1990  invasion of the emirate and the ensuing Gulf War.
 
At the same time, Baghdad has said the UN sanctions  committee routinely holds up contract approvals for purchasing  goods, further limiting its access to the oil earnings. Iraq says  the delays are a deliberate policy by Washington and London to  keep sanctions tight. The U.S. and Britain say a long contract-review process is necessary to assure Iraq only acquires  humanitarian products.
 
But if Saddam sees a low price tag to playing with the oil-for-food program, Baghdad is still limiting its losses by saying it  does not want any of the dollars currently in its escrow account to  be converted. The account, kept at the New York branch of the  French bank BNP Paribas, now totals some $10 billion. 
 
Analysts say Baghdad's decision not to convert that large sum  means Iraq's switching currencies will have no effect on the  embattled euro's fortunes. The untouched $10 billion are  equivalent to several European bank interventions to prop up the  weak currency and such a large conversion might have helped  bolster investor confidence in it.
 
Shammas says that in deciding to move to the euro, Iraq is  dusting off a strategy which another state hit by U.S. sanctions --  Iran -- discussed as recently as last year. But talk of a conversion  quickly ended in Tehran as the euro has plunged over recent  months. Shammas:
 
"In Iran, a presidential adviser -- now he is  a presidential  adviser -- proposed a switch to the euro last year in a newspaper  editorial. But that was before the euro weakened. He said 'since  our European trading allies have the balance tilted in their favor  in our balance of trade, since the bulk of our investment is  coming from the euro zone, and since it's likely to be a very  stable currency, stronger than the dollar, why don't we switch to  the euro?' But, of course, the reality proved different."
 
Shammas says the idea of switching to the euro has appeal to  Iran and Iraq because they feel if several major oil producers did  it they could create a stampede from the dollar which would  weaken Washington. He says another possible candidate for a  changeover if the euro were strong might be Venezuela, whose  relations with Washington have turned rocky as President Hugo  Chavez has stressed ties with Cuba's Fidel Castro.
 
But so far, no big stampede to the euro is on the horizon --  except in Baghdad. And that leaves Saddam once again charting  a highly individual course that guarantees he keeps other  capitals guessing what his next move will be.
 
What I oultlined above....
 
The demise of the dollar - Business News - Business - The Independent
 
And there is the Evil iranians.. 
 
Iran stops selling oil in U.S. dollars -report | Reuters
 
Still think it's a pile of crap Wally?