Iran, Petro-Dollars and the Smokescreen of Nuclear Weapons

May 24, 2006 10:58 |by Herman Damveld

In the British and American media there is heated speculation about a possible attack on Iran. Just as three years ago the western world was put under severe pressure over the (never-to-be-found) chemical weapons of Saddam Hussein, now it appears that the Ayatollahs, under the guise of nuclear power stations, are making nuclear bombs. Or is it, once again, simply about oil? Herman Damveld offers an analysis of a global poker game with the highest stakes imaginable.

Under pressure from the United States the OPEC countries decided in 1971 to accept only dollars in payment for their oil. Ever since then there has been enormous demand for the US currency, for which the Americans have had to do little in return, 85% of trade in oil taking place outside the United States. This demand ensures a strong rate of exchange for the dollar and encourages the OPEC countries to spend their oil revenues in the States.

In 1979, however, following the occupation of the American Embassy in Tehran, things began to go awry. The US decided to take no more Iranian oil and forbade American firms from investing in the country, in response to which the Iranian government came up with a retaliatory measure. Why should they only accept payment in dollars for their oil? Iran sells a third of its oil to western Europe, while the rest goes in large part to India and China. Since the spring of 2003, then, Iran has also accepted euros, a decision which without doubt brought advantages to EU member states.

Last year came the news that Iran intended to establish a new oil exchange. This exchange will shortly open for business. This means competition for the world's two largest oil exchanges, in New York and London, where transactions continue to be conducted exclusively in dollars.

When this exchange in Iran will actually get off the ground is not clear. What is certain is that the plans have provoked a predictable disquiet. If oil producers go over to the Iranian exchange they will also switch to the euro. And why shouldn't they? There is a great deal of sympathy for the move in the Arab world, and not a lot, after all, for the US.

Such a move would mean that the dollar would no longer be needed for the purchase of oil. The result? Dollars would flood into the currency markets, its exchange rate would plummet, and the American economy would find itself beset by problems.

Weeks after attack on Iraq, it was back to dollars

Iraq preceded Iran in going over to the euro, according to researcher Rudo de Ruijter. This was one of the reasons for the American attack on Iraq in 2003, he argues. At the beginning of 2000 Saddam requested permission from the UN to move the Iraqi account containing the proceeds of oil sales from dollars into euros. This was a turning point for the dollar's exchange rate. At the end of 2002 the dollar had lost 18% of its value against the euro. Three months later, on 20th March 2003, the US invaded Iraq. One of the first measures the occupying power took was to abandon the euro as a means of payment for oil. On 5th June 2003, to be precise, purchasers had once again to pay in dollars.

It is, then, also reasonable to ask whether the rumour that Iran is planning to become a nuclear-armed state is nothing more than a smokescreen to hide the real struggle - over oil and dollars. The majority of the Iranian nuclear installations were, it is worth noting, furnished by countries which now claim to be worried. In 1967 the US itself provided the University of Tehran with a small nuclear reactor for research work. The Shah was still in power and Iran was seen as an ally. Other countries have also signed contracts with Iran. China provided the Esfahan Nuclear Technology Centre with four mini-reactors for research work, principally for training personnel. In 1974 there followed the first orders for the delivery of nuclear power stations, intended for electricity generation. The German corporation Kraftwerk Union (since taken over by Siemens) signed a contract for the supply of two reactors to Busher on the Persian Gulf, building beginning the same year. Also in 1974 the French corporation Framatome signed a contract for the delivery of two nuclear power stations to be built in Karun, but because of the revolution in 1979 this contract was never fulfilled.

In 1987 Iraq bombed the Busher nuclear power stations, which were by then 80% complete. They were rebuilt, to which end a contract with Russia worth $800m was agreed. The intention is to have these power stations up and running in 2007.

IEA: Cheap energy makes increased Iranian oil exports possible

Why should Iran want nuclear power, when it has oil? According to the International Energy Agency (IEA) in Paris, electricity use is rising in Iran by 8% per year, and it is for this reason that new power stations are needed. Iran prefers these not to be oil-powered, because it wants to reserve as much of its oil as possible for export. Income from oil is badly needed to cover high subsidies on energy. The Iranian population pays only a third for electricity, gas and petrol as these cost to produce, to say nothing of their market value in the west. Without these subsidies the regime would have difficulty staying in power. 7% of the population have to survive on less than $2 a day. Cheap energy, the IEA assumes, would make possible the export of more oil and maintain stability.

For nuclear power stations you need uranium, and Iran does not want to be dependent on imports. It is for this reason that, in the town of Yazd, Iran last year opened a uranium mine. They will also need a factory for the processing of uranium ore. The next step is the production of low-enriched uranium to power the Busher stations. Iran has developed advanced centrifuges for just this task. In Natanz, 300 kms to the south of Tehran - several hundred such centrifuges have been built, raising the question as to whether Iran wants to make highly-enriched uranium for the production of nuclear weapons. Experts estimate, however, that it would take a probable five years before the factory is operating properly and Iran could make sufficient highly-enriched uranium to build a nuclear bomb. Western governments are claiming that it is already in a position to do so.

The International Atomic Energy Agency (IAEA) in Vienna wants to inspect the enrichment facility in question, in itself no bad idea. Yet the same IAEA will carry out no inspection of two newly-built enrichment facilities in the United States, because, it recently emerged "the IAEA budget won't permit it."

Remarkable too is the fact that in the mid-seventies the US offered a factory to Iran for precisely the purpose of enriching uranium, under the condition that nuclear power stations would be ordered from American suppliers. This concerned not only the enrichment of uranium but a reprocessing plant, by means of which plutonium can be extracted from spent fuel from nuclear power stations. Plutonium is one of the raw materials of nuclear weapons. If this deal had gone through, the Americans would have handed the means to make nuclear weapons to Iran on a plate.

Iran points to failure of nuclear powers to keep promise of disarmament

In the course of various recent meetings countries such as the US, Great Britain and France, as well as international organisations such as the IAEA, have cited the treaty intended to prevent the spread of nuclear weapons, the Non-Proliferation Treaty (NPT), which Iran has signed. The same argument has also often been presented by the UN Security Council, where it has invariably been parried with Article 4 of the NPT, which permits the enrichment of uranium, as well as nuclear energy, for peaceful purposes. "This has nothing to do with nuclear weapons and it's up to you to prove that it has," Iran is in effect saying. Somewhat embarrassing in this context is Article 6, to which Iran also draws attention, in which it is stated that ratifying countries must strive towards total nuclear disarmament. Because this much is certain: to this solemn promise none of the nuclear powers, the US included, has adhered.

Time for action? The slogan "Ban nuclear weapons" has also, twenty-five years on, lost none of its force. It must make a contribution, then, to preventing another nuclear armaments round, a round which appears to be getting under way.

Herman Damveld is an independent researcher and political commentator specialising in nuclear energy. This article was translated from the original Dutch by Steve McGiffen. It first appeared in De Tribune, the monthly magazine of the Socialist Party of the Netherlands, in April, 2006.

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