Late last year, Iran announced that it had stopped carrying out its oil transactions in US dollars.

"At the moment, selling oil in US dollars has been completely halted, in line with the policy of selling crude in non-dollar currencies, " Nozari was quoted as saying in December

http://news.theage.com.au/iran-says-oil-price-too-low-at-115-us-dollars-a-barrel/20080419-278q.html

>John,
>
>That article describes a mechanism, I've learned to exist in a couple of other financial articles. If you search on google, you'll easily find them. It more or less goes like this:
>
>Oil is traded almost exclusively in USD. If the american government prints extra dollars you'd think that would cause inflation right?? That would be the case for each and every currency, except the dollar.
>
>The dollar is currently what they call the worlds leading reserve currency. Countries hold huge amounts of dollars to purchase forreign goods like oil. If the american government prints dollars, the dollar devaluates... However because of the devaluation, the countries purchasing oil (and other resources) need to hold more and more USD to buy the same quantity of oil, which causes the dollar not to devaluate as much as it would in any other country. So the more dollars are printed by the US government, the more dollars the forreign countries have to hold to purchase external goods.
>
>In short, the US is taxing the world throught the devaluation of the dollar.
>
>BTW, Mugabe in zimbabwe does exactly the same, but since nobody needs their currency it does not have quite the same effect :)
>
>>Walter, that article (assuming we're talking about the same article) is built on the belief that an oil-backed US$ is a tax on the world. How? There is no need to accumulate US$ reserves to purchase oil, you can purchase $ as required or use a Eurodollar mechanism. Nor is there any requirement for OPEC members to retain their payments in US$; they could convert the $ straight back to Euros or buy gold or otherwise convert the $ as they see fit. So where's the benefit?
>>
>>Actually, trading oil in multiple currencies probably creates arbitrage opportunities for Wall Street bankers who will gleefully tax wherever they can. Presumably you can report the leveling effect on prices caused by conversion from multiple currencies to the Euro?
>
>The problem is that when oil producing countries are going to allow payments in other currency, the forreign countries don't need a huge amount of ever devaluating dollars in reserve. They will like flush the market with dollars, which will cause a free fall in the valuation of the dollar.
>
>At some point it will stablelize again because the american export will be booming (everything will be darn cheap for forreign countries). But the US will have lost its ruling position in the world as it will not be able to Tax the world through the devaluation of the dollar. That role will be either for the Yen or Euro or maybe something else.