The dollar, the Saudis and our friends at OPEC

Saudis seek to squelch dollar debate.

The accidental airing of a closed OPEC session Friday provided a surprise glimpse into a sensitive debate over the weakening U.S. dollar, with Saudi Arabia's foreign minister warning that even talking publicly about the currency's decline could further hurt its value.

The high-profile blunder ahead of a rare OPEC summit revealed the debate as Iran attempted to convince other member countries to express concern over dollar depreciation in the meeting's final declaration.

Oil is priced in dollars on the world market, and its depreciation has concerned oil producers because it has contributed to rising crude prices and has eroded the value of their dollar reserves. Cartel officials have resisted pressure to increase oil production to ease prices.

Who was behind the press to abandon the dollar?

Why, none other than Iran and Venezuela....of course, it was seconded by Nigeria.

“The reality is that we have this problem. I think we should draft the declaration to reflect our concerns,” Iranian Foreign Minister Manouchehr Mottaki said during a pre-summit meeting here with fellow ministers from the Organization of Petroleum Exporting Countries.

Their proposal:

Iran and Venezuela have proposed trading oil in a basket of currencies to replace the historic link to the dollar, but they have been unable to generate enough support from fellow OPEC members. Both nations have antagonistic relationships with the U.S., suggesting their proposals may have a political motivation as well.

Gee, ya think?

The Saudis came out swinging:

But Saud al-Faisal, foreign minister of U.S. ally Saudi Arabia, came out against the proposal with unusually frank comments.

“In my feeling, the mere mention that the OPEC countries are studying the issue of the dollar is itself going to have an impact that endangers the interests of the countries,” he said.

“We all should be worried if any action that we take will lead us to do some injury to our returns on our product,” said Mr. al-Faisal. “Nobody wants to have less money than more money. I am sure that we all agree on that.”

He went further today in his speech at the opening of the summit, adding:

" oil should not be allowed to become a tool of war.."

Now, about that inadvertent transmission of the session. Was it a real blunder or... just some OPEC political theatre? You gotta wonder.

The closed meeting was accidentally broadcast to journalists and after approximately 40 minutes, an official rushed into the press room and yanked the television cable out of the wall.

Update: Hugo Chavez speaks. 100USD is fair price for oil...

Venezuelan President Hugo Chavez said 100 usd is 'a fair price' for a barrel of oil, adding prices could rise as high as 200 usd if the US continues to threaten OPEC members such as Iran.

He said in his speech to the Third OPEC Summit in Riyadh that '100 usd is a just price, it is a fair price'.

'If the US is crazy enough to invade iran or to threaten Venezuela, then the price of oil will not be 100 usd, it will be 200 usd,' he said in his speech to dignatories at the inaugural session of the summit, attended by heads of all member states.

'(The opec states) need stability, we need to know the world powers do not expect us to guarantee regular supply and stqbility of prices without anything in return.'

Update: And look who else decided to join in the fun? Ahmadinejad joins leaders in Riyadh for OPEC Summit.

A smiling Ahmadinejad, who waved to television cameras as he walked from his plane, was greeted by Saudi Arabia's King Abdullah.

Leaders from Algeria, Angola, Indonesia, Iraq, Kuwait, Nigeria, Qatar and the United Arab Emirates have already arrived in Riyadh, the centre of which has been brought to a stand-still because of security arrangements.

Venezuelan President Hugo Chavez is expected later Saturday and he is to be joined by leftist Ecuadorean President Rafael Correa who will seal the return of the country to OPEC, bringing the cartel's membership to 13.

A representative of Libya is also expected but it is unknown if leader Moamer Kadhafi will attend.

Saturday and Sunday have been declared a public holiday for residents of the Saudi capital due to the tight security, with the main roads in the centre of the city closed to traffic.

OPEC now numbers 13 - hope it's unlucky for them.

Update: Well, we can all heave a deep sigh of relief now. Al Gore will be so pleased! OPEC plans to fight climate change. Their grand plan (and yes, there is something in it for them):

The group's Secretary General, Abdullah al-Badri, said on Thursday that carbon capture and storage (CCS) could be a solution and that OPEC would be willing to play its part to develop the technology.

CCS involves capturing greenhouse gases such as carbon dioxide (CO2) that are produced from burning fossil fuels, and storing them underground chiefly in depleted oil and gas fields.

CCS may be one of the best ways to cut emissions of man-made heat-trapping gases blamed for global warming, but development has been slowed by high costs and legal and safety risks, a United Nations study said.

The technology, most valued for capturing carbon from coal, may benefit oil producers economically, not least because the CO2 can be used to push yet more oil out of near-depleted wells.