A Web of oil intrigue / Rumored Iran plan has blogs breathless

Iran has a plan to destroy America, and it has nothing to do with the bomb.

Instead, the Islamic republic will use oil and euros to slay the Great Satan, breathless accounts on the Internet warn. The attack will proceed as follows:

Iran will open an oil trading exchange that operates in euros rather than dollars -- until now, the world's sole currency for buying crude. Other countries, whose central banks were holding onto dollars largely to buy oil, will dump their dollars en masse.

The greenback's value will collapse. The American economy will tank. The U.S.-dominated New World Order will disappear in a flurry of currency trades.

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This tall tale has circulated on the Web for months. Bloggers type apocalyptic postings about it. People who identify themselves as economists engage in detailed, sometimes arcane debates on it. And like any good online story, the saga of the Iranian oil exchange, or bourse, has taken on a viral life of its own.

It has veered deep into the Web's netherworld of conspiracy theorists. America invaded Iraq, for example, because Saddam Hussein started trading oil in euros. We'll do the same thing to Iran, for the same reason. The dispute over Tehran's nuclear program? A smokescreen to cover America's true intent -- stopping the bourse.

The story contains several grains of truth. Iran does, in fact, want to create an oil exchange.

The petroleum-rich republic has pursued the idea, off and on, for years. The bourse would rival the New York Mercantile Exchange and International Petroleum Exchange in London -- the twin centers of the oil-trading world.

But it's far from clear that the effort will take off. And even if it does, most economists consider it little threat to the United States.

First of all, Iran would need the cooperation of its oil-producing neighbors to make such an exchange work, and relations with many of them are strained.

"I don't believe the Iranians would dream of going ahead without Saudi agreement," said Chris Cook, the British consultant and former director of the International Petroleum Exchange who first suggested to the Iranians that they create the bourse. The exchange, he said, would likely start with selling petroleum chemicals and expand into crude later -- if the gulf's other oil producers agreed.

"The whole idea would be, in the medium or long term, to get into crude oil," he said. "But you understand how sensitive it is."

In addition, luring business from New York and London to the theocratic republic of Iran might prove difficult. And Iran lacks many of the elements needed to create a successful exchange, including close proximity to international financial institutions, traders, economists and computer experts.

"You can't set up a petroleum exchange in Omaha," said John Taylor, a senior fellow at Stanford University's Hoover Institution and a former U.S. Treasury undersecretary for international affairs. Referring to Iran, he added, "It's doable. In this particular case, it seems like a bit of a stretch."

Should the bourse open, most economists regard the idea that it could kill the dollar as preposterous. Currencies can easily be swapped on the financial markets, meaning one doesn't need a stockpile of greenbacks to buy oil, they say. And countries hold onto, or sell, dollars for many other reasons than to trade oil.

"There's a difference between the currency on the invoice and the currency that people actually want to hold," said Richard Lyons, executive associate dean of UC Berkeley's Haas School of Business.

Skeptics see in the oil bourse tale a prime example of an Internet discussion run amok. In the Web's planetwide echo chamber, a story that normally would interest a limited pool of financiers and oil industry players has mutated into Armageddon. Even its most speculative elements have come to be treated as fact, at least by some.

"It's got 20,000 hits on Google -- that means there must be something there," said Geoffrey Bowker, director of Santa Clara University's Center for Science, Technology and Society. "It's like a playground situation, in the old days, when a rumor would start around a school. In an hour, it's reality."

A January article, written by Krassimir Petrov and posted on several Web sites, provides the most complete version of the bourse story.

Petrov, who teaches economics and finance at the American University in Bulgaria, argues that the value of the U.S. dollar is backed by oil, in much the same way that it was once backed by gold. The dollar has become the world's dominant currency because all nations need it to buy oil. If oil starts trading in other currencies, that dominance will end, taking much of America's international power with it.

"The Iranian government has finally developed the ultimate 'nuclear' weapon that can swiftly destroy the financial system underpinning the American Empire," he writes.

In response, Petrov argues, the United States has a limited number of options. These include hacking into and sabotaging the exchange, blowing it up, negotiating with the Iranians, declaring all-out war against them or organizing a coup d'etat.

"Whatever the strategic choice, from a purely economic point of view, should the Iranian Oil Bourse gain momentum, it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar," he writes.

To say the least, this is not a universal view.

Many people question the eagerness of international oil traders, now comfortably ensconced in London and New York, to decamp to Iran. Those traders and their companies might be hesitant to set up shop in a country known for its opaque government, strict application of Muslim law and hostility to the West.

Although Tehran has an active stock market, it is no hub of international finance. Neither is the bourse's proposed location, a small Persian Gulf island called Kish.

In addition, the bourse could face serious competition close to home. Nymex is part of a joint venture planning to open an oil exchange in Dubai. Growing at breakneck speed, Dubai has worked for years to turn itself into a regional center for trade and finance, since its oil wealth is relatively modest. The Dubai Mercantile Exchange, scheduled to open in the fourth quarter of this year, will trade in dollars.

A spokesman for the Iranian mission to the United Nations said he had no information on the bourse.