Slowly but surely the war drums beat louder between the US and Iran.
Last weekend the celebrated American journalist Seymour Hersh claimed the US had drawn up plans to attack the Islamic Republic's with nuclear bunker-buster weapons. Iran has been refered to the UN Security Council for "defiance" of its international obligations not to develop nuclear weapons. Iranian president Mahmoud Ahmadinejad shows no sign of backing down in this stand-off, calling for the destruction of Israel and railing against "the Great Satan".
Conflict within the next few years seems a good possibility. If Iran is attacked, it will likely retaliate by funding Shia attacks throughout the Middle East and the world. But is this confrontation really about nuclear weapons? A number of economic experts believe the real motor behind this latest stand-off is not nuclear power but currency.
In June 2004 Iran announced plans to start an oil exchange to trade petroleum in euros. The exchange was due to open on March 20th on the island of Kish. However the date has been put back a few months, possibly even a year due to what the Ministry of Petroleum described as "technical glitches."
Nevertheless Iran is adamant that the plan will go ahead. Finance minister Davoud Danesh-Jafari said: "The issue has already been agreed upon and the oil ministry has been instructed to open the exchange. It will have a positive impact not only for Iran but for the whole Gulf region."
While this may seem like a dry news in brief for the business pages, such a move could have drastic consequences. Currently oil can only be traded in dollars in New York and London, meaning every oil-importing country in the world must keep a US currency reserve. This has allowed successive administrations in Washington to live beyond their means, running up huge deficits safe in the knowledge that foreign central banks will always go on buying greenbacks.
An exchange operating in euros could pose a grave threat to this cushy status quo. If the Iranian venture were to get off the ground it could prove disastrous to the US economy. If countries started dumping their dollars for euros, the US would be hit by a round of massive inflation.
International finance lecturer Krassimir Petrov has written about this subject. He said: “Should the Iranian oil exchange gain momentum it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar. The collapsing dollar will dramatically accelerate US inflation and push up interest rates. America will have to choose between deflation - which will induce a major depression - or the Weimar route of hyper-inflation."
Award-winning author William Clark agrees with this hypothesis. He said: "The Iranian exchange will introduce petro-dollar versus petro-euro currency hedging, and bring fundamentally new dynamics to the biggest market in the world -- global oil and gas trades. The US will no longer be able to effortlessly expand credit via US Treasury bills."
Indeed many countries are already running down their dollar reserves, fearing that America can not go on running such a huge debt forever. In 2005 rapidly-growing China announced that it was diversifying its reserve to take in the yen and the euro. Russia has also taken on more euros. And all this before the dollar's oil hegemony has been challenged.
But even among opponents of the current US administration, opinion is divided. In spite of having served in the Reagan administration, economist Paul Craig Roberts is a fierce critic of George W Bush. But he doesn't believe that the oil exchange is driving the stand-off with Iran. He said: "Oil is billed in dollars because the dollar is the world reserve currency. The dollar is not the reserve currency because oil is billed in dollars. When a trusted alternative appears, the dollar is likely to lose its reserve currency role. Iran, however, cannot cause that transition."
All very interesting, but even if the proposed Iranian exchange does damage the US economy, is this really what is causing the current tension between America and Iran? While this view is attractive to conspiracy theorists, it is overly simplistic. After all, relations between the two countries have been frosty for decades, long before any proposed oil exchange. The sources of tension are many - oil, Iraq, Israel, ideology, religion. If Iran announced today that it was scrapping plans for an oil exchange, would the stand-off with the US magically disappear? Of course not.
Still though, it is difficult to accept current US foreign policy at face value. For all the talk of Iran's "defiance" of international law, the country is yet to do anything wrong. Under the Non-Proliferation Treaty, Iran has a right to develop nuclear power for civilian purposes. It does not have the right to build nuclear weapons, but the US has not claimed that it is developing weapons - only that it might one day want to. So where is the defiance?
Given the gap between rhetoric and reality over the reasons for invading Iraq, it is prudent not to take explanations at face value.
Perhaps the oil exchange story is something in nothing, the result of fevered speculation by over-imaginative minds.
Interestingly, one of Iran's neighbours tried to switch from dollars to euros a few years ago. In September 2000 Iraq announced it would only accept euros for its oil. At first this was dismissed as a political stunt by Saddam. But as the euro appreciated against the dollar other oil-producing states took note.
Within two months of Saddam's downfall Iraqi oil was back on the market - in dollars."