Iranian President Mahmoud Ahmadinejad said on Sunday that OPEC's member countries have expressed interest in converting their cash reserves into a currency other than the depreciating US dollar, which he called a "worthless piece of paper."
His comments at the end of a rare OPEC summit exposed fissures within the 13-member oil cartel -- especially after US ally Saudi Arabia was reluctant to mention concerns about the falling dollar in the summit's final declaration.
The hardline Iranian leader's comments also highlighted the growing challenge that Saudi Arabia, the world's largest oil producer, faces from Iran and its ally Venezuela within the organization.
"They get our oil and give us a worthless piece of paper," Ahmadinejad told reporters after the close of the summit in the Saudi capital. He blamed US President George W. Bush's policies for the decline of the dollar and its negative effect on other countries.
"All the participating leaders showed an interest in changing their hard currency reserves to a credible hard currency," Ahmadinejad said. "Some said producing countries should designate a single hard currency aside from the US dollar ... to form the basis of our oil trade."
Venezuelan President Hugo Chavez echoed this sentiment on Sunday on the sidelines of the summit.
"The empire of the dollar has to end," Chavez said.
"Don't you see how the dollar has been in free-fall without a parachute?" he said, calling the euro a better option.
Saudi Arabia's King Abdullah had tried to direct the focus of the summit toward studying the effect of the oil industry on the environment, but he continuously faced challenges from Ahmadinejad and Chavez.
Iran and Venezuela have proposed trading oil in a basket of currencies to replace the historic link to the dollar, but they had not been able to generate support from enough fellow OPEC members -- many of whom are staunch US allies.
Yesterday the US dollar continued to fall against the yen after a group of six Arab nations said they would consider changing their fixed exchange rates to the US currency.
The six member countries of the Gulf Cooperation Council, which includes Saudi Arabia and the United Arab Emirates, will discuss a proposal next month to revalue their currencies, Secretary General Abdul Rahman al-Attiyah said on Sunday.
The dollar declined against eight of the 16 most-active currencies on speculation a US government report today would show housing starts fell to a 14-year low.
"The U.S. dollar is weaker across the board on the talk of a move away from the dollar peg," said Sue Trinh, a senior currency strategist in Sydney with RBC Capital Markets, the second-most accurate forecaster in the second quarter in Bloomberg news surveys. "The bearish dollar sentiment will continue with the housing data."
The dollar fell to ¥110.47 early yesterday in London from ¥111.09 late in New York on Friday. The US currency was at US$1.4666 per euro from US$1.4662 late last week. The euro traded at ¥162.04 from ¥162.86. The dollar may find support, an area where buy orders are clustered, at US$1.4685 per euro, Trinh said.
The Gulf oil-producing nations are under pressure to scrap the pegs after the dollar weakened to a record low against an index of six major currencies.
The difference between the price of the Saudi Arabian riyal and the cost of buying it in a year using forward contracts has widened 10-fold since last month, closing at 3.68 riyal on Friday. The riyal spot rate was quoted at 3.7235 by BNP Paribas Bahrain yesterday, down from a close of 3.7295 on Friday.
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