Stark divisions over falling dollar come to fore at Opec meeting

You wouldn't think that an Opec meeting could be as exciting to watch as a good rugby game, but this last meeting - with its heady intrigue, infighting over the US dollar and poorly executed misdirections - came pretty darned close.

Heads of Opec nations met for this rare summit, only the third ever, which was held in Riyadh at the beginning of the week and was the scene of a background scrum between US allies such as Saudi Arabia and those who are squabbling with President George Bush, namely Iran and Venezuela.

The best part, from a spectator's standpoint, was watching the Saudis try and keep the focus on the effect of the oil industry on the environment.

Since I've not seen much out of Saudi Arabia that would indicate any definite green leanings, it looked like a rather lame attempt to beat back the dollar controversy.

And while I'd be thrilled if more care was taken with the environment while extracting non-renewable resources - after all, I'm one of the few Alaskans who isn't keen to have the Arctic National Wildlife Refuge (ANWAR) opened for drilling - I can't help but see why Iranian President Mahmoud Ahmadinejad and Venezuelan President Hugo Chavez were so keen to get discussion about the declining dollar on the table.

After all, oil is priced in US dollars and the currency's rapid fall is a concern for oil producers because it contributes to rising crude prices and erodes the value of their dollar reserves.

The dollar has dropped 14 per cent against the euro in the last 12 months, and it has slid to its worst levels in thirty years against the British pound and the Australian and New Zealand dollars.

So it wasn't a surprise that countries having a difficult time with the US foreign policy have been playing up the downside of the dollar and the possible benefits of substituting a basket of currencies instead.

And it isn't as though Gulf states like Saudi Arabia aren't having their own problems with the greenback. There has been substantial discussion throughout the Gulf Cooperation Council states about dropping the dollar as their currencies' peg and going with either the euro or a basket as well.

But there is little question that the tug of war over what this meeting actually focused on is highlighting the fact that Opec is not a monolithic bloc and Saudi Arabia doesn't seem to have the control that it once enjoyed.

Although it won the battle to keep any mention of the dollar out of Sunday's closing statement, it definitely lost the war to keep the issue on the down-low.

Saudi foreign minister's warning that talking publicly about the dollar's drop could even push its value lower, a concern that was roundly ignored as Opec finance ministers were directed to study the issue, and the press had a feeding frenzy between statements from Ahmadinejad and Chavez.

"They get our oil and give us a worthless piece of paper," Ahmadinejad told reporters.

Chavez, who advocates switching to the euro, followed up with "Don't you see how the dollar has been in free-fall without a parachute?"

While the jury is still out on whether the results of this meeting will damage the greenback further, it has already had one effect - oil prices are up again, and analysts are pointing the finger at the statements made by the leaders of Iran and Venezuela.

The writer is a freelance journalist based in Alaska, USA.

Oil is priced in US dollars and the currency's rapid fall is a concern foroil producers because it contributesto rising crude prices and erodes the value of their dollar reserves.