Based on a September 18 Times (UK) report regarding the meeting of Middle Eastern finance ministers, the question was asked about the veracity of a plan for a single currency for the Middle East based on oil.
The answer is both true and false and maybe.
Yes, the immediate goal of the meeting last week was to establish a single currency for the Mideast. In that sense, the new currency would be similar to the euro, where various countries have joined under a common umbrella.
No, there were no (public or published) talks of an oil-based currency, which would effectively replace the U.S. dollar as the principal currency of oil trade.
Maybe? The idea of replacing the US dollar with an oil-based currency is not new. The late Saddam Hussein, various Iranian leaders and others have often broached the idea.
As early as 1987, financier George Soros in his book The Alchemy of Finance outlined just such a plan.
A single, oil-based currency would require the agreement of the various Middle Eastern heads of state as well as further agreement by OPEC.
Recent U.S. financial disasters do not rule out such an eventuality. However, the cumbersome and institutional process required should not add fuel to existing speculation.
The single currency issue addressed (without the use of oil) is planned for slightly more than two years hence. However, instability in world financial markets may prompt more rapid agreement to reach the goal.
The Arab oil ministers meeting agreed in principle to establish a single currency. While there was no mention of oil or another commodity backing the potential currency, there is some speculation that the euro, rather than the U.S. dollar, could be designated for oil trades.
Stephan is a former department chair for economics and taught at various colleges and universities at both graduate and undergraduate levels. If you would like Stephan to answer your economics-related questions, read his post “Got an Economics Question?” and submit your questions in the comments area there.