Global Policy Forum

Iranian President Mahmoud Ahmadinejad said Sunday that OPEC's members have expressed interest in converting their cash reserves into a currency other than the depreciating U.S. dollar, which he called a "worthless piece of paper." His comments at the end of a rare summit of OPEC heads of state exposed fissures within the 13-member cartel - especially after U.S. 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 of Petroleum Exporting Countries. "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 of Riyadh. He blamed U.S. President George W. Bush's policies for the decline of the dollar and its negative effect on other countries.

Oil is priced in U.S. dollars on the world market, and the currency's depreciation has concerned oil producers because it has contributed to rising crude prices and has eroded the value of their dollar reserves. "All 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 U.S. dollar ... to form the basis of our oil trade."

Venezuelan President Hugo Chavez echoed this sentiment Sunday on the sidelines of the summit, saying "the empire of the dollar has to end." "Don't you see how the dollar has been in free-fall without a parachute?" Chavez 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, including Saudi Arabia, are staunch U.S. allies.

Both Iran and Venezuela have antagonistic relationships with the U.S., suggesting their proposals may have a political motivation as well. While Tehran has been in a standoff with Washington over its nuclear program, left-wing Chavez is a bitter antagonist of Bush. U.S. sanctions on Iran also have made it increasingly difficult for the country to do business in dollars. During Chavez's opening address to the summit on Saturday, the Venezuelan leader said OPEC should "assert itself as an active political agent." But Abdullah appeared to distance himself from Chavez's comments, saying OPEC always acted moderately and wisely.

A day earlier, Saudi Arabia opposed a move by Iran on Friday to have OPEC include concerns over the falling dollar included in the summit's closing statement after the weekend meeting. Saudi Arabia's foreign minister even warned that even talking publicly about the currency's decline could further hurt its value. But by Sunday, it appeared that Saudi Arabia had compromised. Though the final declaration delivered Sunday did not specifically mention concern over the weak dollar, the organization directed its finance ministers to study the issue.

OPEC will "study ways and means of enhancing financial cooperation among OPEC ... including proposals by some of the heads of state and governments in their statements to the summit," OPEC Secretary General Abdalla Salem el-Badri said, reading the statement. Iran's oil minister went a step further and said OPEC will form a committee to study the dollar's affect on oil prices and investigate the possibility of a currency basket. "We have agreed to set up a committee consisting of oil and finance ministers from OPEC countries to study the impact of the dollar on oil prices," Gholam Hussein Nozari told Dow Jones Newswires.

Iraqi Oil Minister Hussein al-Shahristani said the committee would "submit to OPEC its recommendation on a basket of currencies that OPEC members will deal with." He did not give a timeline for the recommendation. The meeting in Riyadh, with heads of states and delegates from 13 of the world's biggest oil-producing nations, was the third full OPEC summit since the organization was created in 1960. Abdullah tried to take the focus off the dollar debate, announcing the donation of $300 million to set up a program to study the effect of the oil industry on the environment. Kuwait, Qatar and the United Arab Emirates also agreed to donate $150 million each to the fund, Prince Saud Al-Faisal, Saudi Arabia's foreign minister, said Sunday.

The run-up to the meeting was dominated by speculation over whether OPEC would raise production following recent oil price increases that have approached $100. But cartel officials have resisted pressure to increase oil production and said they will hold off any decision until the group meets next month in Abu Dhabi, United Arab Emirates. They have also cast doubt on the effect any output hike would have on oil prices, saying the recent rise has been driven by the falling dollar and financial speculation by investment funds rather than any supply shortage. During his final remarks, el-Badri stressed he was committed to supply - but did not mention changing oil outputs. "We affirm our commitment ... to continue providing adequate, timely, efficient, economic and reliable petroleum supplies to the world market," he said.