ECONOMIC ANALYSIS: Scandiarabia

Norway’s role in the international oil market is about to increase. On Tuesday, Feb. 21, 2006, 192 additional exploration lease parcels of the Norwegian North Sea fields were offered for sale--the largest such sale in over 40 years.I’ve been thinking about “Scandiarabia.” Actually I’ve been thinking about Scandinavia, Hans Blix, the Jyllands-Posten cartoons, Norwegian oil, Sven Arild Andersen, and the US Dollar. While the images of snow-capped mountains, reindeer, and stable political democracies of the Scandinavian countries are a far cry from the images of arid geography, camels, and questionable stability of the oligarchies of the Arabian Peninsula; there are clear links.
You see, Scandinavian connections figure predominantly in the unfolding drama of the present war/instability in the Middle East—and have been so since before the US invasion of Iraq on March 19, 2003. The significance of these “Scandiarabia” factors cannot be downplayed. Two of these links (with ongoing ramifications) have already transpired. One more link between these regions is about to unfold in the coming weeks. It will hit with a bang, not a whimper.

The publication of twelve comic representations of the central figures of Islam by the Danish newspaper Jyllands-Posten, and their re-publication globally, has triggered worldwide riots and other acts of violence. Are they “directly” responsible for the past week’s bombings and intra-Islam conflicts in Iraq? It is impossible to say, but they certainly did not help the situation. Iraq is now on the brink of all-out civil war, and the “light at the end of the tunnel” is looking more and more like an on-coming train.

On Dec. 27th, 2005, it was published (in Norwegian) that Swen Arild Andersen, the Director of the Norwegian (energy) Bourse, would pursue an expanded role for their exchange in the trading of Norway’s oil, and that the transactions would be denominated in EUROs. Andersen stated: "We have performed market studies and both Russia, which is a large oil exporter, as well as the countries of the Middle East, have large parts of their economies in Euros. They would be able to view such a bourse as a contribution to balancing their economies in a better manner than at present, where their products are traded solely in dollars."

Accepting the EURO for oil sales was begun by Saddam Hussein of Iraq in December 2002. Chavez of Venezuela has since followed suit. Now it is Iran, Norway, and—Ka-Ching, Ka-Ching, Ka-Ching: OUCH!The Norwegian article was not translated and re-published in English until Feb 22, 2006, and this development comes on the back of the already much publicized Iranian Energy Bourse scheduled to commence trading oil, gas, and petro-chemical (in EUROs) on March 20, 2006. The largest mandated use of the US dollar (up until now) has been for the purchase of oil. Accepting the EURO for oil sales was begun by Saddam Hussein of Iraq in December 2002. Chavez of Venezuela has since followed suit. Now, it is Iran, Norway, and—Ka-Ching, Ka-Ching, Ka-Ching: OUCH!

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.