chavez leads opec against drowning dollar

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http://www.cbsnews.com/stories/2007/11/17/world/main3517873.shtml

Chavez Uses OPEC Summit To Blast U.S.

RIYADH, Saudi Arabia, Nov. 17, 2007(CBS/AP) Venezuelan President Hugo Chavez warned the Unites States on Saturday that oil prices could more than double if Washington attacked his country or Iran - part of a provocative opening address here to a rare OPEC summit.
The Venezuelan leader also appealed to fellow members of the Organization of Petroleum Countries to join his crusade for social justice, saying the group should be « at the vanguard in the fight against poverty. »
After Chavez’s speech, Saudi Arabia’s King Abdullah, the conservative head of the world’s largest oil exporter, appeared to rebuke the leftist president by insisting « OPEC has always acted moderately and wisely. »
« Oil is an energy for development, it should not become a tool for conflict and emotions, » said Abdullah, a strong U.S. ally.
The king also sought to head off Chavez’s attempt to reshape OPEC in his socialist image, saying the organization « has not overlooked its responsibilities to developing countries and poverty alleviation. » He highlighted that the OPEC Fund for International Development has made donations to over 120 developing countries.
The OPEC summit opened Saturday in the Saudi Arabian capital of Riyadh with heads of states and delegates from 13 of the world’s biggest oil-producing nations. It was the third OPEC summit since the organization was created in 1960.
But Chavez’s comments overshadowed another controversial discussion, whether to drop the dollar as the standard for pricing petroleum, reports CBS News correspondent Randall Pinkston.
In part, the move was political—to embarrass the United States, but there are also basic economics involved. The value of the dollar against foreign currencies is dropping, which in turn is one of the reasons oil prices are rising.
Some OPEC members, including Saudi Arabia and Algeria opposed the idea, which was put forth by Venezuela and Iran, fearing the move could trigger a recession in the U.S. and damage America’s ability to keep buying huge quantities of crude.
« We would like to see the dollar, you know, stabilized, » said Algeria’s minister of energy and mines, Chakib Khelil.
Some economists say this talk signals global concern about the strength of the U.S. economy and foreign investor confidence in the dollar, reports Pinkston.
« If foreigners decide we don’t want to hold dollars anymore, and they start to sell dollars for other assets like euros, that means that our dollars buy a lot less in the world, » said Benn Steil, director of international economics at the Council on Foreign Relations.
Some analysts say OPEC’s threat to ditch the dollar is a bluff, reports Pinkston. OPEC nations have billions of dollars in their reserves, and a sell off would hurt them, as well as the U.S., which buys more oil than any other nation in the world.
Chavez used his position as the summit’s opening speaker to further his faceoff against the U.S. « We are witnessing constant threats against Iran, » Chavez said. « If the United States attempts the madness of invading Iran or attacking Venezuela again, the price of oil is probably going to reach $200, not just $100, » Chavez said.
The Venezuelan president has accused Washington of backing a short-lived 2002 coup against him—a claim U.S. officials strongly deny.
The U.S. is at odds with Iran over its nuclear program, which Washington claims is cover for weapons development and Tehran insists is peaceful.
Chavez’s calls to OPEC to increase its efforts to redistribute wealth to the world’s poorest countries were equally strident, proposing the group « put itself at the forefront in the design of a new international economic structure. »
Prior to the summit, the Venezuelan president had suggested OPEC sell oil to poor countries at much lower prices than those paid by wealthy nations. During Saturday’s speech, he also suggested the group set up a bank to fund increased international development.
During his address to a hall full of heads of state, ministers and journalists, King Abdullah sought to redirect the focus back toward one of the summit’s key agenda items, which was OPEC’s efforts to mitigate the impact of the oil industry on the environment.
He announced that Saudi Arabia would donate US$300 million to a program for environmental research, and urged fellow member countries to do the same.
He also countered Chavez’s views of OPEC with a more traditional representation, saying the group has had « two essential objectives » since its creation: « First to defend the interest of its members, and second to protect the international economy from sudden shake-ups in oil prices and supplies. »
The run-up to the meeting was dominated by speculation over whether OPEC would raise production following recent oil price increases that have closed in on US$100.
U.S. Energy Secretary Samuel Bodman called on OPEC to increase production earlier this week, but cartel officials have said they will hold off any decision until the group meets next month in Abu Dhabi, United Arab Emirates.
Both Chavez and Abdullah potrayed the current price of oil as fair, saying it was close to the levels in the seventies and eighties when adjusted for inflation.
Also, OPEC officials have 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.

© MMVII, CBS Interactive Inc. The Associated Press contributed to this report.