The announcement of the opening, perhaps by late 2006, of a Euro-denominated Iranian Oil Bourse has sparked wide-spread discussions concerning the impact on the U.S. dollar. One common theme is that the bourse will weaken the demand for dollars, causing its value to fall over time, eventually terminating its role as an international means of payment. Is this likely to occur? Specifically: (1) given existing practices in the pricing of oil and the institutional setting of Iran, can we expect a large volume of oil to be denominated in euros in the near and foreseeable future? (2) In light of (1), is there a good chance the proposed Iranian Euro-denominated oil bourse might a direct role as the catalyst that sets off a movement away from the dollar? Or, (3) are there good reasons to discount the bourse attracting much attention and therefore unlikely to play a significant role in affecting the future value of the dollar? An analysis of these issues suggests that across a wide spectrum of possible events and probabilities, it is unlikely that the proposed Iranian Oil Bourse will be all that attractive to traders, taking a large volume of sales away from established markets. In addition, there are a number of elements tending to perpetuate the dollar’s role as a reserve currency in the international system. It follows that concerns over the dollar are premature.
