Iran's oil gambit - and potential affront to the US

Jafarzadeh, formerly of the US office of the National Council of Resistance of Iran, is considered of dubious reliability by some experts because of his connections to the Iranian regime's opposition. The National Council is actually on the US list of terrorist organizations.

But Jafarzadeh points out that information he presented on Iran's nuclear program in 2002 turned out to be accurate and became part of the body of evidence against Iran that led to its being in the international hot seat over its nuclear program. Jafarzadeh says his sources are well placed inside Iranian nuclear facilities and that he cannot reveal their names for that reason.

Some Iran experts back Jafarzadeh's claims as important additions to growing evidence against Iran.

His information shows that "at the same time Iran sought nuclear bomb capability, it also pursued development of long-range missiles capable of carrying nuclear warheads," says Raymond Tanter, an Iran expert with close ties to the Bush administration's toughest Iran critics. "By using reverse engineering, from secretly purchased cruise missiles from Ukraine four years ago, Iran is a screwdriver's turn away from having a nuclear-capable cruise missile system that is integrated with a ballistic missile system."

As for any plans to build an alliance of Asian countries against the West, experts note that its energy deals don't necessarily mean that Iran can count on its new oil partners as political allies, experts say. But they also note that already Iran is thought to have little to fear from any eventual referral of its nuclear program to the United Nations Security Council because of its ties to Russia and China, both permanent Council members.

Iran's success so far at building powerful friendships to counter efforts by the US and the European Union to squelch its nuclear ambitions has led some observers - in particular pro-Iran partisans or the most virulent detractors of the Iranian regime - to highlight the oil-exchange proposal. In particular, in Web page commentaries, it is being lauded by the former, while the latter sound alarm bells.

Iran probably stands to gain little from its talk of establishing a petro-euro exchange except for some propaganda value, say experts in energy markets.

"It's purely rhetorical," says Roger Diwan, managing director for oil markets at the Petroleum Finance Co. in Washington. "In order to have these [oil] contracts, you have to have a lot of people invest in them, and most of those people are in places like New York and London," he adds. "I don't see a lot of investors in New York deciding to shift [contract writing] from New York to Tehran." Mr. Diwan also notes that Iran is not alone in envisioning an oil exchange in the world's major oil-producing region. Dubai is also trying to create a market, he adds, but is not finding the way easy.

Yet even as remote as the Iranian threat may be, others note that past attempts to create new markets have not been greeted warmly. None other than Saddam Hussein decided to sell oil only in contracts dominated in euros - in the months before he was ousted by a US-led military invasion.

The Iranian regime is certainly not looking to provoke a similar reaction, experts say, but on the other hand it is taking similar stabs at the global economic system as it faces waves of mostly Western-based criticism. "Basically they are just throwing stuff out," says Carnegie's Mr. Perkovich, "throwing out these ideas in an effort to stay on the offensive."

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