By Philip Thornton, Economics Correspondent
Published: 14 March 2006
Middle Eastern anger over the decision by the US to block a Dubai company from buying five of its ports hit the dollar yesterday as a number of central banks said they were considering switching reserves into euros.
The United Arab Emirates, which includes Dubai, said it was looking to move one-tenth of its dollar reserves into euros, while the governor of the Saudi Arabian central bank condemned the US move as 'discrimination'…
The governor of the UAE central bank, Sultan Nasser al-Suweidi, said the bank was looking to convert 10 per cent of its reserves, which stand at $23bn (£13.5bn), from dollars to euros. 'They are contravening their own principles,' he said. 'Investors are going to take this into consideration [and] will look at investment opportunities through new binoculars.'
London's The Independent has an instructive article noting that political games are open to many players. With the UAE considering pulling over $2 billion out of US currency and into the Euro, they're showing that political stunts can bear a price. (Not to mention the multi-billion dollar sale pending for Boeing, of course!)
Dumping dollar securities will put a ding in the US economy. Converting all dollars to Euros would be a serious blow. And a decision to renominate oil prices in Euros rather than dollars would be devastating.
Perhaps the American Congress will learn that grandstanding has its costs, always. Just because they aren't immediately apparent, doesn't mean they don't exist."
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