It was only during the Amahdinejad days that the bourse took its currency role, when it was made clear that the US$ would be left out. Later the media ventilated straightforward declarations from the Iranian Oil ministry that the bourse was an attack on the greenback. This was reported on the Teheran Times (again from memory) it was then deleted from their servers and some time later it was denied by the Iranian government.
Every day more than 40 million barrels of oil are traded internationally. At 80 dollars per barrels that equates to more than 3 billion (3x10e9) changing hands every day. On the course of a year that will go over 1 trillion dollars (1x10e12).
To get a better grasp of what this means, think that China's $ reserves can buy all the oil traded internationally during a year.
The trade of Oil in $ is the primary reason for non-US central banks to build $ reserves. This is clear when you take into account the amount of currency needed in the trade every day. Naturally when the dollar became the de facto world currency things got a different aspect, but Oil is the root of it.
What you have to understand is this, to keep US economy running with the current trade deficit the country had to export debt at a hallucinating pace. The amount of foreign currency reserves kept around the world has been growing 20% per year (doubling every 2/3 years). If that growth rate eases by any reason, it's farewell to the greenback. Vencit omnia veritas.
And I can tell you from the inside that not a word has ever been spoken about trading crude oil on the "Iranian Oil Bourse" in dollars or anything else because the Iranian Oil Ministry has never had the least intention of allowing crude oil to be traded on this "IOB" or anywhere else.
We had a 2 hour meeting with Kazempour Ardebili (20 years the Iranian OPEC rep) who made that quite clear.
Oil products, such as bitumen and petrochemicals, are the only likely candidates for trading on the exchange, which will be a sub-division of the Tehran Commodities Exchange (due to be launched tomorrow, I understand) and which combines two existing minor Tehran exchanges, in Metals and Agricultural products.
We met Khatami in late 2005, and he put what was left of his authority behind the IOB project (it was conceived in 2001, but didn't get going until May 2004): it made no difference.
Subsequently, Ahmadinejad - who we know was very much behind the project - was never able to appoint a non-insider as Oil Minister. He had 3 goes and gave up.
The Dark Side won: you can forget transparency in Iranian oil any time soon.
So much for the IOB: the amount of dollars physically needed for oil purchases is de minimis: it's not even a pimple on the backside of the $ FX marketwhich turns over trillions per day.
The whole thesis of the Saddam/IOB oil in Euro's conspiracy theory is and always has been completely misguided.
Having said that, the unsustainability of US fiscal and trade policy is not in doubt. There is a crisis coming, and oil will indeed be at the heart of it simply because oil sellers will no longer be using dollar proceeds to buy dollar assets (I mean liabilities...) "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
