- 11 May 2017
MEI Political Economy Cluster Seminar: The Iran Nuclear Deal and the Challenge against Petrodollar Dominance
An academic discussion organised by MEI’s Political Economy Research Cluster.
Abstract: Does preventing nuclear war guarantee geopolitical stability? This paper seeks to spark a scholarly discussion with regard to the impact of the Iran Nuclear Deal (JCPOA) on the petrodollar system, which is the existing system that uses dollars for oil trade. Thus far, the JCPOA’s impact on the petrodollar system has received far less policy attention than it has gathered with regard to nuclear weapons development or sanctions. Prior to the Iran Nuclear Deal, alternative petrocurrencies of the Chinese yuan, the Indian rupee, and the Russian ruble were used to avoid dollar transactions. After the Deal, Iran declared in June 2016 that it only accepts the Euro for its oil trade. The paper argues that by lifting EU, UN, and partial US sanctions on Iran, the Iran Nuclear Deal has allowed for the gradual decline of the petrodollar system, a pillar of US financial dominance in the global economy. The US may have achieved diplomatic success by avoiding a military confrontation with Iran, but at the expense of giving up the monetary hegemony in oil transactions that it held for decades. We develop a theoretical framework of shifting hegemonic order that influences global monetary order to explain for the evolution of the petrodollar system. It argues that hegemonic goals are significantly restrained when its efforts to maintaining geopolitical stability comes at the cost of disavowing the global economic order. Through comparative case studies of alternative petrocurrencies used by Iran and other GCC states, the paper underscores that a geopolitical effort such as the Iran Nuclear Deal can facilitate the emergence of other petrocurrencies that would accelerate the ascendance of alternative currencies in the global financial system, thereby causing a gradual decline of hegemony. The paper explains that alternative currencies are gaining leverage as oil producing countries diversify its currency options for oil trade in an effort to decrease its reliance on the US.
About the Speakers
June Park specializes in U.S. foreign economic policymaking on export-oriented economies of East Asia. Her research interests include international trade disputes, bilateral currency conflicts, and intellectual property enforcement. For her dissertation book project entitled ‘Trade Wars & Currency Conflict: China, Japan, and South Korea’s Response to U.S. Protectionism, 1971-2015’, she conducted 3 years of fieldwork in Tokyo, Seoul, Beijing, and Washington, DC. June was born in South Korea and spent her early childhood in the United States and her teenage years in South Korea. She received her BA in Political Science and Journalism, her MA in International Relations with a focus on international security from Korea University, and a PhD in International Relations with a focus on international political economy from Boston University.
Hamoon Khelghat-Doost is a final year PhD candidate at the Department of Political Science, National University of Singapore. His PhD research on gender dynamics within jihadi organizations focuses on the relationship between the jihadi organizations’ view on state building and the roles women are assigned to within these organizations. His research interests are in comparative politics, international relations, gender and security affairs and counter-terrorism studies with a specific interest in the Middle East and Southeast Asia. Some of his academic work has appeared in The Journal of Counter Terrorist Trends and Analysis, The Fletcher Forum of World Affairs, The Central European Journal of International and Security Studies, The Journal of International Security Affairs and the Singapore-Middle East Paper Series by The Middle East Institute-NUS.
