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Revisited - The Real Reasons for the Upcoming War With Iraq
by William Clark
Revisited - The Real Reasons for the Upcoming War With Iraq:
A Macroeconomic and Geostrategic Analysis of the Unspoken Truth
by William Clark
[email protected]
Original Essay January 2003
-Revised March 2003
-Post-war Commentary January 2004
"To the living we owe respect, but to the dead we own only the truth."
-Voltaire
Contents
* Note to readers
* Summary
* Revisited--The Real Reasons for the Upcoming War With Iraq:
A Macroeconomic and Geostrategic Analysis of the Unspoken Truth
o Synopsis
o Background on Hydrocarbons and US Geostrategy
o References
* Addendum: Notable International Monetary Movements
o European Commentary on the Essay:
`The Real Reasons for the Upcoming War With Iraq'
o Saving the American Experiment (March 10, 2003)
o References
* Post-War Commentary (January 1, 2004)
o Conclusion
o References
* Additional Recommended Reading
Note to readers:
I would like to thank the hundreds of people from all over the
world that emailed me positive feedback throughout 2003 with
respect to my research and Internet based essay on the Iraq war.
Based on your overwhelmingly positive feedback and my own sense of
patriotic duty, I am currently writing a book based on this
research. Additionally, I am also working with a former government
economist to construct an empirical model studying the possible
effects of the dollar's valuation in response to a euro currency
pricing mechanism for OPEC producers. The results of will
hopefully be included in the proposed forthcoming book,
tentatively entitled: Petrodollar Warfare: Oil, Iraq, and the
Future of the Dollar (Available Fall 2004).
For those who are already familiar with my original pre-war essay
from January and March 2003, you may want to skip the opening
parts of this essay and review the expanded section explaining the
importance of Hydrocarbons regarding Peak oil and US Geostrategy,
and then review my somewhat lengthy update from January 1, 2004.
The main flaw from my original essay a year ago was an excessive
focus on the macroeconomic perspectives of the Iraq war. In this
essay, and in the forthcoming book, I have attempted to remedy
this deficiency by including a detailed analysis of the oil
depletion/geostrategic aspects, which appear to be second
coalescing factor that lead to the Iraq war. For comments email:
[email protected].
Summary
Although completely unreported by the U.S. media and government,
the answer to the Iraq enigma is simple yet shocking -- it is in
large part an oil currency war. One of the core reasons for this
upcoming war is this administration's goal of preventing further
Organization of the Petroleum Exporting Countries (OPEC) momentum
towards the euro as an oil transaction currency standard. However,
in order to pre-empt OPEC, they need to gain geo-strategic control
of Iraq along with its 2nd largest proven oil reserves. The second
coalescing factor that is driving the Iraq war is the quiet
acknowledgement by respected oil geologists and possibly this
administration is the impending phenomenon known as Global "Peak
Oil." This is projected to occur around 2010, with Iraq and Saudi
Arabia being the final two nations to reach peak oil production.
The issue of Peak Oil has been added to the scope of this essay,
along with the macroeconomics of `petrodollar recycling' and the
unpublicized but genuine challenge to U.S. dollar hegemony from
the euro as an alternative oil transaction currency. The author
advocates graduated reform of the global monetary system including
a dollar/euro currency `trading band' with reserve status parity,
a dual OPEC oil transaction standard, and multilateral treaties
via the UN regarding energy reform. Such reforms could potentially
reduce future oil currency and oil warfare. The essay ends with a
reflection and critique of current US economic and foreign
policies. What happens in the 2004 US elections will have a large
impact on the 21st century.
Revisited -- The Real Reasons for the Upcoming War With Iraq:
A Macroeconomic and Geostrategic Analysis of the Unspoken Truth
"If a nation expects to be ignorant and free, it expects what
never was and never will be . . . The People cannot be safe
without information. When the press is free, and every man is able
to read, all is safe."
Those words by Thomas Jefferson embody the unfortunate state of
affairs that have beset our nation. As our government prepares to
go to war with Iraq, our country seems unable to answer even the
most basic questions about this upcoming conflict. First, why is
there a lack of a broad international coalition for toppling
Saddam? If Iraq's old weapons of mass destruction (WMD) program
truly possessed the threat level that President Bush has
repeatedly purported, why are our historic allies not joining a
coalition to militarily disarm Saddam? Secondly, despite over 400
unfettered U.N inspections, there has been no evidence reported
that Iraq has reconstituted its WMD program. Indeed, the Bush
administration's claims about Iraq's WMD capability appear
demonstrably false.[1][2] Third, and despite President Bush's
repeated claims, the CIA has not found any links between Saddam
Hussein and Al Qaeda. To the contrary, some intelligence analysts
believe it is more likely Al Qaeda might acquire an unsecured
former Soviet Union Weapon(s) of Mass Destruction, or potentially
from sympathizers within a destabilized Pakistan.
Moreover, immediately following Congress's vote on the Iraq
Resolution, we suddenly became informed of North Korea's nuclear
program violations. Kim Jong Il is processing uranium in order to
produce nuclear weapons this year. (It should be noted that just
after coming into office President Bush was informed in January
2001of North Korea's suspected nuclear program). Despite the
obvious contradictions, President Bush has not provided a
rationale answer as to why Saddam's seemingly dormant WMD program
possesses a more imminent threat that North Korea's active nuclear
weapons program. Millions of people in the U.S. and around the
world are asking the simple question: "Why attack Iraq now?" Well,
behind all the propaganda is a simple truth -- one of the core
drivers for toppling Saddam is actually the euro currency, the --
[eurodollar symbol].
Although apparently suppressed in the U.S. media, one of the
answers to the Iraq enigma is simple yet shocking. The upcoming
war in Iraq war is mostly about how the CIA, the Federal Reserve
and the Bush/Cheney administration view hydrocarbons at the
geo-strategic level, and the unspoken but overarching
macroeconomic threats to the U.S. dollar from the euro. The Real
Reasons for this upcoming war is this administration's goal of
preventing further OPEC momentum towards the euro as an oil
transaction currency standard, and to secure control of Iraq's oil
before the onset of Peak Oil (predicted to occur around 2010).
However, in order to pre-empt OPEC, they need to gain
geo-strategic control of Iraq along with its 2nd largest proven
oil reserves. This essay will discuss the macroeconomics of the
`petrodollar' and the unpublicized but real threat to U.S.
economic hegemony from the euro as an alternative oil transaction
currency. The following is how an individual very well versed in
the nuances of macroeconomics alluded to the unspoken truth about
this upcoming war with Iraq:
"The Federal Reserve's greatest nightmare is that OPEC
will switch its international transactions from a dollar
standard to a euro standard. Iraq actually made this
switch in Nov. 2000 (when the euro was worth around 82
cents), and has actually made off like a bandit
considering the dollar's steady depreciation against the
euro. (Note: the dollar declined 17% against the euro in
2002.)
"The real reason the Bush administration wants a puppet
government in Iraq -- or more importantly, the reason
why the corporate-military-industrial network
conglomerate wants a puppet government in Iraq -- is so
that it will revert back to a dollar standard and stay
that way." (While also hoping to veto any wider OPEC
momentum towards the euro, especially from Iran -- the
2nd largest OPEC producer who is actively discussing a
switch to euros for its oil exports)."
Although a collective switch by OPEC would be extremely unlikely
barring a major panic on the U.S. dollar, it would appear that a
gradual transition is quite plausible. Furthermore, despite Saudi
Arabia being our `client state,' the Saudi regime appears
increasingly weak/threatened from massive civil unrest. Some
analysts believe civil unrest might unfold in Saudi Arabia, Iran
and other Gulf states in the aftermath of an unpopular U.S.
invasion and occupation of Iraq[3]. Undoubtedly, the Bush
administration is acutely aware of these risks. Hence, the
neo-conservative framework entails a large and permanent military
presence in the Persian Gulf region in a post-Saddam era, just in
case we need to surround and control Saudi's large Ghawar oil
fields in the event of a Saudi coup by an anti-western group. But
first back to Iraq.
"Saddam sealed his fate when he decided to switch to the
euro in late 2000 (and later converted his $10 billion
reserve fund at the U.N. to euros) -- at that point,
another manufactured Gulf War become inevitable under
Bush II. Only the most extreme circumstances could
possibly stop that now and I strongly doubt anything can
-- short of Saddam getting replaced with a pliant
regime.
"Big Picture Perspective: Everything else aside from the
reserve currency and the Saudi/Iran oil issues (i.e.
domestic political issues and international criticism)
is peripheral and of marginal consequence to this
administration. Further, the dollar-euro threat is
powerful enough that they will rather risk much of the
economic backlash in the short-term to stave off the
long-term dollar crash of an OPEC transaction standard
change from dollars to euros. All of this fits into the
broader Great Game that encompasses Russia, India,
China."
This information about Iraq's oil currency is not discussed by the
U.S. media or the Bush administration as the truth could
potentially curtail both investor and consumer confidence, reduce
consumer borrowing/spending, create political pressure to form a
new energy policy that slowly weans us off Middle-Eastern oil, and
of course stop our march towards a war with Iraq. This quasi
`state secret' is addressed in a Radio Free Europe article that
discussed Saddam's switch for his oil sales from dollars to the
euros, to be effective November 6, 2000:
"Baghdad's switch from the dollar to the euro for oil
trading is intended to rebuke Washington's hard-line on
sanctions and encourage Europeans to challenge it. But
the political message will cost Iraq millions in lost
revenue. RFE/RL correspondent Charles Recknagel looks at
what Baghdad will gain and lose, and the impact of the
decision to go with the European currency."[4]
At the time of the switch many analysts were surprised that Saddam
was willing to give up approximately $270 million in oil revenue
for what appeared to be a political statement. However, contrary
to one of the main points of this November 2000 article, the
steady depreciation of the dollar versus the euro since late 2001
means that Iraq has profited handsomely from the switch in their
reserve and transaction currencies. Indeed, The Observer
surprisingly divulged these facts in a recent article entitled:
`Iraq nets handsome profit by dumping dollar for euro,' (February
16, 2003).
"A bizarre political statement by Saddam Hussein has
earned Iraq a windfall of hundreds of millions of euros.
In October 2000 Iraq insisted upon dumping the US Dollar
-- `the currency of the enemy' -- for the more
multilateral euro."[5]
Although Iraq's oil currency switch appears to be completely
censored by the U.S. media conglomerates, this UK article
illustrates that the euro has gained almost 25% against the dollar
since late 2001, which also applies to the $10 billion in Iraq's
U.N. `oil for food' reserve fund that was previously held in
dollars has also gained that same percent value since the switch.
It was reported in 2003 that Iraq's UN reserve fund had swelled
from $10 billion dollars to [euro dollarsymbol]26 billion euros.
According to a former government analyst, the following scenario
would occur if OPEC made an unlikely, but sudden (collective)
switch to euros, as opposed to a gradual transition.
"Otherwise, the effect of an OPEC switch to the euro
would be that oil-consuming nations would have to flush
dollars out of their (central bank) reserve funds and
replace these with euros. The dollar would crash
anywhere from 20-40% in value and the consequences would
be those one could expect from any currency collapse and
massive inflation (think Argentina currency crisis, for
example). You'd have foreign funds stream out of the
U.S. stock markets and dollar denominated assets,
there'd surely be a run on the banks much like the
1930s, the current account deficit would become
unserviceable, the budget deficit would go into default,
and so on. Your basic 3rd world economic crisis
scenario.
"The United States economy is intimately tied to the
dollar's role as reserve currency. This doesn't mean
that the U.S. couldn't function otherwise, but that the
transition would have to be gradual to avoid such
dislocations (and the ultimate result of this would
probably be the U.S. and the E.U. switching roles in the
global economy)."
Although the above scenario is unlikely, and most assuredly
undesirable, under certain economic conditions it is plausible. In
fact, one of the conditions that could create such an environment
is a near unilateral U.S. led war in the Middle East. For example,
a large spike in oil prices could create huge problems for the
imperiled Japanese banking system, the world's largest holder of
U.S. dollar reserves. Unfortunately the current Bush
administration has chosen a military option instead of a
multilateral conference on monetary reform to resolve these
issues. In the aftermath of toppling Saddam it is clear the U.S.
will keep a large and permanent military force in the Persian
Gulf. Indeed, there is no talk of an `exit strategy,' as the
military will be needed to protect the newly installed regime, and
to send a message to other OPEC producers that they too might
receive `regime change' if they convert their oil payments to
euros.
An interesting yet again underreported story from last year
relates to another OPEC `Axis of Evil' country, Iran, who is
vacillating on pricing their oil export in the euro currency.
"Iran's proposal to receive payments for crude oil sales
to Europe in euros instead of U.S. dollars is based
primarily on economics, Iranian and industry sources
said.
"But politics are still likely to be a factor in any
decision, they said, as Iran uses the opportunity to hit
back at the U.S. government, which recently labeled it
part of an `axis of evil.'
"The proposal, which is now being reviewed by the
Central Bank of Iran, is likely to be approved if
presented to the country's parliament, a parliamentary
representative said.
"`There is a very good chance MPs will agree to this
idea . . . now that the euro is stronger, it is more
logical,' the parliamentary representative said."[6]
Moreover, and perhaps most telling, during 2002 the majority of
reserve funds in Iran's central bank were shifted to euros. It
appears imminent they intend to switch oil payments to euros.
"More than half of [Iran] the country's assets in the
Forex Reserve Fund have been converted to euro, a member
of the Parliament Development Commission, Mohammad
Abasspour announced. He noted that higher parity rate of
euro against the US dollar will give the Asian
countries, particularly oil exporters, a chance to usher
in a new chapter in ties with European Union's member
countries.
"He said that the United States dominates other
countries through its currency, noting that given the
superiority of the dollar against other hard currencies,
the US monopolizes global trade. The lawmaker expressed
hope that the competition between euro and dollar would
eliminate the monopoly in global trade."[7]
After toppling Saddam, this administration may decide that Iran's
disloyalty to the dollar qualifies them as the next target in the
`war on terror.' Iran's interest in switching to the euro as their
currency for oil exports is well documented. Perhaps U.S.
operations against Iran will be mostly covert, but this MSNBC
article alludes to ultimate objectives of the neo-conservatives.
"While still wrangling over how to overthrow Iraq's
Saddam Hussein, the Bush administration is already
looking for other targets. President Bush has called for
the ouster of Palestinian leader Yasir Arafat. Now some
in the administration -- and allies at D.C. think tanks
-- are eyeing Iran and even Saudi Arabia. As one senior
British official put it: `Everyone wants to go to
Baghdad. Real men want to go to Tehran.'"[8]
Aside from the geopolitical risks regarding Saudi Arabia and Iran,
another risk factor is actually Japan. Perhaps the biggest gamble
in a protracted Iraq war may be Japan's weak economy.[9] If the
war creates prolonged oil high prices ($45 per barrel over several
months), or a short but massive oil price spike ($80 to $100 per
barrel), some analysts believe Japan's fragile economy would
collapse. Japan is quite hypersensitive to oil prices, and if its
banks default, the collapse of the second largest economy would
set in motion a sequence of events that could prove quite damaging
to the U.S. economy. There is little doubt the Iraq war plan is
designed to be a quick victory, with the U.S. military securing
Iraq's vital oil fields at the very onset of hostilities.
Nonetheless, other risks might arise if the Iraq war goes poorly
or becomes prolonged. It is possible that civil unrest may unfold
in Iran, Saudi Arabia or other OPEC members in the Middle East.
Such events could foster the very situation this administration is
trying to prevent: another OPEC member switching to euros as their
oil transaction currency standard.
Incidentally, the final `Axis of Evil' country, North Korea,
recently decided to officially drop the dollar and begin using
euros for trade, effective Dec. 7, 2002.[10] Unlike the
OPEC-producers, North Korea's switch will have negligible economic
impact, but it illustrates the geopolitical fallout of President
Bush's harsh rhetoric. Much more troubling is North Korea's recent
action following the oil embargo of their country. They are in
dire need of oil and food; and in an act of desperation they have
re-activated their pre-1994 nuclear program. The re-processing
uranium fuel rods appear to be taking place, and it appears their
strategy is to prompt negotiations with the U.S. regarding food
and oil. The CIA estimates that North Korea could produce 4-6
nuclear weapons by the second half of 2003. Ironically, this
crisis over North Korea's nuclear program further confirms the
fraudulent premise for which this war with Saddam was entirely
contrived.
During the 1990s the world viewed the U.S. as a rather
self-absorbed but essentially benevolent superpower. Military
actions in Iraq (1990-91 & 1998), Serbia and Kosovo (1999) were
undertaken with NATO cooperation and UN involvement, thereby
affording these operations with a sufficient level of
international legitimacy. President Clinton also worked to reduce
tensions in Northern Ireland and attempted to negotiate a
resolution to the Israeli-Palestinian conflict. With the exception
of the Middle East, our superpower status was viewed as mostly
benign. Our trade imbalances were tolerated, and balanced fiscal
policies provided confidence.
However, in both the pre and post 9/11 intervals, the `America
first' policies of the Bush administration, with its unwillingness
to honor International Treaties, along with their aggressive
militarisation of foreign policy has significantly damaged our
reputation abroad. Following 9/11, it appears that President
Bush's `warmongering rhetoric' has created global tensions -- as
we are now viewed as a belligerent superpower willing to apply
unilateral military force without U.N. approval. Moreover, this
administrations failure to actively engage in negotiations
regarding the Israeli/Palestinian conflict is unfortunate.
Lamentably, the tremendous amount of international sympathy we
witnessed in the immediate aftermath of the September 11th tragedy
has been replaced with fear and anger at our government. This
administration's bellicosity has changed the worldview, and
`anti-Americanism' is proliferating even among our closest
allies.[11]
Equally alarming, and completely unreported in the US media, are
significant monetary shifts in the reserve funds of foreign
governments away from the dollar with movements towards the
euro.[12][13][14] It appears the world community may lack faith
in the Bush administration's flawed economic policies, and along
with OPEC, seem poised to respond with economic retribution if the
U.S. government is regarded as an uncontrollable and dangerous
superpower. Despite the absence of media coverage, the
plausibility of slowly abandoning the dollar standard for the euro
is real. An article by Hazel Henderson outlines the dynamics and
the potential outcomes:
"The most likely end to US hegemony may come about
through a combination of high oil prices (brought about
by US foreign policies toward the Middle East) and
deeper devaluation of the US dollar (expected by many
economists). Some elements of this scenario:
1. US global over-reach in the `war on terrorism'
already leading to deficits as far as the eye can
see -- combined with historically-high US trade
deficits -- lead to a further run on the dollar.
This and the stock market doldrums make the US less
attractive to the world's capital.
2. More developing countries follow the lead of
Venezuela and China in diversifying their currency
reserves away from dollars and balanced with euros.
Such a shift in dollar-euro holdings in Latin
America and Asia could keep the dollar and euro
close to parity.
3. OPEC could act on some of its internal discussions
and decide (after concerted buying of euros in the
open market) to announce at a future meeting in
Vienna that OPEC's oil will be re-denominated in
euros, or even a new oil-backed currency of their
own. A US attack on Iraq sends oil to
[eurodollar symbol]40 (euros) per barrel.
4. The Bush Administration's efforts to control the
domestic political agenda backfires. Damage over
the intelligence failures prior to 9/11 and
warnings of imminent new terrorist attacks
precipitate a further stock market slide.
5. All efforts by Democrats and the 57% of the US
public to shift energy policy toward renewables,
efficiency, standards, higher gas taxes, etc. are
blocked by the Bush Administration and its fossils
fuel industry supporters. Thus, the USA remains
vulnerable to energy supply and price shocks.
6. The EU recognizes its own economic and political
power as the euro rises further and becomes the
world's other reserve currency. The G-8 pegs the
euro and dollar into a trading band -- removing
these two powerful currencies from speculators
trading screens (a "win-win" for everyone!). Tony
Blair persuades Brits of this larger reason for the
UK to join the euro.
7. Developing countries lacking dollars or "hard"
currencies follow Venezuela's lead and begin
bartering their undervalued commodities directly
with each other in computerized swaps and counter
trade deals. President Chavez has inked 13 such
country barter deals on its oil, e.g., with Cuba in
exchange for Cuban health paramedics who are
setting up clinics in rural Venezuelan villages.
The result of this scenario? The USA could no longer run
its huge current account trade deficits or continue to
wage open-ended global war on terrorism or evil. The USA
ceases pursuing unilateralist policies. A new US
administration begins to return to its multilateralist
tradition, ceases its obstruction and rejoins the UN and
pursues more realistic international cooperation."[15]
As for the events currently taking place in Venezuela, items #2
and #7 on the above list may allude to why the Bush administration
quickly endorsed the failed military-led coup of Hugo Chavez in
April 2002. Although the coup collapsed after 2 days with Chavez
being restored to power, various reports suggest the CIA and a
rather embarrassed Bush administration approved and may have been
actively involved with the civilian/military coup plotters.
"George W. Bush's administration was the failed coup's
primary loser, underscoring its bankrupt hemispheric
policy. Now it is slowly filtering out that in recent
months White House officials met with key coup figures,
including Carmona. Although the administration insists
that it explicitly objected to any extra-constitutional
action to remove Chavez, comments by senior U.S.
officials did little to convey this. . . .
"The CIA's role in a 1971 Chilean strike could have
served as the working model for generating economic and
social instability in order to topple Chavez. In the
truckers' strike of that year, the agency secretly
orchestrated and financed the artificial prolongation of
a contrived work stoppage in order to economically
asphyxiate the leftist Salvador Allende government.
"This scenario would have had CIA operatives acting in
liaison with the Venezuelan military, as well as with
opposition business and labor leaders, to convert a
relatively minor afternoon-long work stoppage by senior
management into a nearly successful coup de grâce."[16]
Interestingly, according to an article by Michael Ruppert,
Venezuelan's ambassador Francisco Mieres-Lopez apparently floated
the idea of switching to the euro approximately one year before
the failed coup attempt. Furthermore, there is some evidence that
the U.S. is still active in its attempts to overthrow the
democratically elected Chavez administration. In December 2002 a
Uruguayan government official exposed the ongoing covert CIA
operations in Venezuela:
"Uruguayan EP-FA congressman Jose Nayardi says he has
information that far-reaching plan have been put into
place by the CIA and other North American intelligence
agencies to overthrow Venezuelan President Hugo Chavez
Frias within the next 72 hours. . . .
Nayardi says he has received copies of top-secret
communications between the Bush administration in
Washington and the government of Uruguay requesting the
latter's cooperation to support white collar executives
and trade union activists to `break down levels of
intransigence within the Chavez Frias
administration.'"[17]
Venezuela is the fourth largest producer of oil, and the corporate
elites whose political power runs unfettered in the Bush/Cheney
oligarchy appear interested in privatizing Venezuela's oil
industry. Furthermore, the establishment might be concerned that
Chavez's `barter deals' with 12 Latin American countries and Cuba
are effectively cutting the U.S. dollar out of the vital oil
transaction currency cycle. Commodities are being traded among
these countries in exchange for Venezuela's oil, thereby reducing
reliance on fiat dollars. If these unique oil transactions
proliferate, they could create more devaluation pressure on the
dollar by removing it from its crucial `petro-recycling' role.
Continuing attempts to remove Hugo Chavez appear likely.
The U.S. economy has acquired significant structural imbalances,
including our record-high $503 billion trade account deficit (5%
of GDP), a $6.9 trillion dollar deficit (60% of GDP), and the
recent return to annual budget deficits in the hundreds of
billions. These imbalances are exacerbated by the Bush
administration's ideologically driven tax and budget policies,
which are creating enormous deficits for the rest of this decade.
These factors would significantly devalue the currency of any
other nation under the "rules of economics.' Why is the dollar
still the predominant currency despite these structural
imbalances, and why does it appear immune from our twin deficits?
While many Americans assume the strength of the U.S. dollar merely
rests on our economic output (GDP), the ruling elites understand
that the dollar's strength is founded on two fundamentally unique
advantages relative to all other hard currencies.
The reality is that the "safe harbor" status of the U.S. dollar
since 1945 rests on it being the international reserve currency.
Thus it has assumed the role of sole currency for global oil
transactions (ie. `petrodollar'). The U.S. prints hundreds of
billions of fiat dollars, which U.S. consumers provide to other
nations via the purchase of imported goods. These dollars become
"petro-dollars" when are then used by those nation states to
purchase oil/energy from OPEC producers (except Iraq, to some
degree Venezuela, and perhaps Iran in the near future).
Approximately $600 to $800 billion `petrodollars' are annually
from OPEC and invested back into the U.S. via Treasury Bills or
other dollar-denominated assets such as U.S. stocks, bonds, real
estate, etc. This recycling bolsters the dollar's international
liquidity value.
According to research by Dr. David Spiro, in 1974 the Nixon
administration negotiated assurances from Saudi Arabia to price
oil in dollars only, and invest their surplus oil proceeds in U.S.
Treasury Bills. In return the U.S. would protect the Saudi regime.
According to his book, The Hidden Hand of American Hegemony:
Petrodollar Recycling and International Markets[18], these
purchases were done in relative secrecy. These agreements created
the phenomenon known as "petrodollar recycling." In effect, global
oil consumption via OPEC provides a healthy subsidy to the U.S.
economy. Hence, the Europeans created the euro to compete with the
dollar as an alternative international reserve currency. Obviously
the E.U. would also like oil priced in euros as well, as this
would reduce or eliminate their currency risk for oil purchases.
The `old rules' for valuation of the U.S. dollar currency and
economic power were based on our flexible market, free flow of
trade goods, high per worker productivity, manufacturing output/
trade surpluses, government oversight of accounting methodologies
(ie. SEC), developed infrastructure, education system, and of
course total cash flow and profitability. Our superior military
power afforded some additional confidence in the dollar. While
many of these factors remain present, over the last two decades we
have diluted some of the `safe harbor' economic fundamentals.
Despite vast imbalances and structural problems that are
escalating within the U.S. economy, since 1974 the dollar as the
monopoly oil currency created `new rules'. The following excerpts
from an Asia Times article discusses the virtues of our
petrodollar hegemony (or vices from the perspective of developing
nations, whose debt is denominated in dollars).
"Ever since 1971, when US president Richard Nixon took
the dollar off the gold standard (at $35 per ounce) that
had been agreed to at the Bretton Woods Conference at
the end of World War II, the dollar has been a global
monetary instrument that the United States, and only the
United States, can produce by fiat. The dollar, now a
fiat currency, is at a 16-year trade-weighted high
despite record US current-account deficits and the
status of the US as the leading debtor nation. The US
national debt as of April 4 was $6.021 trillion against
a gross domestic product (GDP) of $9 trillion.
"World trade is now a game in which the US produces
dollars and the rest of the world produces things that
dollars can buy. The world's interlinked economies no
longer trade to capture a comparative advantage; they
compete in exports to capture needed dollars to service
dollar-denominated foreign debts and to accumulate
dollar reserves to sustain the exchange value of their
domestic currencies. To prevent speculative and
manipulative attacks on their currencies, the world's
central banks must acquire and hold dollar reserves in
corresponding amounts to their currencies in
circulation. The higher the market pressure to devalue a
particular currency, the more dollar reserves its
central bank must hold. This creates a built-in support
for a strong dollar that in turn forces the world's
central banks to acquire and hold more dollar reserves,
making it stronger. This phenomenon is known as dollar
hegemony, which is created by the geopolitically
constructed peculiarity that critical commodities, most
notably oil, are denominated in dollars. Everyone
accepts dollars because dollars can buy oil. The
recycling of petro-dollars is the price the US has
extracted from oil-producing countries for US tolerance
of the oil-exporting cartel since 1973.
"By definition, dollar reserves must be invested in US
assets, creating a capital-accounts surplus for the US
economy. Even after a year of sharp correction, US stock
valuation is still at a 25-year high and trading at a 56
percent premium compared with emerging markets.
". . . The US capital-account surplus in turn finances
the US trade deficit. Moreover, any asset, regardless of
location, that is denominated in dollars is a US asset
in essence. When oil is denominated in dollars through
US state action and the dollar is a fiat currency, the
US essentially owns the world's oil for free. And the
more the US prints greenbacks, the higher the price of
US assets will rise. Thus a strong-dollar policy gives
the US a double win."[19]
This unique geo-political agreement with Saudi Arabia in 1974 has
worked to our favor for the past 30 years, as this arrangement has
eliminated our currency risk for oil, raised the entire asset
value of all dollar denominated assets/properties, and allowed the
Federal Reserve to create a truly massive debt and credit
expansion (or `credit bubble' in the view of some economists).
These structural imbalances in the U.S. economy are sustainable as
long as:
1. Nations continue to demand and purchase oil for their
energy/survival needs
2. the world's monopoly currency for global oil transactions
remains the US dollar
3. the three internationally traded crude oil markers remain
denominated in US dollars
These underlying factors, along with the `safe harbor' reputation
of U.S. investments afforded by the dollar's reserve currency
status propelled the U.S. to economic and military hegemony in the
post-World War II period. However, the introduction of the euro is
a significant new factor, and appears to be the primary threat to
U.S. economic hegemony. Moreover, in December 2002 ten additional
countries were approved for full membership into the E.U. Barring
any surprise movements, in 2004 this will result in an aggregate
E.U. GDP of $9.6 trillion and 450 million people, directly
competing with the U.S. economy ($10.5 trillion GDP, 280 million
people).
Especially interesting is a speech given by Mr Javad Yarjani, the
Head of OPEC's Petroleum Market Analysis Department, in a visit to
Spain in April 2002. His speech dealt entirely with the subject of
OPEC oil transaction currency standard with respect to both the
dollar and the euro. The following excerpts from this OPEC
executive provide insights into the conditions that would create
momentum for an OPEC currency switch to the euro. Indeed, his
candid analysis warrants careful consideration given that two of
the requisite variables he outlines for the switch have taken
place since this speech in Spring 2002. Articles regarding the
euro and its potential to purchase oil are discussed in the
European and Asian media, but have been completely unreported in
the U.S.
". . . The question that comes to mind is whether the
euro will establish itself in world financial markets,
thus challenging the supremacy of the US dollar, and
consequently trigger a change in the dollar's dominance
in oil markets. As we all know, the mighty dollar has
reigned supreme since 1945, and in the last few years
has even gained more ground with the economic dominance
of the United States, a situation that may not change in
the near future. By the late 90s, more than four-fifths
of all foreign exchange transactions, and half of all
world exports, were denominated in dollars. In addition,
the US currency accounts for about two thirds of all
official exchange reserves. The world's dependency on US
dollars to pay for trade has seen countries bound to
dollar reserves, which are disproportionably higher than
America's share in global output. The share of the
dollar in the denomination of world trade is also much
higher than the share of the US in world trade.
"Having said that, it is worthwhile to note that in the
long run the euro is not at such a disadvantage versus
the dollar when one compares the relative sizes of the
economies involved, especially given the EU enlargement
plans. Moreover, the Euro-zone has a bigger share of
global trade than the US and while the US has a huge
current account deficit, the euro area has a more, or
balanced, external accounts position. One of the more
compelling arguments for keeping oil pricing and
payments in dollars has been that the US remains a large
importer of oil, despite being a substantial crude
producer itself. However, looking at the statistics of
crude oil exports, one notes that the Euro-zone is an
even larger importer of oil and petroleum products than
the US. . . .
". . . From the EU's point of view, it is clear that
Europe would prefer to see payments for oil shift from
the dollar to the euro, which effectively removed the
currency risk. It would also increase demand for the
euro and thus help raise its value. Moreover, since oil
is such an important commodity in global trade, in term
of value, if pricing were to shift to the euro, it could
provide a boost to the global acceptability of the
single currency. There is also very strong trade links
between OPEC Member Countries (MCs) and the Euro-zone,
with more than 45 percent of total merchandise imports
of OPEC MCs coming from the countries of the Euro-zone,
while OPEC MCs are main suppliers of oil and crude oil
products to Europe. . . .
"Of major importance to the ultimate success of the
euro, in terms of the oil pricing, will be if Europe's
two major oil producers -- the United Kingdom and Norway
join the single currency. Naturally, the future
integration of these two countries into the Euro-zone
and Europe will be important considering they are the
region's two major oil producers in the North Sea, which
is home to the international crude oil benchmark, Brent.
This might create a momentum to shift the oil pricing
system to euros. . . .
"In the short-term, OPEC MCs, with possibly a few
exceptions, are expected to continue to accept payment
in dollars. Nevertheless, I believe that OPEC will not
discount entirely the possibility of adopting euro
pricing and payments in the future. The Organization,
like many other financial houses at present, is also
assessing how the euro will settle into its life as a
new currency. The critical question for market players
is the overall value and stability of the euro, and
whether other countries within the Union will adopt the
single currency.
"It is quite possible that as the bilateral trade
increases between the Middle East and the European
Union, it could be feasible to price oil in euros
considering Europe is the main economic partner of that
region. This would foster further ties between these
trading blocs by increasing commercial exchange, and by
helping attract much-needed European investment to the
Middle East.
"In the long-term, perhaps one question that comes to
mind is could a dual system operate simultaneously?
Could one pricing system apply to the Western Hemisphere
in dollars and for the rest of the world in euros? This
will remain the test for the euro, should the currency
gain ground in the market of oil transactions
". . . Should the euro challenge the dollar in strength,
which essentially could include it in the denomination
of the oil bill, it could be that a system may emerge
which benefits more countries in the long-term. Perhaps
with increased European integration and a strong
European economy, this may become a reality. Time may be
on your side. I wish the euro every success."[20]
Based on this important speech, momentum for OPEC to consider
switching to the euro will grow once the E.U. expands in May 2004
to 450 million people with the inclusion of 10 additional member
states. The aggregate GDP will increase from $7 trillion to $9.6
trillion. This enlarged European Union (EU) will be an oil
consuming purchasing population 33% larger than the U.S., and over
half of OPEC crude oil will be sold to the EU as of mid-2004. This
does not include other potential E.U./euro entrants such as the
U.K., Norway, Denmark and Sweden. It should be noted that since
late 2002, the euro has been trading at parity or above the
dollar, and analysts predict the dollar will continue its downward
trending in 2003 relative to the euro.
It appears the final two pivotal items that would create the OPEC
transition to euros will be based on (1) if and when Norway's
Brent crude is re-dominated in euros and (2) when the U.K. adopts
the euro. Regarding the later, Tony Blair is lobbying heavily for
the U.K. to adopt the euro, and their adoption would seem imminent
within this decade. If and when the U.K. adopts the euro currency
I suspect a concerted effort will be quickly mounted to establish
the euro as an international reserve currency. Again, I offer the
following information from an astute individual who analyzes these
international monetary matters very carefully:
"The pivotal vote will probably be Sweden, where
approval this next autumn of adopting the euro also
would give momentum to the Danish government's strong
desire to follow suit. Polls in Denmark now indicate
that the euro would pass with a comfortable margin and
Norwegian polls show a growing majority in favor of EU
membership. Indeed, with Norway having already
integrated most EU economic directives through the EEA
partnership and with their strongly appreciated
currency, their accession to the euro would not only be
effortless, but of great economic benefit.
"As go the Swedes, so probably will go the Danes &
Norwegians. It's the British who are the real obstacle
to building momentum for the euro as international
transaction & reserve currency. So long as the United
Kingdom remains apart from the euro, reducing exchange
rate costs between the euro and the British pound
remains their obvious priority. British adoption (a
near-given in the long run) would mount significant
pressure toward repegging the Brent crude benchmark --
which is traded on the International Petroleum Exchange
in London -- and the Norwegians would certainly have no
objection whatsoever that I can think of, whether or not
they join the European Union.
"Finally, the maneuvers toward reducing the global
dominance of the dollar are already well underway and
have only reason to accelerate so far as I can see. An
OPEC pricing shift would seem rather unlikely prior 2004
-- barring political motivations (ie. from anxious OPEC
members) or a disorderly collapse of the dollar (ie.
Japanese bank collapse due to high oil prices following
a prolonged Iraq conflict) but appears quite viable to
take place before the end of the decade."
In other words, beginning around 2004-2008, from a purely
economic, trade and monetary perspective, it will become logical
for some OPEC producers to transition to the euro for oil pricing.
Of course that will reduce the dollar's international
demand/liquidity value, and hurt the U.S.'s ability to fund its
massive debt unless U.S. policy makers begin to make difficult
fiscal and monetary changes right away -- or use our massive
military power to force events upon OPEC . . .
Facing these potentialities, I hypothesize that President Bush
intends to topple Saddam in 2003 in a pre-emptive attempt to
initiate massive Iraqi oil production in far excess of OPEC
quotas, to reduce global oil prices, and thereby dismantle OPEC's
price controls. The end-goal of the neo-conservatives is
incredibly bold yet simple in purpose, to use the `war on terror'
as the premise to finally dissolve OPEC's decision-making process,
thus ultimately preventing the cartel's inevitable switch to
pricing oil in euros. How would the Bush administration break-up
the OPEC cartel's price controls in a post-Saddam Iraq? First, the
newly installed U.S. ruler (Gen. Garner) will convert Iraq's oil
exports back to the dollar standard. Moreover, according to a
Washington Post article just before the Iraq war, one of the
pre-determined decisions of the "Iraqi interim authority" in a
postwar economy is to drop the Iraq dinar, and covert Iraq to the
U.S. dollar.
"The exact role of the authority, when it would begin to
take over government functions, and who would be part of
it are still to be determined, according to other senior
administration officials. But they did suggest that in
running a postwar Iraqi economy, the U.S. plans to
substitute U.S. dollars for the Iraqi currency that
bears a likeness of President Saddam Hussein."[21]
Obviously the `dollarization' of Iraq would apply to the vital oil
transaction currency issue, but I do not expect that crucial
"detail" to be discussed in the U.S. media. Following the war,
with the U.S. military protecting the oil fields, the new ruling
junta will undertake the necessary steps to significantly increase
production of Iraq oil -- well beyond OPEC's 2 million barrel per
day quota. Analysts have predicted that raising Iraq's oil
production back to pre-1990 levels will take between several
months or two years. Nonetheless, geostrategists such as Henry
Kissenger suggested in 1973 that the US should invade the Middle
East, and disband the OPEC cartel. Mr. Robert Dreyfuss discussed
the history of these goals in his article "The Thirty Year
Itch."[22] Dr. Nayyer Ali offers a succinct analysis of how Iraq's
underutilized oil reserves will not be a `profit-maker' for the
U.S. government, but will fulfill the more important Geostrategic
goal of providing the crucial economic instrument to leverage and
dissolve OPEC's price controls, thus fulfilling the long
sought-after goal of the neo-conservatives to disband the OPEC
cartel:
". . . Despite this vast pool of oil, Iraq has never
produced at a level proportionate to the reserve base.
Since the Gulf War, Iraq's production has been limited
by sanctions and allowed sales under the oil for food
program (by which Iraq has sold 60 billion dollars worth
of oil over the last 5 years) and what else can be
smuggled out. This amounts to less than 1 billion
barrels per year. If Iraq were reintegrated into the
world economy, it could allow massive investment in its
oil sector and boost output to 2.5 billion barrels per
year, or about 7 million barrels a day.
"Total world oil production is about 75 million barrels,
and OPEC combined produces about 25 million barrels.
"What would be the consequences of this? There are two
obvious things.
"First would be the collapse of OPEC, whose strategy of
limiting production to maximize price will have finally
reached its limit. An Iraq that can produce that much
oil will want to do so, and will not allow OPEC to limit
it to 2 million barrels per day. If Iraq busts its
quota, then who in OPEC will give up 5 million barrels
of production? No one could afford to, and OPEC would
die. This would lead to the second major consequence,
which is a collapse in the price of oil to the 10-dollar
range per barrel. The world currently uses 25 billion
barrels per year, so a 15-dollar drop will save
oil-consuming nations 375 billion dollars in crude oil
costs every year.
". . . The Iraq war is not a moneymaker. But it could be
an OPEC breaker. That however is a long-term outcome
that will require Iraq to be successfully reconstituted
into a functioning state in which massive oil sector
investment can take place."[23]
The American people are oblivious to the potential economic risks
regarding the Iraq war. The Bush administration believes that by
toppling Saddam they will remove the juggernaut, thus allowing the
US to control Iraqi's huge oil reserves, and finally break-up and
dissolve the 10 remaining countries in OPEC. However, U.S.
occupation of Iraq could exacerbate tensions within OPEC or
perhaps Iran, providing further impetus for momentum for pricing
oil in euros.
This last issue is undoubtedly a significant gamble even in the
best-case scenario of a relatively quick and painless war that
topples Saddam and leaves Iraq's oil fields intact. Undoubtedly,
the OPEC cartel could feel threatened by the goal of the
neo-conservatives to break-up OPEC's price controls ($22-$28 per
barrel). Perhaps the Bush administration's ambitious goal of
flooding the oil market with Iraqi crude may work, but I have
doubts. Will OPEC simply tolerate quota-busting Iraqi oil
production, thus delivering to them a lesson in self-inflicted
hara-kiri (suicide)? Contrarily, OPEC could meet in Vienna and in
an act of self-preservation re-denominate the oil currency to the
euro. Although unlikely, such a decision would mark the end of
U.S. dollar hegemony, and thus the end of our precarious economic
superpower status. Again, I offer the analysis of an astute
observer regarding the colossal gamble this administration is
undertaking:
"One of the dirty little secrets of today's
international order is that the rest of the globe could
topple the United States from its hegemonic status
whenever they so choose with a concerted abandonment of
the dollar standard. This is America's preeminent,
inescapable Achilles Heel for now and the foreseeable
future.
"That such a course hasn't been pursued to date bears
more relation to the fact that other Westernized, highly
developed nations haven't any interest to undergo the
great disruptions which would follow -- but it could
assuredly take place in the event that the consensus
view coalesces of the United States as any sort of
`rogue' nation. In other words, if the dangers of
American global hegemony are ever perceived as a greater
liability than the dangers of toppling the international
order. The Bush administration and the neo-conservative
movement has set out on a multiple-front course to
ensure that this cannot take place, in brief by a
graduated assertion of military hegemony atop the
existent economic hegemony."
Regrettably, under this administration we have returned to massive
deficit spending, and the lack of strong SEC enforcement has
further eroded investor confidence. Indeed, the flawed economic
and tax policies and of the Bush administration resulting in years
of projected deficits may be exacerbating the weakness of the
dollar, if not outright hastening some countries to diversify
their central bank reserve funds with euros as an alternative to
the dollar. From a foreign policy perspective, the terminations of
numerous international treaties and disdain for international
cooperation via the U.N. and NATO have angered even our closest
allies.
In September 2002, Dr. Paul Isbell wrote an excellent analysis
regarding the quiet "tectonic shifts" underway with respect the
dollar and euro. In his essay he asked, "What can Europe do to
consciously prepare the way for the day when this tectonic shift
in monetary relations becomes undeniably obvious?"[24]
Unfortunately, today we are witnessing this clash of US/EU
financial interests in the form of the upcoming Iraq war over
Saddam's switch to a "petroeuro." Instead of leading a pre-emptive
war in Iraq, the US should be pursuing a multilateral treaty,
perhaps mediated by the UN that establishes a dual-currency
standard for OPEC oil pricing.
Synopsis
It would appear that any attempt by OPEC member states in the
Middle East or Latin America to transition to the euro as their
oil transaction currency standard shall be met with either overt
U.S. military actions or covert U.S. intelligence agency
interventions. Under the guise of the perpetual `war on terror'
the Bush administration is manipulating the American people about
the unspoken but very real macroeconomic reasons for this upcoming
war with Iraq. This war in Iraq will not be based on any threat
from Saddam's old WMD program, or from terrorism. This war will be
over the global currency of oil. A war intended to prevent oil
from being priced in euros.
Sadly, the U.S. has become largely ignorant and complacent. Too
many of us are willing to be ruled by fear and lies, rather than
by persuasion and truth. Will we allow our government to initiate
the dangerous `pre-emptive doctrine' by waging an unpopular war in
Iraq, while we refuse to acknowledge that Saddam does not pose an
imminent threat to the United States? Furthermore, we seem unable
to address the structural imbalances in our economy due to massive
debt manipulation, unaffordable 2001 tax cuts, record levels of
trade deficits, unsustainable credit expansion, corporate
accounting abuses, near zero personal savings, record personal
indebtedness, and our reliance and over consumption of Middle
Eastern oil.
Regardless of whatever Dr. Blix finds or does not find in Iraq
regarding WMD, it appears that President Bush is determined to
pursue his `pre-emptive' imperialist war to secure a large portion
of the earth's remaining hydrocarbons, and ultimately use Iraq's
underutilized oil to destroy the OPEC cartel. Will this gamble
work? That remains to be seen. However, the history of warfare is
replete with unintended consequences. It is plausible that the
aftermath of the Iraq war and a U.S. occupation of Iraq could
increase Al-Qaeda sponsored terrorism against U.S. targets, or
more likely create guerilla warfare in a post-war Iraq. Moreover,
continued U.S. unilateralism could create economic retribution
from the international community or OPEC.
The question we as Americans must ask -- Can the US military
control by force all oil-producing nations and dictate their oil
export transaction currency? In brief, the answer is no. Will we
forfeit any pretense of practicing free-market capitalism while we
enforce a military command economy for global oil transactions? Is
it morally defensible to deploy our brave but naïve young soldiers
around the globe to enforce U.S. dollar hegemony for global oil
transactions via the barrels of their guns? Will we allow
imperialist conquest of the Middle East to feed our excessive oil
consumption, while ignoring the duplicitous overthrowing of a
democratically elected government in Latin America? Is it
acceptable for a U.S. President to threaten military force upon
OPEC nation state(s) because of their sovereign choice of currency
regarding their oil exports? I concur with Dr. Peter Dale Scott's
sentiments on this question:
". . . hopefully decent Americans will protest the
notion that it is appropriate to rain missiles and bombs
upon civilians of another country, who have had little
or nothing to do with this (financial) crisis of
America's own making."
"A multilateral approach to these core problems is the
only way to proceed. The US is strong enough to dominate
the world militarily. Economically it is in decline,
less and less competitive, and increasingly in debt. The
Bush peoples' intention appears to be to override
economic realities with military ones, as if there were
no risk of economic retribution. They should be mindful
of Britain's humiliating retreat from Suez in 1956, a
retreat forced on it by the United States as a condition
for propping up the failing British pound.[25]
Lastly, how can we effectively thwart the threat of international
Al Qaeda terrorism if we alienate so many of our European allies?
Paradoxically, this administration's flawed economic policies and
belligerent foreign policies may hasten the outcome they hope to
prevent -- further OPEC momentum towards the euro. Furthermore,
using U.S. military and/or the threat of force is a rather
unwieldy instrument for Geostrategy, and as such it is unlikely to
indefinitely thwart some OPEC members from acting on their
`internal discussions' regarding a switch to euros. Informed U.S.
patriots realize this administration's failed economic policies in
conjunction with their militant Imperialist overreach is proving
not only detrimental to our international stature, but also
threatens our economy and civil liberties. Thus, remaining silent
is not only misguided, but false patriotism. We must not stand
silent and watch our country continue these imperialist policies.
The US must not become an isolated `rogue' superpower, relying on
brute force, thereby motivating other nations to abandon the
dollar standard -- and with the mere stroke of a pen -- slay our
superpower status?
This need not be our fate. When will we demand that our government
begin the long and difficult journey towards energy conservation,
development of renewable energy sources, and sustained balanced
budgets to allow real deficit reduction? When will we repeal the
clearly unaffordable 2001 tax cuts to facilitate a balanced fiscal
budget, enforce corporate accounting laws, and substantially
reinvest in our manufacturing and export sectors to gradually but
earnestly move our economy from a trade account deficit position
back into a trade account surplus position?
Indeed, over the last two decades, the significant loss of U.S.
manufacturing capability to foreign competition has adversely
affected our ability to maintain a sustainable economy. The "New
Economy" paradigm of the 1990s has created a false `service sector
economy' that simply cannot sustain the U.S.'s economic and
military power status in a competitive globalized economy.
Undoubtedly, we must make these and many more difficult structural
changes to our economy if we are to restore and maintain our
international "safe harbor" investment status.
Furthermore, it would seem imperative that our government begins
discussions with the G7 nations to reform the global monetary
system. We must adopt our economy to accommodate the inevitable
ascendance of the euro as an alternative international reserve
currency. I concur with those enlightened economists who recommend
the U.S. begin the process of convening the next `Bretton Woods
Conference.' The U.S. government should compromise and agree to
the euro becoming the next international reserve currency. A
compromise on the euro/oil issues via a multilateral treaty with a
gradual phase-in of a dual-OPEC currency transaction standard
seems inevitable. It would also seem prudent to investigate a
third `Asia bloc' of the Yen/Yuan as reserve currency options to
give balance to the global monetary system.
While these multilateral reforms may lower our excessive oil
consumption, force the US government to engage in fiscally
responsible policies, and reduce some of our global military
presence, perhaps these adjustments could also reduce some of the
animosity towards U.S. foreign policies. Secondly, it is hoped
such reforms could improve the quality of our lives, and that of
our children by motivating the U.S. to finally become more energy
efficient. Creating balanced domestic fiscal polices, rebuilding
alliances with the E.U./world community and energy reform are in
the long-term national security interests of the U.S. Global Peak
oil is a challenge to humanity itself, and will require an
unprecedented amount of international cooperation and coordination
to overcome this history-making event. Furthermore, global
monetary reform is not only necessary, but could mitigate future
armed or economic warfare over oil, ultimately fostering a more
stable, safer, and prosperous global economy in the 21st century.
Unfortunately, the proposed multilateral conference on monetary
reform and energy reform is viewed as abhorrent to the current
neoconservative movement, which is premised upon the US as the
"Pre-eminent" global Empire.[26] Even a cursory reading of the
neoconservative agenda as outlined in the Project for a New
American Century (PNAC) policy document illustrates their
idealistic goal is US global dominance -- both militarily and
economically. Indeed, the Bush administration's entrenched
political ideology appears quite incompatible with multilateral
economic reform. The neoconservatives seem to view compromise as
antithetical. Ultimately We the People must demand a new
administration. We need responsible leaders who are willing to
return to balanced budgets, conservative fiscal policies, and to
our traditions of engaging in multilateral foreign policies while
seeking broad international cooperation.
Equally important, we must bear in mind the wisdom of founding
fathers like Thomas Jefferson who insisted that a free press is
vital, as it is often the only mechanism to protect democracy. The
American people are not aware of the issues outlined in this essay
because the US mass media has been reduced to approximately six
large media conglomerates that filter 90% of the information that
flows within the U.S. Sadly, part of today's dilemma lays not only
within Congress but also a handful of elitist,
imperialist-oriented media conglomerates that have failed in their
Constitutional obligations to inform the People. Critical
information about the Iraq war was only available via the
Internet, which should not be our only source of real, unfiltered
news.
Finally, despite the media reporting otherwise, the current wave
of `global anti-Americanism' is not against the American people or
against American values -- but against the hypocrisy of militant
American Imperialism. I respectfully submit the current polices of
the neoconservative movement as expressed through various PNAC
documents, their manipulation of the citizenry through fear, and
the application of unilateral U.S. military force is treasonous
not only to the American Public, but incompatible to the very
fundamental principles that founded our nation.
It has been said that the vast majority of wars are fought over
resources and economics, and even so-called "religious wars"
usually have economics or access to resources as a hidden motive.
The Iraq war is no different from other modern wars except it
appears to usher in `oil currency' as a new paradigm for warfare.
However, the world community may not tolerate an imperialist U.S.
Hyper-Power that ignores International Law while using military
force to conquer sovereign nations. Indeed, the facts suggest
additional oil-producing nation states will eventually exercise
their sovereign right by pricing their oil exports in euros
instead of dollars.
I will reiterate the fundamental issue facing our country -- Can
the US military and intelligence agencies control the governments
in all oil-producing nations -- as well as their oil export
currencies? In brief, the answer is no. The question becomes how
many countries will we allow our government to overthrow under the
false pretext of the next "war on terror?" Additionally, how much
international "blowback" against the US and its citizens would
such a Geostrategy create? Likewise, if President Bush pursues an
unprovoked and basically unilateral war against Iraq, the
historians will not be kind to him or his administration. Their
agenda is clear to the world community, but when will US patriots
become cognizant of their modus operandi?
"It is the absolute right of the State to supervise the
formation of public opinion."
"If you tell a lie big enough and keep repeating it,
people will eventually come to believe it."
"The lie can be maintained only for such time as the
State can shield the people from the political, economic
and/or military consequences of the lie. It thus becomes
vitally important for the State to use all of its powers
to repress dissent, for the truth is the mortal enemy of
the lie, and thus by extension, the truth is the
greatest enemy of the State."
-- Dr. Joseph Goebbels, German Minister of Propaganda,
1933-1945
# # #
Background on Hydrocarbons and US Geostrategy
To understand US Geostrategy one needs to have a realistic
appreciation of the importance of hydrocarbons, the phenomenon
referred to as Peak Oil, and the importance of Iraq's oil reserves
with respect to these issues. I should note that two types of data
exist regarding oil reserves, "political data" and "technical
data." Politicians, the media, and economists use political data,
whereas governments, their intelligence agencies, and geologist
use the much more accurate, and much more guarded, technical data.
One important issue not understood by the general population is
the impending geological phenomenon known as "Peak Oil." It is
extremely unfortunate that our corporate-controlled media
conglomerates do not report on the significance of global Peak
Oil. It would seem the European community is openly discussing
this issue, and trying to make preparations to reduce their
overall energy consumption.
Contrarily, the U.S. government is making preparations for more
unilateral wars in an effort to control the worlds' hydrocarbons
-- and the oil currency.[27] The Pentagon has contemplated a
"5-year, 7-war plan."[28] Regarding Peak Oil, Michael Ruppert's
controversial website offers several articles: From the
Wilderness. Although some of these articles are overwrought, their
analysis does illustrate how the expanding `war on terror' follows
wherever US Geostrategic concerns are regarding hydrocarbons
reserves or pipelines (West Africa, South America, etc).
This crucial concept of Peak Oil was first illustrated in
bell-shaped curves by U.S. geophysicist M. King Hubbert, who in
1956 correctly predicted U.S. oil production would peak in 1971.
Each oil field in the world follows a more or less bell-shaped
curve, and the composite view of the world's thousands of oil
fields is one gigantic, ragged edged looking bell-shaped curve.
The best source of data regarding global oil production is form
Petroconsultants Inc out of Zurich. They maintain the largest
private databases of the 40,000 oil fields in the world. It is
rumored that the CIA is their biggest client, and that something
in their 1995 report might have predicted global Peak Oil unless
the Caspian Sea region contained an extensive amount of untapped
oil. Unfortunately the reports by Petroconsultants Inc. cost
approx. $35,000, and non-disclosure statements are required for
their rather exclusive clientele. Undoubtedly the Bush/Cheney
administration is aware of the issues surrounding Peak Oil.
Perhaps acknowledge of this issue is related to their plans to
invade Iraq, which predate Saddam's switch to the euro by years.
To date the two most authoritative books I have reviewed regarding
technical oil production data and Peak Oil are the following; The
Party's Over: Oil, War and the Fate of Industrial Societies (2003)
by Richard Heinberg[29], and Hubbert's Peak; The Impeding World
Oil Shortage (2001) by Kenneth Deffeyes[30]. Highly respected
geologist Colin Campbell has also researched this issue
extensively[31]. Using Hubbert's methodology to measure global oil
production, contemporary geologists have forecast that global Peak
Oil will occur around 2010. Though veteran geologists such as
Kenneth Deffeyes have now concluded that Peak Oil will most likely
occur between 2004 and 2008. The following illustrates his
sentiments:
"My own opinion is that the peak in world oil production
may even occur before 2004. What happens if I am wrong?
I would be delighted to be proved wrong. It would mean
that we have a few additional years to reduce our
consumption of crude oil. However, it would take a lot
of unexpectedly good news to postpone the peak to
2010.[32]
The following information will briefly discuss U.S. Geostrategic
issues regarding Iraq's oil reserves. Other than the core driver
of the dollar versus euro currency threat, the other issue related
to the upcoming war with Iraq appears related to some
disappointing geological findings regarding the Caspian Sea
region. Since the mid-to-late 1990s the Caspian Sea region of
Central Asia was thought to hold approximately 200 billion barrels
of untapped oil (the later would be comparable to Saudi Arabia's
reserve base)."[33] Based on an early feasibility study by Enron,
the easiest and cheapest way to bring this oil to market would be
a pipeline from Kazakhstan, through Afghanistan to the Pakistan
border at Malta. In the late 1990s not only was the Enron
Corporation relying on cheap liquefied natural gas from the
Caspian Sea region for their power plan in India, but also large
energy companies such as Unocal and Halliburton.
"I cannot think of a time when we have had a region
emerge as suddenly to become as strategically
significant as the Caspian." -- Former CEO of
Halliburton, Dick Cheney 1998
In fact, these Caspian region oil reserves were a central
component of Vice President Cheney's energy plan released in May
2001. According to his report, the U.S. will import 90% of its oil
by 2020, and thus tapping into the reserves in the Caspian Sea
region was viewed as a U.S. strategic goal that would help meet
our growing energy demand, and also reduce our dependence on oil
from the Middle East.[34] It is for similar reasons that I believe
Tony Blair endorsed the Iraq war. The U.K. has no oil reserves
other than the North Sea. Unfortunately, the North Sea oil fields
belonging to the U.K. reached peak production in the year 2000.
I suspect the decline in the North Sea output from 2001 to present
day is quite disconcerting to the British government, as it is
much more rapid than one would expect. Like the U.S., the U.K.
will soon import the majority of its oil, perhaps Blair agreed to
the invasion given that British Petroleum (BP) has been the only
non-US oil company that has received oil exploration rights in the
post-Saddam Iraq. Of course the U.K. has not yet ascended to the
euro. Because global oil production seems to have leveled off in
2000, Richard Heinberg recently suggested that we might have
reached a "Peak Oil Plateau."[35] The following graph illustrates
global Peak Oil.
[Reg. Oil&Nat. Gas Liquids]
Once Peak Oil is reached, the supply of oil/energy will begin an
irreversible decline, along with a corresponding irreversible
increase in price despite growing demand from industrialized and
developing nations. Despite various claims by environmental
groups, there is simply no readily available substitute for oil
regarding transportation, nor do the alternatives produce the
power output of oil. Eventually substitutes for oil may become
available, but only if we begin international cooperation on a
truly unprecedented scale, and avoid "global oil warfare."
Although the records from Vice President Cheney's spring 2001
energy meetings are still secret, there is one individual who was
present during some of those meetings and is willing to publicly
discuss Peak Oil. Mr. Matthew Simmons, who was a key advisor to
the Bush Administration, and participated on Vice President
Cheney's 2001 Energy Task Force. Mr. Simmons is an investment
banker in Texas, and CEO of Simmons and Co. International,
handling an investment portfolio of $56 billion. In May 2003 Mr.
Simmons stated the following at a conference for the Association
of the Study of Peak Oil & Gas (ASPO) in Paris, France.
"I think basically that now, that peaking of oil will
never be accurately predicted until after the fact. But
the event will occur, and my analysis is leaning me more
by the month, the worry that peaking is at hand; not
years away. If it turns out I'm wrong, then I'm wrong.
But if I'm right, the unforeseen consequences are
devastating. But unfortunately the world has no Plan B
if I'm right. The facts are too serious to ignore. Sadly
the pessimist-optimist debate started too late."[36]
Regarding US Geostrategy in Afghanistan, according to the French
book, The Forbidden Truth,[37] the Bush administration ignored the
U.N. sanctions that had been imposed upon the Taliban and entered
into negotiations with the supposedly `rogue regime' from February
2, 2001 to August 6, 2001. According to this book, the Taliban
were apparently not very cooperative based on the statements of
Pakistan's former ambassador, Mr. Naik. He reports that the U.S.
threatened a `military option' in the summer of 2001 if the
Taliban did not acquiesce to our demands. Fortuitous for Cheney's
energy plan, Bin Laden delivered to us 9/11/01. The pre-positioned
U.S. military, along with the CIA providing cash to the Northern
Alliance leaders, led the invasion of Afghanistan and the Taliban
were routed. The pro-western Karzai government was ushered in. The
pipeline project was now back on track in early 2002, well, sort
of . . .
After three exploratory wells were built and analyzed, it was
reported that the Caspian region holds only approximately 10 to 20
billion barrels of oil (although it does have a lot of natural
gas)."[38] The oil is also of poor quality, with high sulfur
content. Subsequently, several major companies have now dropped
their plans for the pipeline citing the massive project was no
longer profitable. Unfortunately, this recent realization about
the Caspian Sea region has serious implications for the U.S.,
India, China, Asia and Europe, as the amount of available
hydrocarbons for industrialized and developing nations has been
decreased downward by 20%. (Remaining global estimates reduced
from 1.2 trillion barrels to approx. 1.0 trillion)[39][40].
The following graph illustrates Global Peak Oil, sometimes
referred to as the "Big Rollover."
[World liquids production]
It is widely reported as factual that Iraq has 11% of the world's
total oil reserves (112 billion barrels). However, no geological
surveys have been conducted in Iraq since the 1970s. The Russians,
French, and Chinese were eager to lease Iraq's unexplored fields,
which may contain up to 200 billion barrels[39]. In January 2002
President Bush asked General Tommy Franks to construct an invasion
plan for Iraq. Under the threat of "mushroom clouds," our prime
nemesis, Bin Laden, was skillfully replaced by the OSP into our
new public enemy #1, Saddam Hussein.
For those who would like to review how depleting hydrocarbon
reserves could adversely erode our civil liberties and democratic
processes, retired U.S. Special Forces officer Stan Goff offers a
sobering analysis in his essay: "The Infinite War and Its
Roots".[41] Likewise, for those who wish to review some of the
unspeakable evidence surrounding the September 11th tragedy, Gore
Vidal's controversial book, Dreaming War offers a thorough
introduction.[42] Finally, The War on Freedom: How and Why America
was Attacked, September 11, 2001 by British political scientist
Nafeez Mosaddeq Ahmed methodically presents disconcerting
questions about the 9/11 tragedy and U.S. geostrategy regarding
Afghanistan.[43]
References
1. Rangwala, Glen, `Claims and evaluations of Iraq's proscribed
weapons,' February 25, 2003
2. FAIR Fairness & Accuracy, `Media Advisory: Star Witness On
Iraq Said Weapons Were Destroyed,' February 27, 2003
(Official UNSCOM/IAEA Document); See also Barry, John,
"Exclusive: The Defector's Secrets, Newsweek, March 3, 2003
3. London, Heidi Kingstone, "Middle East: Trouble in the House
of Saud," The Jerusalem Report, January 13, 2003
4. Recknagel, Charles, "Iraq: Baghdad Moves to Euro," Radio Free
Europe, November 1, 2000
5. Islam, Faisal, "Iraq nets handsome profit by dumping dollar
for euro," The Observer, February 16, 2003
6. "Economics Drive Iran Euro Oil Plan, Politics Also Key,"
IranExpert, August 23, 2002
7. "Forex Fund Shifting to Euro," Iran Financial News, August
25, 2002
8. Gutman, Roy & Barry, John, "Beyond Baghdad: Expanding Target
List: Washington looks at overhauling the Islamic and Arab
world," Newsweek, August 11, 2002
9. Costello, Tom, "Japan's Economy at Risk of Collapse," MSNBC
News, December 11, 2002
10. Gluck, Caroline, "North Korea embraces the euro," BBC News,
December 1, 2002
11. "What the World Thinks in 2002 -- How Global Publics View:
Their Lives, Their Countries, The World, America," The Pew
Research Center For The People & The Press, December 4, 2002
12. "Euro continues to extend its global influence,"
europartnership.com, January 7, 2002
13. Garnaut, John, "US Dollar Losing Its Position As Asia's
Reserve Currency," July 17, 2002
14. "Canada sells gold, keeps shift into euro reserves," Forbes,
January 6, 2003
15. Henderson, Hazel, "Beyond Bush's Unilateralism: Another
Bi-Polar World or A New Era of Win-Win?" InterPress Service,
June 2002
16. Birms, Larry & Volberding, Alex, "U.S. is the Primary Loser
in Failed Venezuelan Coup," Newsday, April 21, 2002
17. "USA intelligence agencies revealed in plot to oust
Venezuela's President," vheadline.com, December 12, 2002
18. Spiro, David E., The Hidden Hand of American Hegemony:
Petrodollar Recycling and International Markets, Cornell
University Press (1999)
19. Liu, Henry C K, "US dollar hegemony has got to go," Asia
Times, April 11, 2002
20. "The Choice of Currency for the Denomination of the Oil
Bill," Speech given by Javad Yarjani, Head of OPEC's
Petroleum Market Analysis Dept, on The International Role of
the Euro (Invited by the Spanish Minister of Economic Affairs
during Spain's Presidency of the EU), April 14, 2002, Oviedo,
Spain
21. Walsh, Edward, "U.S. Sketches Plan for Postwar `Iraqi Interim
Authority'," Washington Post, March 15, 2003
22. Dreyfus, Robert, "The Thirty Year Itch,' Mother Jones
Magazine, March/April 2003
23. Nayyer, Dr. Ali, "Iraq and Oil," PakistanLink, December 13,
2002
24. Isbell, Paul, "The Shifting Geopolitics of the Euro," Real
Instituto El Cano, September 23, 2002
25. Scott, Dr. Peter Dale, "Bush Deep Reason's for the War on
Iraq: Oil, Petrodollars, and the OPEC Euro Question,"
February 15, 2003
26. Project for a New American Century (PNAC); See Rebuilding
America's Defenses: Strategy, Forces and Resources For a New
Century, September 2000
27. "US plan for military action against Iran complete," Sidney
Morning Herald, May 30, 2003
28. Clark, Wesley, Waging Modern War: Iraq, Terrorism, and the
American Empire, Public Affairs (2003)
29. Heinberg, Richard, The Party's Over: Oil, War and the Fate of
Industrial Societies, New Society Publishers (2003)
30. Deffeyes, Kenneth S, Hubbert's Peak: The Impending World Oil
Shortage, Princeton University Press (2001)
31. Campbell, Colin, Founder, The Association for the Study of
Peak Oil & Gas (ASPO)
32. Dreffeyes, Hubbert's Peak, op. cit.; See sample chapter
33. Pfeiffer, Dale Allen, "Much Ado about Nothing -- Whither the
Caspian Riches? Over the Last 24 Months Hoped For Caspian Oil
Bonanza Has Vanished With Each New Well Drilled -- Global
Implications Are Frightening," From The Wilderness, December
5, 2002
34. National Energy Policy: Report of the National Energy Policy
Development Group, whitehouse.gov, May 2001
35. Heinberg, Richard, "The Petroleum Plateau," Muse Letter No.
#135, May 2003
36. Revealing Statements from a Bush Insider about Peak Oil and
Natural Gas Depletion, From The Wilderness, Matthew Simmons
Transcript, June 12, 2003
37. Jean Charles-Briscard & Guillaume Dasquie, The Forbidden
Truth: U.S.-Taliban Secret Oil Diplomacy, Saudi Arabia and
the Failed Search for bin Laden, Nation Books (2002)
o Interview: Donahue With Jean-Charles Brisard
o The French Connection - Paris Reporters Say Bush
Threatened War Last Summer, Village Voice, January 2-8,
2002
o Three Reviews of the book
38. Ruppert, Michael, "The Unseen Conflict -- War Plans, Backroom
Deals, Leverage and Strategy -- Securing What's Left of the
Planet's Oil Is and Has Always Been the Bottom Line," From
The Wilderness, October 18, 2002
39. Ruppert, Michael, FTW Interview: "Colin Campbell on Oil --
Perhaps the World's Foremost Expert on Oil and the Oil
Business Confirms the Ever More Apparent Reality of the
Post-9-11 World," From The Wilderness, October 23, 2002
40. Paul, James A, "Iraq: the Struggle for Oil," Global Policy
Forum, December 2002
41. Golf, Stan, "The Infinite War and its Roots," From The
Wilderness, August 27, 2002
42. Vidal, Gore, Dreaming War: Blood for Oil & the Cheney-Bush
Junta, Nation Books, 2002. His essay, "The Enemy Within" was
first printed in the UK Observer, October 27, 2002
43. Ahmed, Nafeez, The War on Freedom: How and Why America was
Attacked, September 11, 2001, Tree of Life Publications
(2002)
Addendum: Notable International Monetary Movements
(Late January 2003)
After completing this essay in mid-January 2003, I began to read
about some interesting international monetary developments and the
related opinions of analysts. These recent developments warrant
inclusion as an addendum. The following two articles relate to the
rapid devaluation of the dollar in late January relative to the
euro. This occurred in the week immediately preceding President
Bush's State of the Union address. Both of these articles suggest
that Russia -- a traditional holder of dollar reserves -- may be
linking `political overtones' to their exchanges of dollars for
euros. The following article may illustrate things to come if
President Bush continues on his present unilateral position on
Iraq.
"The dollar remained on the ropes on Thursday, buffeted
by some hawkish remarks from the US administration about
the standoff with Iraq. It was also stung by a pointed
signal from Russia's central bank that the appeal of
dollar-denominated assets is waning.
"Oleg Vyugin, first deputy chairman at the Russian
central bank, said the bank plans to cut the share of US
dollars in its foreign exchange reserves and increase
the share of other currencies. . . .
"Some analysts questioned whether there may be political
overtones to Vyugin's remarks, that could be related to
the widening rift between the US and some other
potential allies about how to persuade Iraq to comply
with UN weapons' inspectors requirements.
"Although Russia's own foreign exchange reserves are
fairly small by comparison with the world's biggest
central banks, the question is, `Will other central
banks follow and what does this do to the ability of the
US to finance its current account deficit?' said Marc
Chandler, chief currency strategist with HSBC in New
York.
"That deficit is currently around 5% of gross domestic
product and proving to be an increasingly heavy
millstone around the dollar's neck."[44]
Although global currency exchanges are notoriously volatile, it is
interesting to note the following day (January 25th) some analysts
reiterated that these monetary movements may be related not only
to the current geo-political tensions, but may also indicate
political motivations. Is this perhaps a `warning shot over the
bow' for the Bush administration regarding their position on Iraq?
These monetary movements by various central banks illustrate
trouble for the dollar.
"All of a sudden, the dollar's supposedly slow and
gradual decline isn't looking so slow, or gradual.
"In fact the speed of the dollar's slide, against the
euro in particular, has taken even the most seasoned
analysts by surprise: a Dow Jones Newswires foreign
exchange survey just ten days ago showed the major
currency trading banks forecasting the euro climbing to
$1.06 by the middle of February and not coming near
$1.10 until the end of the year.
"Instead, the euro has leaped to highs of around $1.0850
on Friday and has already gained 4% on the dollar this
year, leaving strategists increasingly scrambling to
update their forecasts. The Swiss franc keeps reaching
fresh four-year highs, and the dollar is on the ropes
against sterling and a host of other key rivals.
"Perhaps a more important barometer of broader
confidence in U.S. markets is the Treasurys market. With
the dollar falling, gold spiking and stocks under
pressure, Treasurys continue to retain their safe haven
appeal.
"But there are warning signals here, too, that are
beginning to get more attention. This week, the Russian
central bank said it was lowering the U.S. asset portion
of its foreign exchange reserves -- in other words
selling Treasurys -- calling the dollar a low-yielding
currency.
"Analysts believe some of the large Asian central banks
-- that between them hold the lion's share of the
world's dollar reserves -- are also considering
rejigging their Treasury holdings. A U.S.-led war in
Iraq could further accelerate that trend.
"Indeed, some political analysts believe that U.S.
policy over Iraq may already be having a direct impact
on holdings of U.S. assets, particularly with much of
the rest of the world so opposed to war. `It's hard for
me to believe that the flow of capital cannot help but
be affected by how the U.S. is perceived around the
world,' said Larry Greenberg, an international economist
at Ried Thunberg & Co. in Westport, Conn.
"`Today if you have the U.S. acting (in Iraq) against
world opinion, there could be an even faster pullback
out of dollar-denominated assets,' said Joseph Quinlan,
global economist with Johns Hopkins University, in
Washington. `How we go to war influences the rate of
decline of the dollar' he said."[45]
The day after the above article, the UK Observer's Will Hutton
wrote a forceful article against Bush's unilaterism. This article
further emphasizes the unfortunate economic imbalances of the U.S.
economy, and suggests the potential geo-political fallout of a
unilaterist war or an unstable aftermath in Iraq could create a
significant divestiture of dollar denominated assets.
"The US's economic position is far too vulnerable to
allow it to go war without cast-iron multilateral
support that could underpin it economically as well as
diplomatically and militarily. The multi-lateralism Bush
scorns is, in truth, an economic necessity. . . .
"On latest estimates, its net liabilities to the rest
the world are more than $2.7 trillion, nearly 30 per
cent of GDP, a scale of indebtedness associated with
basket-case economies in Latin America.
"Its industrial base is so uncompetitive that it
consistently imports more than it exports; its
current-account deficit, the gap between all its current
foreign earnings and foreign spending, is now a stunning
5 per cent of GDP, continuing a trend that has lasted
for more than 25 years and which is the cause of all
that foreign debt. As a national community, it has
virtually ceased to save so that government and
individuals alike live on credit.
To finance the current-account deficit, a reflection of
the lack of saving, the US relies on foreigners
supplying it with the foreign currency it can't earn
itself. . . .
"But if foreigners got windy about the prospects for
share and property prices and stopped buying, or began
to withdraw some of the trillions they have invested in
the US economy, then the dollar would collapse. Already,
it has fallen nearly 10 per cent against the euro over
the last six weeks, but that could just be the
beginning. Economists at the Federal Reserve have
estimated that the dollar needs to fall by 30 per cent
to bring the flow of imports and exports into balance,
but in today's markets such a fall doesn't happen
gradually. It happens precipitately.
"If America and Britain spurn a second UN Resolution and
go to war with the active opposition of key members of
the Security Council like France and Russia, be sure the
flow of dollars into the US will slow down dramatically,
and be sure there will be a stampede of foreigners
trying to sell. Shares on Wall Street that Bush is so
anxious to prop up are still massively overvalued.
Against this background, there could be a devastating
sell-off, with all the depressing knock-on consequences
for American consumer confidence and business
investment.
"What the markets were signaling last week was that this
is sufficiently within the bounds of possibility that it
was worth taking precautionary action, hence the
selling. If the war was over in a few weeks, the risks
would be containable, and there will be some shares well
worth buying at today's prices. But if the war was
prolonged or the subsequent peace unstable, then the
pressure on the dollar and Wall Street could become very
severe indeed, reinforcing the depressive influences on
an economy where the underlying imbalances are so
extraordinary.
"The US approach has been unilateralist here as
everywhere else: it does what it likes as it likes, a
policy that is now showing its limits. Bush needs badly
to change course, which Tony Blair should be urging on
him. The UN process needs to be respected and
reinforced, not least to reassure the markets, and
better systems of economic governance need to be put in
place. The US's military capacity may allow
unilateralism; its soft economic underbelly, we are
discovering, does not."[46]
These articles indicate that many central banks are reducing their
reliance on dollars, and quite possibly sending a message about
their opposition to the U.S.'s position on Iraq. Mr. Hutton is
correct; our current economic structure simply cannot afford a
significant divesture of foreign investments, nor can the indebted
US consumer and corporate sectors absorb such disruptions.
Although these currency movements are typically described as
purely economically derived decisions, it would be naïve to
suggest that geopolitics and global tensions have not played a
role in the broad movement away from the dollar. The world has no
interest in challenging the US militarily, but given our debt
levels, we have become quite vulnerable from an economic
perspective. . Hence, it is inadvisable for President Bush to
pursue an aggressive, unilateral application of U.S. military
force without broad U.N./international support.
European Commentary on the Essay:
`The Real Reasons for the Upcoming War With Iraq'
To finish, in January 2003, Mr. Coílín Nunan reviewed a draft of my
essay on an Internet forum. He subsequently published an
exceptional summary on an Irish website (www.feasta.org).
Hopefully our efforts will facilitate public awareness, and
stimulate a more honest debate on the Iraq issues. Below are
excerpts from his informative article "Oil, Currency, and the War
on Iraq."
"One of the stated economic objectives, and perhaps the
primary objective, when setting up the euro was to turn
it into a reserve currency to challenge the dollar so
that Europe too could get something for nothing.
"This however would be a disaster for the US. Not only
would they lose a large part of their annual subsidy of
effectively free goods and services, but countries
switching to euro reserves from dollar reserves would
bring down the value of the US currency. Imports would
start to cost Americans a lot more and as increasing
numbers of those holding dollars began to spend them,
the US would have to start paying its debts by supplying
in goods and services to foreign countries, thus
reducing American living standards. As countries and
businesses converted their dollar assets into euro
assets, the US property and stock market bubbles would,
without doubt, burst. The Federal Reserve would no
longer be able to print more money to reflate the
bubble, as it is currently openly considering doing,
because, without lots of eager foreigners prepared to
mop them up, a serious inflation would result which, in
turn, would make foreigners even more reluctant to hold
the US currency and thus heighten the crisis.
"There is though one major obstacle to this happening:
oil. Oil is not just by far the most important commodity
traded internationally, it is the lifeblood of all
modern industrialised economies. If you don't have oil,
you have to buy it. And if you want to buy oil on the
international markets, you usually have to have dollars.
Until recently all OPEC countries agreed to sell their
oil for dollars only. So long as this remained the case,
the euro was unlikely to become the major reserve
currency: there is not a lot of point in stockpiling
euros if every time you need to buy oil you have to
change them into dollars. This arrangement also meant
that the US effectively part-controlled the entire world
oil market: you could only buy oil if you had dollars,
and only one country had the right to print dollars --
the US.
"If on the other hand OPEC were to decide to accept
euros only for its oil (assuming for a moment it were
allowed to make this decision), then American economic
dominance would be over. Not only would Europe not need
as many dollars anymore, but Japan which imports over
80% of its oil from the Middle East would think it wise
to convert a large portion of its dollar assets to euro
assets (Japan is the major subsidizer of the US because
it holds so many dollar investments). The US on the
other hand, being the world's largest oil importer would
have, to run a trade surplus to acquire euros. The
conversion from trade deficit to trade surplus would
have to be achieved at a time when its property and
stock market prices were collapsing and its domestic
supplies of oil and gas were contracting. It would be a
very painful conversion.
"The purely economic arguments for OPEC converting to
the euro, at least for a while, seem very strong. The
Euro-zone does not run a huge trade deficit nor is it
heavily indebted to the rest of the world like the US
and interest rates in the Euro-zone are also
significantly higher. The Euro-zone has a larger share
of world trade than the US and is the Middle East's main
trading partner. And nearly everything you can buy for
dollars you can also buy for euros -- apart, of course,
from oil . . .
"All of this is bad news for the US economy and the
dollar. The fear for Washington will be that not only
will the future price of oil not be right, but the
currency might not be right either. Which perhaps helps
explain why the US is increasingly turning to its second
major tool for dominating world affairs: military
force."[47]
Saving the American Experiment (March 10, 2003)
Considering the core economic challenges that our nation faces,
and the deplorable oil currency war that I fear we are about to
witness in Iraq, this author advocates that the global monetary
system be reformed without delay. This would include the dollar
and euro designated as equal international reserve currencies, and
placed within an exchange band along with a dual-OPEC oil
transaction currency standard. Additionally, the G7 nations should
also explore a third reserve currency option regarding a yen/yuan
bloc for Asia. Such reforms may lower our ability to fund massive
deficits, consume excessive oil/energy, and project a global
military force, but they could improve the quality of our lives
and that of our children by reducing animosity towards the U.S.
and force our government to pursue more fiscally responsible
polices.
Given that 95% of the world's transportation system is dependent
on depleting hydrocarbons, the urgency in which we must pursue new
and alternative methods of energy production cannot be overstated.
Indeed, it is plausible that if the US government effectively
advocates energy reform regarding our own consumption levels, we
as a nation could simultaneously pursue the crucial patriotic goal
of enhancing the security of our nation by becoming one of the
world's leaders in developing and implementing alternative energy
sources. This is the missed opportunity that real US leadership
could have provided in the aftermath of 9/11. We could have
received an inspiring call to duty, challenging our nation to "go
to the moon" by the end of this decade regarding energy policy,
but instead the message was: "Unite. Go shopping, and don't be
afraid to fly." Failing to rally the citizenry for truly patriotic
purposes to strengthen our nation was perhaps one of the greatest
missed opportunities since the end of the Cold War.
We need a real National Energy Policy instead of an "endless war
on terrorism." Today's "blowback" is partly due to our ongoing
support of corrupt Middle East regimes/dictatorships.[48] Creating
a more equitable global monetary system while maintaining a strong
transatlantic relationship with Europe is in the long-term
national security interest of the U.S. Hopefully monetary and
energy reform could mitigate future armed or economic warfare over
oil, thus ultimately fostering a more stable, safer, and
prosperous 21st century.
Tragically, President Bush's administration does not appear
willing to initiate the arduous structural changes that our
economy must undertake if we are to adapt and accommodate the euro
as the second World reserve currency. Furthermore, this
administration has not communicated to the People the urgent need
for energy reform. Instead, they intend to enforce global dollar
monopoly for oil transactions via the application of superior U.S.
military force. My essay was written out of patriotic duty in an
effort to illustrate that such a military-centric geostrategy for
Empire has produced international isolation of the U.S., and may
ultimately result in our economic failure. I firmly believe our
nation will be better prepared to meet this decade's challenges if
the citizenry is cognizant of why the worldview is coalescing
against the U.S., why our nation is attempting by force to secure
Iraq's oil, revert its oil currency back to the dollar, and
install a permanent US military presence in the Persian Gulf
region. We must not allow the militant imperialism of this
administration to bring down the American Experiment.
"Of all the enemies to public liberty war is, perhaps,
the most to be dreaded because it comprises and develops
the germ of every other . . . No nation could preserve
its freedom in the midst of continual warfare."
-- James Madison
*************************
References: Addendum Section
44. Associated Press, "US Dollar on Shaky Ground," January 24,
2003
45. McCarthy, Grainne "Dollar's Decline Starting To Accelerate,
Rattling Nerves," Dow Jones Newswire, January 25, 2003
46. Hutton, Will, "Why Bush is sunk without Europe," The
Observer, January 26, 2003
47. Nunan, Coílín, "Oil, Currency, and the War on Iraq,"
Feasta.org, January 2003 (PDF)
48. Johnson, Chalmers, Blowback; The Cost and Consequences of
American Empire, Owl Books (2003)
Post-War Commentary (January 1, 2004)
"Hussein has not developed any significant capability
with respect to weapons of mass destruction. He is
unable to project conventional power against his
neighbors."
--Colin Powell on February 24, 2001
"Our conservative estimate is that Iraq today has a
stockpile of between 100 and 500 tons of chemical
weapons agent. That is enough agent to fill 16,000
battlefield rockets. Even the low end of 100 tons of
agent would enable Saddam Hussein to cause mass
casualties across more than 100 square miles of
territory, an area nearly five times the size of
Manhattan."
--Colin Powell at the UN on February 5, 2003
"Simply stated, there is no doubt that Saddam Hussein
now has weapons of mass destruction,"
--Dick Cheney on August 26, 2002.
"Intelligence leaves no doubt that Iraq continues to
possess and conceal lethal weapons."
--George W. Bush on March 18, 2003
"We are asked to accept Saddam decided to destroy those
weapons. I say that such a claim is palpably absurd."
--Tony Blair on March 18, 2003
"Why of course the people don't want war. . . . That is
understood. But, after all, it is the leaders of the
country who determine the policy, and it's always a
simple matter to drag the people along whether it's a
democracy, a fascist dictatorship, a parliament or a
communist dictatorship . . . the people can always be
brought to the bidding of the leaders. . . . All you
have to do is tell them they are being attacked, and
denounce the pacifists for lack of patriotism, and
exposing the country to greater danger.
--Hermann Goering, Nazi Reichsmarshal and Luftwaffe
chief
at Nuremberg trials, 1945
From the Roman Empire to today, the propaganda tactics for war as
discussed by Hermann Goering remain effective. It is deplorable
that even in the US or UK, people can always be "brought to the
bidding of the leaders." It is New Years Day, almost nine months
since the invasion of Iraq. The American people are slowly
realizing how much they were misled about this war. Many books
will be written about how these events unfolded, so I will only
briefly summarize my general observations in a few opening
paragraphs, and then return to the basic underlying Geostrategic
and macroeconomic reasons for the Iraq war. First, it has emerged
that a small clique of neoconservative ideologues and an Iraqi
exile provided most of the fraudulent "intelligence data" that was
publicized by the Executive Branch. This disinformation was
apparent before the war, but now it is simply irrefutable. A brief
synopsis of events follows.
Apparently in 2001-2002 the DIA and CIA were not giving Secretary
of Defense Donald Rumsfeld intelligence information that would
justify a US invasion of Iraq. In fact, it was well known to our
intelligence agencies that Iraq's WMD was dormant, and as early as
1998 it was understood that Saddam had no ties to Al Qaeda.[49] To
date, no professionals in the CIA, DIA, MI5 or MI6 have provided
reliable evidence linking Saddam Hussein to bin Laden, Al Qaeda or
to the September 11th attacks.[50] Undeterred, Donald Rumsfeld set
up his own secretive and rather autonomous unnamed intelligence
unit referred to simply as the "cell." This small group later
merged into his other small "intelligence unit" called the Office
of Special Plans (OSP).
The purpose of these "intelligence units" was to bypass the CIA
and DIA, and to provide "faith-based intelligence" to Vice
President Cheney and President Bush. The OSP's sole purpose was to
promote the Iraq war. This group self-mockingly referred to
themselves the "cabal".[51] The following is a slightly modified
chart from the February 2004 edition of Mother Jones.[52]
[The Lie Factory]
It is now obvious the main rationales for the Iraq war were
developed by a rather unprecedented government conspiracy
perpetrated by a small number of radical neoconservatives in the
OSP, plus Iraqi exiles in the INC. In essence, the justification
for invading of Iraq was a coordinated and transparent pack of
fabrications and deceptions -- designed to create the requisite
societal fear for an invasion. I suspect the OSP "cabal" will go
down in history as the `Office of Special Propaganda.' It is
disconcerting that 19 men were able to instill massive levels of
irrational fear into the citizenry by creating visions of
"mushroom clouds" and "1000 metric tons" of Anthrax.
Of course our elitist, corporate-controlled media dutifully
repeated all this propaganda verbatim. Indeed, the 2002-2003
propaganda campaign by the OSP and the Bush administration was
designed to portray an "imminent threat" to U.S. national security
-- regardless of the facts. According to former intelligence
professionals, members of the OSP are dangerous ideologues. The
following is a review of the findings regarding the search for
WMD, as of October 2003:[53]
Claims about Iraqi WMD vs. Actual Facts
Precursor Chemicals: Found: None
3,307 tons
Tabun, nerve agent Found: None
Mustard agent Found: None
Sarin, nerve agent Found: None
VX nerve agent, Found: None
1.6 tons
Anthrax spores raw Found: None
material: 25,550 liters
Botulinnum toxin Found: One vial of Sarin B, 10
years old, in an Iraqi
scientist's domestic
refrigerator
Alfotoxins Found: None
Ricin Found: None
Mobile bio-weapons Found: Two suspected mobile
laboratories: possibly 18 labs found to be harmless,
possibly purchased from the UK
in 1987 as atmospheric hydrogen
balloon labs for artillery
aiming purposes
Bombs, rockets, and Found: None
shells for poison, gas:
up to 30,000 shells
L-29 unmanned aerial Found: None
vehicles for delivering
biological and
chemical weapons
Nuclear weapons material Found: None (corroded parts
from a single 12-year old
centrifuge buried under a rose
bush in the back yard of a
former Iraqi scientist)
Al Hussein surface-to- Found: None
surface missile with
410 mile/650 kilometer
range, up to 20
With their mission accomplished, Donald Rumsfeld disbanded the OSP
in September 2003. Despite the so-called Congressional
investigation into "intelligence failures" regarding Iraq, there
is "strong resistance" by the Republicans to investigate the OSP
and related activities. It is highly doubtful Congress will expose
the truth in the near future, as it would make Richard Nixon's
"dirty tricks" and the Watergate scandal simply pale in
comparison. Indeed, if Thomas Jefferson, James Madison, or George
Washington were alive today, they would probably demand these
nineteen men be immediately charged with high crimes and treason.
As I noted a year ago, it would seem more likely that Al Qaeda
will search within the former states of the Soviet Union for a
source of WMD. Initially, the Bush administration froze funding
for the Russian non-proliferation WMD destruction program, but now
have unfrozen funding.[49]
According to retired 27-year veteran of the CIA, Ray McGovern,
there is an "incredible amount of unease and disarray" between the
neoconservatives and US intelligence professionals.[54] Aside from
the Iraq debacle, the CIA may be distraught at the apparently
politically motivated "outing" of Valerie Plume's, a covert CIA
agent whose expertise was on the preventing the proliferation of
the WMD. Such irresponsible behavior, possibly emanating from the
Executive branch of our government, needlessly jeopardizes the
national security of the U.S.
Regarding the post-war situation in Iraq, it appears to be an
unfortunate and deteriorating situation. Despite the ongoing
resistance in the form of guerilla warfare and almost daily deaths
of U.S. soldiers, this administration is moving forward with their
Geostrategic goals. On May 9th, 2003 the Bush administration
presented U.N. Security Council Resolution 1483, proposing to drop
all sanctions against Iraq, and allow the U.S./U.K. to completely
control Iraq's oil production revenue. Due to US pressure, this UN
resolution was passed on May 22, 2003. However, according to the
original UN resolutions from 1991, the sanctions could not to be
lifted until the U.N. certifies Iraq as being free of WMD.
Interestingly, the Bush administration blocked Dr. Blix and all of
the U.N. inspectors from returning to Iraq in the "post-war"
period, and successfully had the UN sanctions lifted regardless of
Iraq's WMD status. Why? Empire.
Neoconservative Geostrategy is based upon the idea of a US "Global
Empire" and therefore it could not be tolerated for any nations,
be it France, Russia or China to gain control over 40 billion
barrels of Iraqi oil, or for that oil be sold in the euro
currency. (This assumes Iraq reserves are in fact 112 billion
barrels, of which those three nations would have gained legal
exploration access to 35% of Iraq's total reserves -- but only if
Iraq was declared by the UN to be free to WMD). The European media
has noted that had Dr. Blix and the U.N. inspectors been allowed
to complete their `pre-war' inspection process for an estimated 6
more months in 2003, they could have ultimately determined Iraq
was indeed free of WMD.
In that scenario, the lease contracts and oil exploration rights
that the Russians, French and Chinese held regarding Iraq's oil
fields could have been legally initiated. Indeed, lifting the UN
sanctions would have allowed foreign investment to begin
rebuilding and exporting Iraqi's vast reserves, while
simultaneously impeding the ability of major US/UK oil companies
to gain access to Iraqi oil given Saddam's dislike of the US/UK
post-1991 foreign policies towards Iraq.
Returning to the core macroeconomic reasons for the Iraq war, it
should be noted that under the UN's `oil for food' program, the
U.N. provided oversight of Iraq's oil receipts, which in 2000
became denominated in euros, and then deposited into a French
bank. The passage of UN resolution 1483 effectively ended French
involvement with Iraqi oil via the UN `oil for food' program.
Incidentally, the various contracts that Saddam Hussein signed
during the 1990's regarding oil exploration leases with France,
Russia and China are now also void. Without a doubt, oil is the
critical substance for all industrialized nations, and with the
imminent global Peak Oil phenomenon, the U.S. government is using
the military to insure U.S. access to the largest reserves. The
price of the Iraq war is not yet clear, but the history of Empires
is quite unambiguous. They always end with military overextension
and subsequent economic decline.
On April 28, 2003, I read the first article in the mainstream US
media (msnbc.com) since the autumn of 2000 that addressed some of
the issues regarding Iraqi oil exports in the euro. Apparently
until the U.N. sanctions were lifted; Iraq's oil was to remain
under UN control in the "oil for food" program. However, UN
Resolution 1483 passed on May 22, 2003 establishing a joint US/UK
administered "Iraqi Assistance Fund" which provided the mechanism
to quietly and legally reconvert Iraqi's oil exports back to the
dollar. To reiterate, the following excerpts from this forthright
msnbc.com article is the only mainstream US media reference that I
could locate during 2003 that discussed the Iraq war and the
underlying petrodollar versus petroeuro issues. It was entitled
"In Round 2, It's the Dollar versus the Euro" (implying the Iraq
war was `Round 1').
A new world is being created. Ironically, the most
troublesome clash of civilizations in it may not be the
one the academics expected: not Islamic fundamentalists
vs. the West in the first instance, but the United
States against Europe.
To oversimplify, but only slightly, it's the dollar vs.
the euro.
. . . The Europeans and the United Nations want the
inspections regime to resume because as long as it is in
place, the U.N. "oil-for-food" program remains in
effect. Not only does France benefit directly-its banks
hold the deposits and its companies have been involved
in the oil sales-the entire EU does as well, if for no
other reason than many of the recent sales were counted
not in dollars but in euros. The United Nations benefits
because it has collected more than a billion dollars in
fees for administering the program. As long as the 1990
sanctions remain in effect, Iraq can't "legally" sell
its oil on the world market. At least, to this point,
tankers won't load it without U.N. permission, because
they can't get insurance for doing so.
Sometime in the next few weeks, push will come to shove.
There are storage tanks full of Iraqi crude waiting in
Turkish ports. For now, Rumsfeld and Powell are playing
"bad cop, bad cop." "This isn't on the president's radar
screen right now," an aide told me. "Powell is totally
on board, though. He is as angry at the French as anyone
else, maybe more. There may come a time when the smart
thing to do is turn the whole Iraq situation over to the
U.N. This is not that time." Meanwhile, if the rest of
the world tries to block any and all Iraq oil sales,
it's possible that American companies will find a way to
become the customer of first and last resort.
And we'll pay in dollars.[55]
Although the author addressed this subject somewhat obliquely, his
final sentence is quite candid. Indeed, my original hypothesis
from December 2002 was reinforced in a Financial Times article
dated June 5th 2003 which confirmed Iraqi oil sales returning to
the international markets were once again denominated in U.S.
dollars, not euros. Not surprisingly, this detail was never
mentioned in our imperialist, corporate-controlled US media, but
confirmation of this fact provides insight into one of the crucial
-- yet overlooked -- rationales for the Iraq war.
"The tender, for which bids are due by June 10, switches
the transaction back to dollars -- the international
currency of oil sales -- despite the greenback's recent
fall in value. Saddam Hussein in 2000 insisted Iraq's
oil be sold for euros, a political move, but one that
improved Iraq's recent earnings thanks to the rise in
the value of the euro against the dollar."[56]
Additionally, one notable post-war realization is the dollar's new
role in Iraq. In April 2003 it was reported that US dollars are
being flown into Iraq in order to pay the Iraq civil servants $20
per week as a "temporary" measure.[57] Ironically, some Iraqis
were returning to a newly appreciating Iraq Dinar or supposedly
dead "Saddam Dinar" -- instead of U.S. dollars.[58]
Given the lack of WMD in Iraq, the lack of evidence tying Saddam
to the September 11th attacks, and the lack of any proof that
Saddam had worked with the Al Qaeda terrorist organization, the
Bush administration is trying to switch the rational of the Iraq
war to "spreading democracy." Again, the facts on the ground do
not support this assertion. In June 2003 Paul Bremer unilaterally
canceled the request from the Iraqis to hold local elections.[59]
Not surprisingly, this administration has also discussed
disbanding the Coalition Provisional Authority (CPA). In the harsh
reality of oil and geostrategy, the US probably does not want a
real democracy in Iraq for the same reasons that the CIA and
British overthrew Iran's fledgling democracy in 1953. In order to
understand why the U.S. does not promote democracies in the oil
producing states of the Persian Gulf, I recommend that others read
All the Shah's Men by Stephen Kinzer.[60] There are lessons to
learn from what happened in Iran fifty years ago.
At the time, Prime Minister Mohammed Mossadegh, a nationalist and
anti-communist, and requested that the British allow Iran to audit
the oil proceeds from Iran's oil exports. He felt Iran was not
getting sufficient financial returns on their vital resources. The
British resisted, and Mossadegh made a decision that was
beneficial to Iranian, but not the British. After the British
refused to share with Iran more of the profits over its oil
export, Dr. Mossadegh made the unfortunate mistake of
nationalizing Iran's oil in 1952. At the time the Anglo-Iranian
oil company (later to become BP) was reaping 88% of the profits
from Iran's oil exports.[61] Prime Minister Mossadegh then offered
the British 25% of the profits after he nationalized Iran's oil.
The British responded by blockading Iran and freezing Iran's
assets. Furthermore, the British claimed that nationalization of
Iran's oil was illegal. This was a dubious claim over Iran's
sovereignty, so Dr. Mossadegh argued his case in front of the
United Nations and won. Undeterred, Winston Churchill asked
President Truman to help overthrow Mossadegh, but Truman declined.
However, in 1953 incoming President Eisenhower did agreed to the
coup, and the CIA successfully overthrew Prime Minister Mossadegh
in August 1953. The US/UK then installed Mohammed Shah, who later
became despised as a US-puppet, and whose brutal SAVAK secret
police force ultimately radicalized Iranian society. This
"blowback" resulted in the Iranian Revolution of 1979. It is
interesting to note that current Islamic mullahs in Iran do not
speak with reverence about Dr. Mossadegh (who was a secular
leader), but apparently the Iranian people fondly remember his
secular government. Below is an excerpt from All the Shah's Men.
"Why did you Americans do that terrible thing?" a
relative of Mossadegh demands of Kinzer. "We always
loved America. To us, America was the great country, the
perfect country, the country that helped us while other
countries were exploiting us. But after that moment, no
one in Iran ever trusted the United States again. I can
tell you for sure that if you had not done that thing,
you would never have had that problem of hostages being
taken in your embassy in Tehran. All your trouble
started in 1953. Why, why did you do it?"[60]
As evidenced by Stephen Kinzer's interviews with various Iranians,
it is clear the Iranian people were quite pro-US before we
intervened and overthrew their democracy. Regrettably, many
Iranians have not forgiven us for what we did to them 50 years
ago. Ironically, Iran still appears to be the best candidate for a
large Middle Eastern democracy. Perhaps if our government leaves
Iran alone, and in conjunction with a peaceful resolution to the
Israeli-Palestinian conflict, the Iranian people might eventually
revise their Constitution. Reforming their government to reflect a
more democratic and secular nation is plausible given the large
and youthful Iranian population who embraces a more open society.
In the meantime, we should attempt to build confidence by
providing diplomatic engagement, and assistance as needed, such as
offering humanitarian aid in the aftermath of the earthquake that
struck Iran in December 2003.
Undoubtedly, President Bush's declaration that Iran is an "Axis of
Evil" has damaged the US-Iran relationship, and thus has allowed
the E.U. to establish enhanced trade relationships with Iran. It
is obvious that any U.S. military or covert action against Iran
would be completely unilateral, and even the U.K. has warned that
"regime change" in Iran is not a plausible option. In fact,
threatening Iran is only creating more "blowback" against the
United States. As for Iraq, the "blowback"/resistance is
continuing despite Saddam's capture, making the "installment" of
democracy even more unrealistic. I suspect a real democracy in
Iraq would most likely nationalize Iraq's oil industry in an
effort to keep the critical oil profits within the country,
thereby greatly facilitating the rapid rebuilding of Iraq society
(infrastructure, healthcare, education, etc.)
Obviously re-nationalizing Iraq's oil industry is not something
the Bush administration and its major campaign contributors are
interested in pursuing. The Iraq war was over power, and UN
Resolution 1483 insured U.S./U.K. control over Iraq's oil revenue,
contrary to reports that the Iraqi people wanted the United
Nations to retain control of Iraqi's oil resources. Despite its
faults, the UN simply has more credibility in the eyes of the
world community than Paul Bremer, and that includes the Iraqi
citizenry as well. On the contrary, the Bush administration's
major paymasters -- the military-oil-industrial conglomerates --
expect and are receiving hundreds of billions of our tax dollars.
(ie. no-bid contracts for Halliburton and Bechtel corporations,
etc).
However, there are also macroeconomic reasons why I doubt we will
see democratic rule in Iraq -- the petrodollar versus petroeuro
oil currency issue. As of December 30, 2003 the euro was worth 25%
more than the dollar ([eurodollar symbol]1.25 to $1.00). Given the
EU's upcoming enlargement plans for 2004, and the fact that
following this enlargement 60% of OPEC oil will be imported by the
EU, from a purely economic perspective it makes sense for Iraq to
do what Iran has recently done -- require payment for oil in
euros, not dollars. Of course the emergence of a `petroeuro' is
one of the crucial reasons why we overthrew Saddam in the first
place. Therein lies the paradox for the United States -- In a true
democracy the leader of Iraq would be expected to do what is in
the best interest for the majority of Iraqi citizens, regardless
of whether they are Shi'ite, Sunni or Kurdish. At this time it
would be logical to re-nationalize Iraq's oil industry (which the
Bush administration privatized after the invasion -- but only for
the "major" US and UK oil companies).
Further, it would be economically advantageous to denominate oil
sales in the currency that would provide Iraq with the most
purchasing power and trade potential in which to rebuild the
country -- which given current valuations now and into the
foreseeable future implies the euro. Self-determination and
democratic rule does not always fit U.S. "hegemonic interests."
Much of the current "anti-Americanism" in the Middle East is based
on the hypocrisy of our foreign policies -- we say we stand for
democracy, yet we have a long history of propping up "stable" but
brutal and oppressive regimes. Examples include Iran 1953-1979,
Iraq 1963-1990, Saudi Arabia 1944-present, and our overtly biased
policies regarding the Israel-Palestinian conflict.
Below are excerpts from an article on www.prudent bear.com. While
this author acknowledges the issues regarding Iraq and the
dollar/euro oil conflict, he suggests that reporting the truth is
"freedom of screech" (in Washington DC the truth has been reduced
to "political hate speech.")
At present, we notice that many US citizens are
exercising their "freedom of screech" to politicize the
fact that the current President miss-stated the case for
immediate war with Iraq. Perhaps the President should be
praised for "doing what was right" for America's
interests, even though the Administration could be
faulted for the "way it was done". I, for one, would not
want to bring back an Arab oil embargo and long lines at
the gas pump.[62]
The idea that re-denominating oil exports in a different currency
is the same as an "Arab oil embargo" is an interesting display of
flawed logic, especially from a website that it promotes increased
market transparency, fiscal discipline, and is rightfully
pre-occupied with the Fed's expansion of the US money supply.
Despite these flaws, the author acknowledge the key issue:
. . . the one factor underpinning American prosperity is
keeping the dollar the World Reserve Currency. This can
only be done if the oil producing states keep oil priced
in dollars, and all their currency reserves in dollar
assets. If anything put the final nail in Saddam
Hussein's coffin, it was his move to start selling oil
for Euros.
The US is the sole super power and we control and
dictate to the Middle East oil producers. America has
the power to change rulers if they can't follow the
"straight line" the US dictates. America's prosperity
depends on this.
Governments have secrets. If politicians always told the
truth, there wouldn't be any secrets. So, if governments
are to keep secrets, how can you fault a politician for
not telling the whole truth? We would assert that the
President failed to present the real case for Iraq,
which is: 1) prosperity for America based on controlling
Middle East oil, and on maintaining the Dollar as the
World Reserve Currency, and 2) peace and stability,
which the guaranteed access to oil brings to the
world.[62]
I find his statement about the "need" for government secrets to be
rather tautological, circular in logic, and certainly not in the
spirit of what the Founding Fathers stated was imperative to a
functioning democracy -- an informed citizenry. I would suggest to
the author and other like-minded individuals that our nation
(including the President) owes the truth to the families of our
soldiers who have been killed or wounded, and to those who
continue to fight and die in Iraq. Additionally, some of us are
burdened with a lower tolerance threshold for hypocrisy when it
comes to life and death. In any event, the author is quite correct
that much of our prosperity has been created by artificial
geopolitical arrangements, some of which are slowly coming
unglued.
During the Cold War and into the present day, the US has supported
many dictators and oppressive regimes in the Middle East that did
not always "follow the `straight line' the US dictates." We seem
unable to learn from history. Indeed, the 2003 Iraq war is the
third US-sponsored `regime change' in Iraq since the end of
WWII.[63] Therefore, we must not be naïve in believing that the
Bush administration has any intent of establishing democratic rule
in Iraq, assuming it is possible. As Americans, we have engaged in
wishful thinking that somehow the US military was capable of
invading Iraq and "installing" democracy. We are an Empire trying
to reaffirm our position as the world's only Superpower, thus
altruism is not our goal. Our goal in Iraq is to install a
pliant/puppet-regime. The facts on the ground in Iraq speak for
themselves:
The US ended UN control of Iraq's oil revenue and
quickly changed Iraq's oil transaction currency from
euros back to dollars, just as I predicted they would a
year ago . . .
The neoconservatives canceled Iraq's oil contracts with
other nations (ie. France, Russia and China, thus
creating new and potentially dangerous geopolitical
alliances)
Paul Bremer unilateral blocked municipal elections that
were to held in Iraq in June 2003 (He basically implied
that the `outcome' of elections would not be preferable
to the U.S.)
The neoconservatives threatened Iran and Syria during
the Iraq war despite the fact that Al Qaeda is an
organization financed by Saudi Arabians who promote
intolerant Whabbism.
The neoconservatives have alienated most of the world
due to their unilaterism and overtly vindictive actions
regarding Iraq's reconstruction contracts (In December
2003 Paul Wolfowitz released a document barring
non-coalition nations such France, Russia, Germany,
Canada and Mexico from participating in Iraqi
reconstruction projects)
Simply put, we cannot win this war from a strategic point, and we
desperately need the U.N to involve itself in Iraq. It is the U.S.
soldiers whose morale is suffering the worse, they believed their
mission was to "disarm Iraq" of its "massive" WMD program, and are
now the targets of nationalists Iraqis. However, because the
current administration went to war without approval of the U.N.
Security Council, the US has placed the UN in the position that
active support of the United States and U.K. in Iraq would in
effect legitimize the U.S. invasion. If truth be told, numerous
international lawyers have opined the US/UK led invasion meets the
definition of a "war of aggression," implying the war violated the
United Nations Charter, and was illegal.[64]
Hence, the UN is now in a very uncomfortable position.
Irrefutably, unless the current US administration agrees to
relinquish some of its power in Iraq, thereby allowing the UN and
world community to participate in the rebuilding of Iraq, along
with a coordinated withdrawal of most US soldiers in exchange for
international troops wearing the distinct light-blue UN helmets,
we should expect nothing but a very ugly, protracted and costly
guerilla war with Iraqi nationalists. Time is not on our side, the
longer we are seen as unilateral occupiers who have come to Iraq
to `seize the oil,' the more highly radicalized Iraqi society will
become. Likewise, we should also learn from our own history in
Iran that despotic US puppets often get overthrown in due time.
As for the ongoing guerilla/resistance war in Iraq, this should
have been expected given Iraq's nationalistic
inclinations/history. Although most of the Iraqis are glad Saddam
is gone, they will not tolerate an extended presence of American
troops in Iraq unless the U.N. and some sort of legitimate Iraqi
governing body control these troops. The lack of UN involvement
negates the legitimacy required for the current US military
presence in Iraq. US unilaterism has produced not only a quagmire
for our soldiers, but a magnet for young Islamic' jihadis.'[65]
Regarding the US military, it was reported in the Stars and Stripes
that 49% of the participants in the survey were not going to
re-enlist.[66] Morale is very low, and those whom I have spoken to
no longer believed "in their mission." Aside from the budget
deficits and war related expenses that are pushing our nation
further into debt, it is becoming increasingly obvious that we
need a bigger military to fulfill the stated objectives of the
neoconservative dream of "Global Empire." After nine months in
Iraq, it is clear that by the spring of 2004 the US military will
run out of fresh reserves. Other than a few nations, most of the
world community is not going to send troops into Iraq because they
do not want the neoconservatives to pursue their global
Geostrategy, and it appears the UN does not want to legitimize the
concept of "preventative war" either.
According to various reports, our regular army and reserves appear
very unhappy about these extended deployments -- as it is often
financially painful, sometimes destroys families, and it is
difficult to fight a war to disarm Iraq -- when no WMD seem to
exist.[67] Obviously the current administration would prefer to
avoid any discussion of the draft until after the 2004 Elections.
Nonetheless, unless in early 2004 other nations suddenly begin
sending thousands of troops into Iraq, conscription may become
necessary -- even under a Democratic President in 2005. Obviously
the draft will be highly controversial. Indeed, in order to
successfully enact the draft; a new and ominous existential threat
would have to emerge. Given that the neoconservative conspiracy
behind Iraq and the OSP has been exposed, I doubt even the Bush
administration will be able to succeed in scaring the American
people into the necessity of conscription.
For those who remain skeptical that a draft is being considered,
the Selective Service website provides information suggesting the
President has requested that activation of draft be available
within 75 days of Congressional authorization. A careful reading
suggests June 15, 2005 is the target date. After 30 years of
dormancy, why else would the Selective Service suddenly request
$29 million in order to bring the US draft apparatus up to 90%
operational capability?[68]
Undoubtedly, the requirements for Global Empire and five more wars
will require many more soldiers. The neoconservatives have a plan
for global domination, but their execution has been poor and
incredibly arrogant. It is interesting to note that in September
2003 the Directorate for Special Operations and Low-Intensity
Conflict at the Pentagon showed the controversial movie from the
1960s The Battle for Algiers. The invitation at the Pentagon
stated the following:
"How to win a battle against terrorism and lose the war
of ideas. Children shoot soldiers at point-blank range.
Women plant bombs in cafes. Soon the entire Arab
population builds to a mad fervor. Sound familiar? The
French have a plan. It succeeds tactically, but fails
strategically. To understand why, come to a rare showing
of this film."[69]
Based on a story from the Common Dreams website, the idea came
from a civilian-led group with "responsibility for thinking
aggressively and creatively" on issues of guerrilla war. The
Pentagon employee stated, "Showing the film offers historical
insight into the conduct of French operations in Algeria, and was
intended to prompt informative discussion of the challenges faced
by the French." It should also be noted that former U.S. National
Security Adviser Zbigniew Brzezinski also recommended this same
movie the following month after the Pentagon screening. In an
October 2003 speech Brzezinski stated: "If you want to understand
what's happening right now in Iraq, I recommend The Battle for
Algiers."[70]
Another issue addressed in my original essay was the possibility
of Iran moving towards a petroeuro for oil exports. A June 2003
article in the Hindu Business Line confirmed my earlier prediction
regarding Iran's imminent movement towards the euro. Dr Mohammed
Jaffar Mojarrad, Vice-Governor of the Iranian Central Bank stated
for this article that Iran actually made the switch to the euro
for its oil payments in the summer of 2003. Although Iranian oil
is still priced in dollars, the payment for its oils exports to
the EU is now denominated in euros.
"Iran's oil and gas exports destined mostly for Europe
are already denominated in euros. Iran produces about
3.5 barrels and is the second largest oil exporter among
the Organisation of Petroleum Exporting Countries
(OPEC). About 30 per cent of the Iran's oil exports are
destined for European markets. The other two large
consumers of Iranian Oil are India and China. Even in
the case of Indian only a small quantum of the oil
imports come through the ACU mechanism.
But, he added, the switch to the euro, which as done
during the last few months had helped the country to
negate the effects of a depreciating dollar and falling
international oil prices. He said that if the country
had continued its receipts in US dollars, it would have
meant large losses, which would have translated into
domestic inflation. This was because large volumes of
its imports are also sourced from Europe. The Iranian
central bank was keen to avert that situation and had
consequently adopted the euro-denominated payments to
ensure that the losses were minimised. The country had
also resorted to managing its reserves to minimise the
effects of the depreciating dollar, he added.[71]
Given the continuing devaluation of the dollar, pressure will
build within OPEC to switch to the euro. The central impediment to
such a switch is that all three internationally traded crude oil
pricing "markers" are currently denominated in dollars (West Texas
Intermediate crude, Norway Brent crude and UAE Dubai crude). Given
the rapid decline of oil output from the North Sea, it is possible
another crude marker could emerge later this decade, perhaps
denominated in euros. It is also possible that during 2004-2005
OPEC could decide to denominate oil in a "basket of currencies,"
which would include the euro. OPEC contemplated this idea in the
early 1970s after the US dollar devalued following the collapse of
the Bretton Woods Agreement.[72]
Certainly one of the most interesting and troubling pieces of news
regarding the dollar/euro issues and the potential political
fallout from the unauthorized Iraq war relates to Russia. In
mid-October 2003, after meeting with German Chancellor Gerhard
Schroeder, Russian President Vladimir Putin mentioned that Russian
oil sales could be re-denominated in euros.
"We do not rule out that it is possible. That would be
interesting for our European partners," Putin said at a
joint news conference with German Chancellor Gerhard
Schroeder in the Urals town of Yekaterinburg, where the
two leaders conducted two-day talks.
"But this does not depend solely on us. We do not want
to hurt prices on the market," he said.
A move by Russia, as the world's second largest oil
exporter, to trade oil in euros, could provoke a chain
reaction among other oil producers currently mulling a
switch and would further boost the euro's gradually
growing share of global currency reserves.
That would be a huge boon to the euro zone economy and
potentially catastrophic for the United States.
Dollar-based global oil trade now gives the United
States carte blanche to print dollars without sparking
inflation -- to fund huge expenses on wars, military
build-ups, and consumer spending, as well as cut taxes
and run up huge trade deficits.
Almost two-thirds of the world's currency reserves are
kept in dollars, since oil importers pay in dollars and
oil exporters keep their reserves in the currency they
are paid in. This effectively provides the U.S. economy
with an interest-free loan, as these dollars can be
invested back into the U.S. economy with zero currency
risk.
If a Russian move to the euro were to prompt other oil
producers to do the same, it could be a "catastrophe"
for the United States, Ibrahim said. "There are already
a number of countries within OPEC that would prefer to
trade in euros."[73]
Continuing in this same Moscow Times article, two other pieces of
vital information were revealed. If Saudi Arabia were evaluating a
"petroeuro," it would imply major geopolitical and macroeconomic
shifts. Although I doubt Saudi Arabia would make this switch, we
shall see . . .
"And after the war in Iraq, there is growing debate in
the United States' traditional ally Saudi Arabia on a
switch too, though its government has not come down
firmly on one side, Ibrahim said. "There is a revision
going on of its strategic relationship with the United
States. Already, they're buying more [French-made]
Airbuses," he said. "The Saudi Crown Prince [Abdullah
Bin Abdul Aziz Al-Saud]'s visit to Russia was of great
significance and the regime is talking about closer
cooperation with LUKoil and other Russian companies."
Furthermore, this article candidly reinforced my original thesis
that the creation of a "petroeuro" was indeed one of the core
reasons for the 2003 US/UK invasion of Iraq.
Under Saddam Hussein, Iraqi oil was traded in euros.
"This was another reason [why the U.S. attacked],"
Ibrahim said. "There is a great political dimension to
this. Slowly more power and muscle is moving from the
United States to the EU, and that's mainly because of
what happened in Iraq," he said.
Putin had previously brought up the proposal to switch
to euros as prime minister in October 1999, at a meeting
of EU leaders in Helsinki. Then, in an attempt to forge
a new bloc to counterbalance the United States, he made
the proposal alongside calling for closer cooperation
between Russia and the EU, including on security issues.
Since then, however, Russia's ties with the United
States have warmed considerably -- and it is unclear
whether Putin would risk damaging that relationship by
going ahead with the euro move, analysts said.
. . . Yevgeny Gavrilenkov, chief economist at Troika
Dialog and an earlier architect of the Putin
government's first economic plan, said debate is growing
on a move to the euro as Russia mulls siding with the
EU. "Such an idea is really possible," he said. "Why
not? More than half of Russia's oil trade is with
Europe. But there will be great opposition to this from
the United States."
. . . LUKoil vice president Leonid Fedun said Thursday
that he saw no problem in the euro switch and that
payments for such transactions would be minimal, at just
0.08 percent.
The proposition that Russia, currently the 2nd largest oil
exporter, switching to the euro will be met with "great
opposition" from the United States is quite an understatement.
Nevertheless, according to the above excerpts, from a purely
monetary and trade perspective a Russian switch to the euro
appears logical. Obviously the US government would prefer Russia
sell its oil in dollars or a dual currency arrangement. It would
highly advisable for the US to negotiate and compromise with
Russia regarding access to Iraq's oil and the issues regarding
Iraqi debts.
Also, a Russian oil executive suggested that oil from the Urals
region in Russia could become an `alternative crude oil marker'
with respect to internationally traded oil contracts. This may be
unlikely given that Russia's Peak Oil production occurred in 1987,
but such an event could provide a new euro-based oil pricing
mechanism. Regardless, by the end of this decade I suspect Norway
and Sweden will likely ascend to the euro, thus facilitating the
Brent crude marker being re-denominating in the euro. There
appears to be fall-out from the Iraq war in some countries that
are not under US control. In April 2003 Bloomberg News reported
that Indonesia, a small non-OPEC producer with a Muslim majority
was evaluating a "petroeuro."
"Pertamina, Indonesia's state oil company, dropped a bombshell
recently. It's considering dropping the U.S. dollar for the euro
in its oil and gas trades.
Other Asian countries may not be far behind any move in Indonesia
to dump the dollar. The reasons for this are economic and
political, and they could trigger a realignment that undermines
U.S. bond and stock markets over time."[74]
Additionally, some articles have suggested that other countries
such as Malaysia may soon be dropping the dollar in favor of the
euro. These countries perceive that switching to the euro will
eventually diminish our ability to pursue an agenda of global
militant Imperialism. In fact, it appears that a disconcerting
"anti-dollar" movement could be spreading. Indeed, in 2003 a Wall
Street Journal reporter witnessed an unusual anti-war protest in
Nigeria, an OPEC member.
"Newspaper columnists and anti-war activists in
countries stretching from Morocco to Indonesia have
rallied behind the sentiments shouted in a Nigerian
street protest witnessed by a Wall Street Journal
reporter this week: "Euro yes! Dollar no!"[75]
The Bush administration probably believes the occupation of Iraq
and the installation of large and permanent U.S. military bases in
Iraq will thwart remaining OPEC producers from even considering
switching the denomination of their oil sales from dollars to
euros. However, using the military to enforce dollar hegemony for
oil transactions strikes me as a rather unwieldy and inappropriate
Geostrategy. Regrettably, President Bush and his neo-conservative
advisors appear to have chosen to apply a military option to a
U.S. economic problem that requires a multilateral treaty. History
may not look kindly upon their actions.
Paradoxically, for a variety of economic and political reasons, it
appears that a growing number of oil producers in the Middle East,
South America, and Russia may wish to transition their oil pricing
from dollars to euros, or perhaps denominate oil in a "basket of
currencies." Disturbingly, we may be witnessing the emergence of a
European-Russian-OPEC alliance in an effort to counter American
militant imperialism. Although you will not hear it spoken
publicly, the broad international movement away from the dollar
may be an effort to facilitate "regime change" here in the U.S.
Indeed, if the dollar's steep devaluation in 2004 parallels 2003,
every American will suffer for the misguided policies of our
government. We need to quickly change course.
Despite the current stock market "rally", there is much to be
concerned about regarding the long-term structural imbalances of
our economy, and the Bush administration's flawed tax, economic
and most principally their overtly Imperialist foreign polices
could place the dollar's status as the World Reserve currency
and/or oil transaction currency role in jeopardy, or at the very
least significantly diminished over the next few years. In the
event that such a hypothesis materializes, the U.S. economy will
require restructuring in some manner to account for the reduction
of either of these two pivotal advantages. This will be an
exceedingly painful process if it occurs in a disorderly manner,
perhaps reminiscent of the 1930's Great Depression. Certainly a
multilateral treaty recognizing these issues would be preferable
before the onset of serious economic dislocations -- or warfare.
Only time will tell what will happen in the aftermath of the Iraq
war and U.S. occupation, but I am confident my research will
contribute to the historical record and help others understand
some of the important but unspoken reasons for why we conquered
Iraq. Regrettably, until the U.S. agrees to a more balanced Global
Monetary system, and embarks on a viable National Energy Strategy,
our nation will continue to pursue hypocritical foreign policies
incompatible with the principles established by the founding
fathers regarding democracy, liberty and freedom.
Conclusion
In conclusion, the Iraq war was designed to 1) secure U.S./U.K.
oil supplies before and after global Peak Oil, and 2) to have a
large military presence to "dissuade" other oil-producers from
moving towards the euro as an oil transaction currency. These are
the two crucial elements for maintaining U.S. hegemony over the
world economy. Reconverting Iraq back to the petrodollar was not
the critical issue, but preventing any further momentum towards a
petroeuro is a critical component of current US Geostrategy. While
deceiving the American people into war, this administration sent a
message to other OPEC-producers -- "You are either with us or
against us."
However, in the end I predict the rules of economics and the laws
of physics will prevail over the dreams of Global Empire. It will
be increasingly "sensible" for OPEC to re-denominate oil sales in
euros once the EU expands in 2004.[76] Additionally, Peak Oil will
usher in an era in which demand for oil will forever outstrip
supply. The neoconservatives understand what this means -- the end
of US Hyper power, and thus the end of their dreams of a US Global
Empire. The true test of US leadership and the citizenry will be
acknowledging that our nation will soon endure some economic
hardship. Everyone on earth will be impacted by Peak Oil, and
given that reality -- multilaterialism rather than unilateralism
is the only way to create a peaceful outcome.
First, the industrialized economies need to develop new energy
policies and technologies, but here in the US we have the most to
lose due to our high consumption rate and structural debt
problems. In fact, out entire "suburban" infrastructure was
designed for the utilization of automobiles and we do not have
enough mass transit in place when Peak Oil arrives. We have a lot
of work to do, not enough time, and too much debt, which further
reduces our options. Secondly, our currency is challenged for the
first time since WWII with an alternative -- the euro.
So, we have been reduced to using military force to maintain our
hegemonic status, but under the neoconservatives we are doing it
in such an overt, arrogant way that the world community is
objecting. Disparaging the United Nations while unsuccessfully
bribing our allies to support the Iraq war is a radical departure
from decades of US diplomatic policy. Furthermore, the world
community is probably more aware of the implications of the
Project for a New American Century than the US citizens are, and
the world does not appear ready to accept the US as a militant,
unilateral hyper-power. Neoconservatives fail to understand that
the industrialized world can and will topple us from our hegemonic
status if they perceive us to be a greater threat to world
stability than the economic disruptions that would occur from the
displacement of the dollar standard. Let us hope the world will
not allow a disorderly dollar decline or "panic."
The dollar is our Achilles Heel, and it will also be our undoing
if we do not change course and compromise with the European Union,
otherwise we will probably have military conscription, political
repression and tyranny at home, and the American Experiment as we
have known it for the past 227 years will end. This need not be
the case. What we as citizens must realize is that overt pursuit
of Empire abroad will ultimately result in tyranny at home. We
have already begun this process with the incessant fear mongering,
deception and intolerant portrayal of events surrounding the Iraq
war. Furthermore, our civil rights and Constitutional protections
are being dangerously eviscerated (possible elimination of Posse
Comitatus, along with various hidden provisions within Patriot
Acts I & II, Office of Homeland Security, and various Executive
Orders).
The only way out of this dilemma is international cooperation,
real leadership, global monetary reform and sacrifices by the US
citizenry regarding energy consumption. U.S. Politicians are not
interested in being truthful with the People, as both parties are
more or less in the pockets of the military-energy conglomerates.
Real Campaign Finance Reform may be the only way in which the US
can enact the sufficient energy reforms that will be required with
the onset of Peak Oil.
1. In order to save the American Experiment the neoconservative
goal of US "Global Domination" must be quickly discarded by a
new administration. The concept of the U.S. violating
international law with unilateral "preventative wars" will
simply not be tolerated by most industrialized nations.
Hopefully one of the first official acts of the 44th
President will be to officially disavow the "Bush Doctrine"
of preventive warfare. Such a gesture would allow the world
community to breath a collective sign of relief, and extend
to the new administration much needed political capital.
Multilateral cooperation will be needed for the following
issues/reforms.
2. We must restore some semblance of fiscal responsibility in
this country if we want to save the dollar. The Iraq conflict
has cost the US approximately $300 billion dollars by the end
of 2003, and estimates of current military expenditures are
approximately $1 billion per week. Unlike the 1991 Gulf War,
US taxpayers (and their children and grandchildren) will pay
for the 2003 Iraq war. It has been said that the credit
worthiness of a currency is based upon the ability of the
government to collect tax revenue from its citizens. Perhaps
the devaluation of the dollar during 2002-2003 reflects the
world community's lack of faith in this administration's tax
policies.
Passing large tax cuts in 2003 while in the midst of a war in
Iraq is the ultimate act of fiscal irresponsibility. The
American people appear ignorant of the historical correlation
between wars and taxes. Do we honestly believe we can afford
massive tax cuts along with massive increases in military and
domestic spending? Not even a French socialist would dare to
do what we have done. I suspect 2003 was the first time in
modern history that a nation decreased taxes while in the
midst of a major war. We need to dispel with this ideological
and quasi-mystical belief about tax cuts: "Nothing is more
important in the face of a war than cutting taxes." -- Tom
Delay (R-TX)
The IMF and the finance ministers of the world community must
think we have lost our collective minds. I do not envy the
fiscal mess the next US President will inherit. The next
President will have the unenviable task of attempting to
balance the current budget deficit, which will require
increasing taxes, perhaps to their pre-2001 levels. Some
semblance of fiscal sanity will be required to support the
dollar. While such a tax policy will be wildly unpopular, we
need to face reality, throughout history and into the present
day -- wars are very expensive. We have not yet paid for
Afghanistan war, or the Iraq invasion, it is all borrowed
money. To date the price has been a significant devaluation
of our currency. Although our `war taxes' will probably be
avoided until after the 2004 Elections, this is only a
temporary respite. Without a UN mandate for starting the Iraq
war, it is inevitable the US citizens will pay heavily for
the Iraq war.
3. The Federal Reserve may soon be prompted to raise interest
rates in an effort to stem the weakening dollar, but we are
in a perilous situation. US corporations and consumers have
acquired so much debt that a rate hike might starve-off
domestic economic growth. A rate increase may cause a lot of
pain for average Americans, but we have lived in the fantasy
of huge tax cuts, low-interest rates, huge budget deficits
and a huge trade account deficit for much too long. Militant
Empires have never been cheap. The wildcard seems to be the
dollar, which is being rapidly debased. Exactly how much pain
will occur when and if the Federal Reserve increases the
lending rates above 1.0% is unknown. In a best-case scenario,
the Fed would spread this pain over several years, but dollar
devaluation will probably occur precipitously.
4. Propose to the UN to form an International Consortium of
energy scientists & researchers from all over the globe to
develop alternative fuels for transportation. Could be a
combo of biomass, fuel cells, renewables, etc. The US, as the
greatest energy consumer, must show leadership in developing
and promoting alternatives. Along with rejecting the Bush
Doctrine, this will do much to repair our international
image. Imagine the Manhattan Project but on an international
scale, hopefully a $50+ billion yearly international effort
beginning in 2005. Redirecting funds and brainpower from our
military R&D is warranted. We don't have much time, as some
have suggested we may have arrived at a plateau in global oil
production . . .
5. The U.N. should form an International Group of scientists and
engineers to study energy depletion stemming from global Peak
Oil. Considerable financial resources totaling tens of
billions should provide to this Group by the International
community. The UN should also devise some type of methodology
regarding the distribution of hydrocarbons. This will be an
equally contentious and difficult reform to achieve, but the
only alternative is either oil warfare in the Persian Gulf,
or economic warfare in the international foreign exchange
markets. Both of these adverse outcomes can be avoided if the
international community can agree to some sort of complex
energy formula that reflects economic output and population
growth statistics.
The UN should attempt to establish guidelines, along with an
enforcement mechanism based on energy price. The bottom line
is the US needs to use less energy, and we need to
immediately begin improving our infrastructure before the
full effects of Peak Oil make our energy reforms excessively
painful and expensive. Given that we consume 25% of the world
hydrocarbons, we have both the most to gain and most to lose
if energy reforms are not implemented during this decade.
Mother Nature and Peak Oil will not wait for the scientists
or the politicians to act . . .
6. Global monetary reform: A painful but absolutely necessary
reform to "rebalance" the global economy. The US consumer
cannot go into indefinite debt as the single engine for
global growth, nor can the Federal Reserve continue to
"re-inflate" the bubbles into perpetuity. Economists such as
Stephen Roach (Morgan Stanley) and Richard Duncan (author of
The Dollar Crisis[77]) have suggested the excessive growth of
global credit in conjunction with the structural problems of
the US dollar may create a deflationary contraction of the
global economy. In other words, a deflationary depression
could occur with a significant devaluation/ panic on the
dollar, and the downturn will be very long lasting unless the
global aggregate demand increases. The G8 nations should
begin the process of global monetary reform. However, I
remain skeptical these reforms will take place until a truly
significant crisis unfolds
Regardless, the global economy will be more balanced and
better off with three engines of global growth: the US, the
EU and Asia. First reform should be the euro as the 2nd
International Reserve currency, at parity with the dollar,
thereby allowing a dual-OPEC oil transaction currency
standard. This should join the US with the EU as two equal
"co-hegemons."
At some point a third world reserve currency will make sense
for the Asian bloc, perhaps a Yuan/Yen currency around 2010
that allows China and Japan to purchase oil with their own
reserve currency. These reforms are obviously very
controversial proposals, but again, I fear that failure to
compromise on these monetary issues will ultimately result in
a dangerous and unstable multi-polar world engaged in global
oil and/or economic warfare. It is preferable to begin
negotiations that compromise on these monetary/energy issues
via multilateral accords before things get desperate in the
post-Peak Oil environment.
Under the above scenarios regarding monetary reform, we may have
to reduce our overblown military expenditures by a considerable
amount, perhaps 50% ("only" $200 billion per year), and spend our
tax revenues on reducing our debts and improving our energy
infrastructure for a less energy intensive existence. That
transition will undoubtedly be difficult for those who drive large
SUVs, but our choices are increasingly limited. The past few
generations including the Baby Boomers, Generation X or Generation
Y, all grew-up with the US as a Superpower. To even imagine a
different scenario -- where the US shares power with the EU as an
equal (and ultimately with China) creates cognitive dissonance.
However the "Greatest Generation," to which my grandparents
belong, grew-up when America was not a superpower, and they
endured hardships that strengthened their characters. We too must
adapt to new realities.
My principal concern at is time? Has our nation become too
militarized and too fearful of shadowy enemies supposedly lurking
inside every airplane or foreign nation? (Similar to the German
population of the 1930s) Will we be able to willingly overcome our
irrational fear, and peacefully make some painful but necessary
adjustments to our economy and society? As Mr. Brzezinski noted,
it is troubling the US has acquired a rather "paranoiac" view of
the world.[78] We must throw off such fears and be realistic, it
is we who have changed, not the world. Indeed, no industrialized
or developing nation wants the US economy to collapse. They admire
our technical base, R&D capability, education system, and of
course they need us as consumers.
However, what the world community realizes is the `war on
terrorism' is a cynically strategy used by the Bush administration
to reaffirm the US status as the global hegemonic Empire. This is
a dangerous policy. Our problems with Al Qaeda are based on a few
radical zealots who distort religion to justify their crimes.
While terrorist tactics are utterly cruel and never justifiable,
there are often causes for their anger, usually political
grievances. Bin Laden does not "hate our freedoms" -- according to
his own words he hates our foreign policies. He is a violent
"anti-imperialist militant Islamist." Bin Laden is a product of
Whabbism, but his views grotesquely distort Islam. This intolerant
version of Islam is practiced only in Saudi Arabia and by
Saudi-financed madrassas in Pakistan. Saudi Arabia needs to
undertake immense internal political and social reform, and
perhaps resolving the Israeli-Palestinian conflict could
facilitate reform.
In truth, apprehending Al Qaeda members and reducing terrorism
will require massive international cooperation via joint
intelligence/police operations involving the US, EU, Africa,
central Asia and the Middle Eastern states. I suggest that a
highly empowered INTERPOL (International Police) operation would
produce the least amount of "blowback" in a worldwide
anti-terrorism campaign.[79] According to senior FBI agents, as of
late 2002 there were only about 200 hard-core Al Qaeda members
still at large.[80] In comparison, Al Capone's infamous Chicago
mafia had about two to three times as many members as Al Qaeda.
However, the FBI did not bomb Sicily during our `war against
organized crime.' We cannot stop Al Qaeda by bombing or via
"regime change." The situation in post-Saddam Iraq is a prime
example of this dangerously flawed ideology, as we have created
terrorists where they did not previously exist.
We must acknowledge that terrorism has and will exist as long as
man walks the earth, so we must live in dignity, not in fear.
Reducing ignorance and oppression that breeds fear and hatred will
reduce future recruits for terrorist groups. We must frame
international terrorism as acts of crimes against humanity,
committed by a small number of criminals. We need to adjust our
perception accordingly, and work diligently together within the
international framework.
Moreover, we must also face the facts regarding one of the prime
causes of anti-Americanism in the Middle East. If the
Isreali-Palestinain conflict is resolved peacefully via a
two-state solution, the humiliation in the general Arab population
will eventually subside, allowing much needed political reform.
Both the Israelis and the Palestinians are entitled to live in
peace, security, and prosperity. Although some will argue
differently, objective observers realize that a peaceful
resolution to the Isreali-Palestinan issue is one of the most
critical components to winning the campaign against terrorism. I
pray the next US President will succeed in achieving this goal.
I believe the real struggle in the US is more internal than
external. If we truly practiced our values as majestically
articulated in the Declaration of Independence, Constitution and
Bill of Rights, we would have the world's respect, not the world's
fear and loathing. Overcoming the current "anti-Americanism"
requires a balanced foreign policy regarding Israel, and a viable
National Energy Strategy that will allow us to stop supporting
repressive regimes. The key is a policy of sustained energy reform
-- which would then allow more enlightened foreign policies --
just as the founding fathers envisioned. Our struggle? Can we
return to our republican origins and restrain ourselves from
seeking Empire? Can we rejoin the community of industrialized
nations -- as an equal to the EU? The ultimate test for the
American Experiment? Can we once again begin living within our
means -- from both fiscal and energy perspectives? If we can do
that, our problems with today's "anti-Americanism" and tomorrow's
terrorist will quickly subside.
Quite frankly, in order to save the American Experiment and stop
our slide towards an isolated and authoritarian state, we must
elect an enlightened administration in 2004. It would appear that
four difficult challenges await the next U.S. administration,
including; 1) negotiating global monetary reform, 2) broadly
re-organizing U.S. fiscal policies, 3) developing a National
Energy Strategy, and 4) attempting to repair our damaged foreign
relationships with the UN, EU, Russia, and the Middle East. Sadly,
the next U.S. President will have to undertake these challenges
from a weakened position both economically and diplomatically. I
do not envy the arduous journey that awaits the 44th President of
the United States.
Dear readers, it is not hyperbole to suggest the destiny of the
United States may very well be determined by the 2004 Elections.
We are at an epochal moment in history. The reality is the
beginning of the 21st century will either be a disastrous time
period of oil related military and economic warfare, or a noble
effort at international cooperation via global energy and monetary
reform. The choice is ours: Will we desperately fight for Empire
under the guise of the "war on terror" -- or will we heed the
wisdom of founding fathers by "resisting the temptation" of Empire
-- and compromise for Peace? The path we choose in November 2004
will determine not only our future, but also the future of
millions of people around the world.
*************************************
"America will never be destroyed from the outside. If we
falter and lose our freedoms, it will be because we
destroyed ourselves."
"I am a firm believer in the people. If given the truth,
they can be depended upon to meet any national crisis.
The great point is to bring them the real facts."
-Abraham Lincoln
I have sworn upon the altar of God eternal hostility
against every form of tyranny imposed upon the mind of
man."
-- Thomas Jefferson
# # #
References (post-war commentary)
49. Dreyfuss, Robert and Vest, Jason, "The Lie Factory," Mother
Jones, February 2004
50. Sengupta, Kim, "Intelligence agencies doubt al-Qa'ida links,"
UK Independent, February 4, 2003
51. Hersh, Seymour, "Selective Intelligence: Donald Rumsfeld Has
His Own Special Sources. Are They Reliable?," The New Yorker,
May 6, 2003
52. "The Lie Factory," ibid.
53. Hiro, Dilip, Secrets and Lies, Nation Books (2003)
54. "Interview: 27-Year CIA Veteran," by Will Pitt,
www.truthout.org, June 26, 2003
55. "In Round 2, it's the dollar vs. euro," Newsweek, April 23,
2003
56. Hoyos, Carol & Morrison, Kevin, "Iraq returns to
international oil market," Financial Times, June 5, 2003
57. "US to pay its Iraqi workers in dollars," Times Online [UK],
April 23, 2003
58. Anderson William L., "Dollar or Dinar?", mises.org, April 29,
2003
59. Booth, William Booth & Chandrasekaran, Rajiv, "Occupation
Forces Halt Elections Throughout Iraq," Washington Post, June
28, 2003
60. Stephen, Kinzer, All the Shah's Men: An American Coup and the
Roots of Middle East Terror, John Wiley & Sons (2003)
61. Enforcing American Hegemony - A Timeline, Josh Buermann
62. Benson, Richard, "Oil, the Dollar, and US Prosperity,"
www.prudentbear.com, August 11, 2003
63. Vance, Laurence, "Eight Facts about Iraq,"
www.lewrockwell.com, January 2, 2004
64. Links to Opinions on Legality of War Against Iraq,
robincmiller.com
65. O'Loughlin, Ed, "It's guerilla war, new commander admits,"
The Herald, July 18, 2003
66. Goldenberg, Suzanne "US troops question presence in Iraq", UK
Guardian, October 17, 2003
67. Pleming, Sue "Iraq: US Soldiers Complain of Low Morale,"
Reuters, July 17, 2003
68. Selective Service System, Annual Performance Plan, April
2003, www.sss.gov; See Also: "Oiling up the draft machine?,"
November 4, 2003
69. Kaufman, Michael, "What Does the Pentagon see in `Battle of
Algiers'?," CommonDreams.org, September 7, 2003
70. Speech by Zbigniew Brzezinski at New American Strategies for
Security and Peace, October 28, 2003
71. Shivkumar, C., "Iran offers oil to Asian union on easier
terms," The Hindu Business Line, June 16, 2003
72. Spiro, David, ibid.
73. Belton, Catherine, Putin: "Why Not Price Oil in Euros?" The
Moscow Times, Oct. 10, 2003 (original article, expanded
article)
74. Pesek Jr., William, "Indonesia May Dump Dollar; Rest of Asia
Too?" Bloomberg, April 17, 2003
75. Geewax, Marilyn, "Muslims eye euro as new oil currency," The
Sydney Morning Herald, April 22, 2003
76. "European Central Bank believes pricing oil in euros is
sensible," Moscow Times/Alexander Gas & Oil News, October 14,
2003
77. Duncan, Richard, The Dollar Crisis: Causes, Consequences,
Cures, John Wiley & Sons (2003)
78. Zbigniew Brzezinski Speech, ibid.
79. "Interpol's involvement in the fight against international
terrorism," www.interpol.int
80. Kelley, Jack, "Al-Qaeda fragmented, smaller, but still
deadly," USA TODAY, September 9, 2002
# # #
Michel Chossudovsky's book: War and Globalization, the Truth
behind Sept 11 addressed the global tensions regarding US/EU
strategic currency issues. The below excerpts are found on Dr.
Chossudovsky's website, and in the Fall 2003 (Issue #5) magazine,
Global Outlook.
The Anglo-American Military Axis
By Michel Chossudovsky
. . .
Euro versus Dollar: Rivalry Between America and "Old Europe"
. . . The [euro encroaches] upon the hegemony of the US dollar. .
. . Wall Street is clashing with competing Franco-German financial
interests. The war in Iraq pertains not only to control over [oil]
reserves[, but also] the control over [currency,] money creation
and credit. . . .
The European common currency system has a direct bearing on
strategic and political divisions. London's decision not to adopt
the common currency is consistent with the integration of British
financial and banking interests with those of Wall Street, not to
mention the Anglo-American alliance in the oil industry (BP,
Exxon-Mobil, Texaco Chevron, Shell) and weapons production (by the
"Big Five" US weapons producers plus British Aerospace Systems).
This shaky relationship between the British pound and the US
dollar is an integral part of the Anglo-American military axis.
What is at stake is the rivalry between two competing global
currencies: the euro and the US dollar, with Britain's pound being
torn between the European and the US-dominated currency systems.
In other words, two rival financial and monetary systems are
competing worldwide for the control over money creation and
credit. The geopolitical and strategic implications are
far-reaching because that are also marked by splits on the Western
defense industry and the oil business.
In both Europe and America, monetary policy, although formally
under State jurisdiction, is largely controlled by the private
banking sector. The European Central Bank based in Frankfurt --
although officially under the jurisdiction of the EU -- is, in
practice, overseen by a handful of private European banks
including Germany's largest banks and business conglomerates.
The . . . Federal Reserve Board is formally under State
supervision -- marked by a close relationship to the US Treasury.
Distinct from the European Central Bank, the 12 Federal Reserve
banks (of which the Federal Reserve Bank of New York is the most
important) are controlled by their shareholders, which are private
banking institutions. In other words, "the Fed" as it is known in
the US, which is responsible for monetary policy and hence money
creation for the nation, is actually controlled by private
interests on Wall Street.
Currency Systems and `Economic Conquest'
. . . Ultimately, control over national currency systems is the
basis upon which countries are colonized. While the US dollar
prevails throughout the Western Hemisphere, the euro and the US
dollar are clashing in the former Soviet Union, the Balkans,
Central Asia, sub-Saharan Africa and the Middle East.
In the Balkans and the Baltic States, central banks largely
operate as colonial style `currency boards' invariably using the
euro as a proxy currency. What thus means is: German and European
financial interests are in control of money creation and credit.
That is, the pegging of the national currency to the euro --
rather than the US dollar -- means that both the currency and the
monetary system will be in the hands of German-EU banking
interests.
More generally, the euro dominates in Germany's hinterland:
Eastern Europe, the Baltic States and the Balkans, whereas the US
dollar tends to prevail in the Caucasus and Central Asia. In these
countries (which have military cooperation agreements with
Washington) the dollar tends (with the exception of the Ukraine)
to overshadow the euro.
The `Dollarization' of national currencies is an integral part of
America's Silk Road Strategy. The latter consists in first
destabilizing and then replacing national currencies with the
American greenback over an area extending from the Mediterranean
to China's Western border. The underlying objective is to extend
the dominion of the Federal Reserve System -- namely, Wall Street
-- over a vast territory.
What we are dealing with is an `imperial' scramble for control
over national . . . economies and currency systems, they seem to
have also agreed on "sharing the spoils" -- ie. Establishing their
respective "spheres of influence." Reminiscent of the policies of
`partition' in the late 19th Century, the US and Germany have
agreed upon the division of the Balkans; Germany has gained
control over national currencies in Croatia, Bosnia and Kosovo
where the euro is King. The US has established a permanent
military presence in the region (i.e. the Bondsteel military base
in Kosovo).
# # #
Additional Recommended Reading
* Brethour, Patrick, "OPEC mulls move to euro for pricing
crude oil," The Globe And Mail, January 12, 2004
* Ahmed, Nafeez M., "Behind the War on Terror: Western Secret
Strategy and the Struggle for Iraq," New Society Publishers
(2003)
* "Behind the Iraq Invasion," Aspects of India's Economy, Nos.
33&34, December 2002
* Cooper, Peter J, "Forget about the price of oil, what about
the euro?," AME info.com October 14, 2000
* "ECB blasts Bush economy," Eupolitix.com, October 30, 2003
* Engdahl, F. William, "A New American Century? Iraq and the
hidden euro-dollar wars," Current Concerns, No 4, June 2003
* Hentoff, Nat, The War on the Bill of Rights and the Gathering
Resistance," Seven Stories Press, 2003
* Isbell, Paul, "The Shifting Geopolitics of the Euro," Elcano
Royal Institute, September 23, 2002
* Islam, Faisal, "When will we buy oil in euros? When it comes
to the global oil trade, the dollar reigns supreme. But it
has a challenger, writes Faisal Islam,' The Observer,
February 23, 2003
* Makhijani, Arjun, "Saddam's Last Laugh: The Dollar Could be
Headed for Hard Times if OPEC Switches to the Euro,"
TomPaine.com, May 9, 2001
* Pincus, Walter, "CIA Finds No Evidence Hussein Sought to Arm
Terrorists," Washington Post, November 16, 2003
* Sommers, Jeffrey, "Dollar Crisis and American Empire,"
Znet.com, June 20, 2003
* Notes on Project Censored: For the past several years,
journalism students and faculty at the University of
California at Sonoma have reviewed important news stories and
published an annual book on stories that never "made the
news." This past year 150 faculty and students reviewed a
total of 900 stories for the 2003 publication. My essay,
`Real Reasons for the Upcoming Iraq War' was ultimately
awarded by Project Censor as one of the most important but
"censored" news stories of 2003. Below are links to their
website. (A synopsis of my research is provided in story #19
in their publication, Censored 2004.)
I would like to thank Dr. Peter Phillips for his ongoing
efforts at Project Censored. None of the authors published in
`Censored 2004' receive any financial compensation (only
infamy), but if you would like a glimpse as to how our 6 US
media conglomerates profoundly censor our news, I recommend
this book:
Phillips, Peter, Censored 2004: The Top-Twenty Five Censored
Stories Seven Stories Press, 2003
Over the past few years I have often been amazed by the degree to
which the American public remains willingly uninformed, and
despite my skepticism, I sometimes wonder about the validity of
this statement.
"The CIA owns everyone of any significance in the major
media."
--former CIA Director William Colby
Copyright © 2003-2004 William Clark
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