Revisited - The Real Reasons for the Upcoming War With Iraq:
A Macroeconomic and Geostrategic Analysis of the Unspoken Truth
by William Clark
wrc92@aol.com
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
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: wrc92@aol.com.
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 -- .
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 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:
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.
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.
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 40 (euros) per barrel.
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.
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.
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.
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:
Nations continue to demand and purchase oil for their energy/survival
needs
the world's monopoly currency for global oil transactions remains the
US dollar
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, ***** 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.
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."
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
Rangwala, Glen, `Claims and evaluations of Iraq's proscribed weapons,'
February 25, 2003
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
London, Heidi Kingstone, "Middle East: Trouble in the House of Saud,"
The Jerusalem Report, January 13, 2003
Recknagel, Charles, "Iraq: Baghdad Moves to Euro," Radio Free Europe,
November 1, 2000
Islam, Faisal, "Iraq nets handsome profit by dumping dollar for euro,"
The Observer, February 16, 2003
"Economics Drive Iran Euro Oil Plan, Politics Also Key," IranExpert,
August 23, 2002
"Forex Fund Shifting to Euro," Iran Financial News, August 25, 2002
Gutman, Roy & Barry, John, "Beyond Baghdad: Expanding Target List:
Washington looks at overhauling the Islamic and Arab world," Newsweek,
August 11, 2002
Costello, Tom, "Japan's Economy at Risk of Collapse," MSNBC News,
December 11, 2002
Gluck, Caroline, "North Korea embraces the euro," BBC News, December
1, 2002
"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
"Euro continues to extend its global influence," europartnership.com,
January 7, 2002
Garnaut, John, "US Dollar Losing Its Position As Asia's Reserve
Currency," July 17, 2002
"Canada sells gold, keeps shift into euro reserves," Forbes, January
6, 2003
Henderson, Hazel, "Beyond Bush's Unilateralism: Another Bi-Polar World
or A New Era of Win-Win?" InterPress Service, June 2002
Birms, Larry & Volberding, Alex, "U.S. is the Primary Loser in Failed
Venezuelan Coup," Newsday, April 21, 2002
"USA intelligence agencies revealed in plot to oust Venezuela's
President," vheadline.com, December 12, 2002
Spiro, David E., The Hidden Hand of American Hegemony: Petrodollar
Recycling and International Markets, Cornell University Press (1999)
Liu, Henry C K, "US dollar hegemony has got to go," Asia Times, April
11, 2002
"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
Walsh, Edward, "U.S. Sketches Plan for Postwar `Iraqi Interim
Authority'," Washington Post, March 15, 2003
Dreyfus, Robert, "The Thirty Year Itch,' Mother Jones Magazine,
March/April 2003
Nayyer, Dr. Ali, "Iraq and Oil," PakistanLink, December 13, 2002
Isbell, Paul, "The Shifting Geopolitics of the Euro," Real Instituto
El Cano, September 23, 2002
Scott, Dr. Peter Dale, "Bush Deep Reason's for the War on Iraq: Oil,
Petrodollars, and the OPEC Euro Question," February 15, 2003
Project for a New American Century (PNAC); See Rebuilding America's
Defenses: Strategy, Forces and Resources For a New Century, September
2000
"US plan for military action against Iran complete," Sidney Morning
Herald, May 30, 2003
Clark, Wesley, Waging Modern War: Iraq, Terrorism, and the American
Empire, Public Affairs (2003)
Heinberg, Richard, The Party's Over: Oil, War and the Fate of
Industrial Societies, New Society Publishers (2003)
Deffeyes, Kenneth S, Hubbert's Peak: The Impending World Oil Shortage,
Princeton University Press (2001)
Campbell, Colin, Founder, The Association for the Study of Peak Oil &
Gas (ASPO)
Dreffeyes, Hubbert's Peak, op. cit.; See sample chapter
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
National Energy Policy: Report of the National Energy Policy
Development Group, whitehouse.gov, May 2001
Heinberg, Richard, "The Petroleum Plateau," Muse Letter No. #135, May
2003
Revealing Statements from a Bush Insider about Peak Oil and Natural
Gas Depletion, From The Wilderness, Matthew Simmons Transcript, June
12, 2003
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)
Interview: Donahue With Jean-Charles Brisard
The French Connection - Paris Reporters Say Bush Threatened War Last
Summer, Village Voice, January 2-8, 2002
Three Reviews of the book
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
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
Paul, James A, "Iraq: the Struggle for Oil," Global Policy Forum,
December 2002
Golf, Stan, "The Infinite War and its Roots," From The Wilderness,
August 27, 2002
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
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
Associated Press, "US Dollar on Shaky Ground," January 24, 2003
McCarthy, Grainne "Dollar's Decline Starting To Accelerate, Rattling
Nerves," Dow Jones Newswire, January 25, 2003
Hutton, Will, "Why Bush is sunk without Europe," The Observer, January
26, 2003
Nunan, Coílín, "Oil, Currency, and the War on Iraq," Feasta.org,
January 2003 (PDF)
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,"
--***** 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]
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: 3,307 tons Found: None
Tabun, nerve agent Found: None
Mustard agent Found: None
Sarin, nerve agent Found: None
VX nerve agent, 1.6 tons Found: None
Anthrax spores raw material: 25,550 liters Found: None
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 laboratories: possibly 18 Found: Two
suspected mobile labs found to be harmless, possibly purchased from
the UK in 1987 as atmospheric hydrogen balloon labs for artillery
aiming purposes
Bombs, rockets, and shells for poison,
gas: up to 30,000 shells Found: None
L-29 unmanned aerial vehicles for delivering
biological and chemical weapons Found: None
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-surface missile with
410 mile/650 kilometer range, up to 20 Found: None
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, a covert CIA agent
whose expertise was in the field of reducing 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 1990, 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 |
