|
|
 |
|
|
|
bbs |
search |
rss |
faq |
about
|
|
|
digg |
del.icio.us |
sphere |
google
|
|
|
|
Revisited - The Real Reasons for the Upcoming War With Iraq
by William Clark
Revisited - The Real Reasons for the Upcoming War With Iraq:
A Macroeconomic and Geostrategic Analysis of the Unspoken Truth
by William Clark
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
Contents
* Note to readers
* Summary
* Revisited--The Real Reasons for the Upcoming War With Iraq:
A Macroeconomic and Geostrategic Analysis of the Unspoken Truth
o Synopsis
o Background on Hydrocarbons and US Geostrategy
o References
* Addendum: Notable International Monetary Movements
o European Commentary on the Essay:
`The Real Reasons for the Upcoming War With Iraq'
o Saving the American Experiment (March 10, 2003)
o References
* Post-War Commentary (January 1, 2004)
o Conclusion
o References
* Additional Recommended Reading
Note to readers:
I would like to thank the hundreds of people from all over the
world that emailed me positive feedback throughout 2003 with
respect to my research and Internet based essay on the Iraq war.
Based on your overwhelmingly positive feedback and my own sense of
patriotic duty, I am currently writing a book based on this
research. Additionally, I am also working with a former government
economist to construct an empirical model studying the possible
effects of the dollar's valuation in response to a euro currency
pricing mechanism for OPEC producers. The results of will
hopefully be included in the proposed forthcoming book,
tentatively entitled: Petrodollar Warfare: Oil, Iraq, and the
Future of the Dollar (Available Fall 2004).
For those who are already familiar with my original pre-war essay
from January and March 2003, you may want to skip the opening
parts of this essay and review the expanded section explaining the
importance of Hydrocarbons regarding Peak oil and US Geostrategy,
and then review my somewhat lengthy update from January 1, 2004.
The main flaw from my original essay a year ago was an excessive
focus on the macroeconomic perspectives of the Iraq war. In this
essay, and in the forthcoming book, I have attempted to remedy
this deficiency by including a detailed analysis of the oil
depletion/geostrategic aspects, which appear to be second
coalescing factor that lead to the Iraq war. For comments email:
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 --
[eurodollar symbol].
Although apparently suppressed in the U.S. media, one of the
answers to the Iraq enigma is simple yet shocking. The upcoming
war in Iraq war is mostly about how the CIA, the Federal Reserve
and the Bush/Cheney administration view hydrocarbons at the
geo-strategic level, and the unspoken but overarching
macroeconomic threats to the U.S. dollar from the euro. The Real
Reasons for this upcoming war is this administration's goal of
preventing further OPEC momentum towards the euro as an oil
transaction currency standard, and to secure control of Iraq's oil
before the onset of Peak Oil (predicted to occur around 2010).
However, in order to pre-empt OPEC, they need to gain
geo-strategic control of Iraq along with its 2nd largest proven
oil reserves. This essay will discuss the macroeconomics of the
`petrodollar' and the unpublicized but real threat to U.S.
economic hegemony from the euro as an alternative oil transaction
currency. The following is how an individual very well versed in
the nuances of macroeconomics alluded to the unspoken truth about
this upcoming war with Iraq:
"The Federal Reserve's greatest nightmare is that OPEC
will switch its international transactions from a dollar
standard to a euro standard. Iraq actually made this
switch in Nov. 2000 (when the euro was worth around 82
cents), and has actually made off like a bandit
considering the dollar's steady depreciation against the
euro. (Note: the dollar declined 17% against the euro in
2002.)
"The real reason the Bush administration wants a puppet
government in Iraq -- or more importantly, the reason
why the corporate-military-industrial network
conglomerate wants a puppet government in Iraq -- is so
that it will revert back to a dollar standard and stay
that way." (While also hoping to veto any wider OPEC
momentum towards the euro, especially from Iran -- the
2nd largest OPEC producer who is actively discussing a
switch to euros for its oil exports)."
Although a collective switch by OPEC would be extremely unlikely
barring a major panic on the U.S. dollar, it would appear that a
gradual transition is quite plausible. Furthermore, despite Saudi
Arabia being our `client state,' the Saudi regime appears
increasingly weak/threatened from massive civil unrest. Some
analysts believe civil unrest might unfold in Saudi Arabia, Iran
and other Gulf states in the aftermath of an unpopular U.S.
invasion and occupation of Iraq[3]. Undoubtedly, the Bush
administration is acutely aware of these risks. Hence, the
neo-conservative framework entails a large and permanent military
presence in the Persian Gulf region in a post-Saddam era, just in
case we need to surround and control Saudi's large Ghawar oil
fields in the event of a Saudi coup by an anti-western group. But
first back to Iraq.
"Saddam sealed his fate when he decided to switch to the
euro in late 2000 (and later converted his $10 billion
reserve fund at the U.N. to euros) -- at that point,
another manufactured Gulf War become inevitable under
Bush II. Only the most extreme circumstances could
possibly stop that now and I strongly doubt anything can
-- short of Saddam getting replaced with a pliant
regime.
"Big Picture Perspective: Everything else aside from the
reserve currency and the Saudi/Iran oil issues (i.e.
domestic political issues and international criticism)
is peripheral and of marginal consequence to this
administration. Further, the dollar-euro threat is
powerful enough that they will rather risk much of the
economic backlash in the short-term to stave off the
long-term dollar crash of an OPEC transaction standard
change from dollars to euros. All of this fits into the
broader Great Game that encompasses Russia, India,
China."
This information about Iraq's oil currency is not discussed by the
U.S. media or the Bush administration as the truth could
potentially curtail both investor and consumer confidence, reduce
consumer borrowing/spending, create political pressure to form a
new energy policy that slowly weans us off Middle-Eastern oil, and
of course stop our march towards a war with Iraq. This quasi
`state secret' is addressed in a Radio Free Europe article that
discussed Saddam's switch for his oil sales from dollars to the
euros, to be effective November 6, 2000:
"Baghdad's switch from the dollar to the euro for oil
trading is intended to rebuke Washington's hard-line on
sanctions and encourage Europeans to challenge it. But
the political message will cost Iraq millions in lost
revenue. RFE/RL correspondent Charles Recknagel looks at
what Baghdad will gain and lose, and the impact of the
decision to go with the European currency."[4]
At the time of the switch many analysts were surprised that Saddam
was willing to give up approximately $270 million in oil revenue
for what appeared to be a political statement. However, contrary
to one of the main points of this November 2000 article, the
steady depreciation of the dollar versus the euro since late 2001
means that Iraq has profited handsomely from the switch in their
reserve and transaction currencies. Indeed, The Observer
surprisingly divulged these facts in a recent article entitled:
`Iraq nets handsome profit by dumping dollar for euro,' (February
16, 2003).
"A bizarre political statement by Saddam Hussein has
earned Iraq a windfall of hundreds of millions of euros.
In October 2000 Iraq insisted upon dumping the US Dollar
-- `the currency of the enemy' -- for the more
multilateral euro."[5]
Although Iraq's oil currency switch appears to be completely
censored by the U.S. media conglomerates, this UK article
illustrates that the euro has gained almost 25% against the dollar
since late 2001, which also applies to the $10 billion in Iraq's
U.N. `oil for food' reserve fund that was previously held in
dollars has also gained that same percent value since the switch.
It was reported in 2003 that Iraq's UN reserve fund had swelled
from $10 billion dollars to [euro dollarsymbol]26 billion euros.
According to a former government analyst, the following scenario
would occur if OPEC made an unlikely, but sudden (collective)
switch to euros, as opposed to a gradual transition.
"Otherwise, the effect of an OPEC switch to the euro
would be that oil-consuming nations would have to flush
dollars out of their (central bank) reserve funds and
replace these with euros. The dollar would crash
anywhere from 20-40% in value and the consequences would
be those one could expect from any currency collapse and
massive inflation (think Argentina currency crisis, for
example). You'd have foreign funds stream out of the
U.S. stock markets and dollar denominated assets,
there'd surely be a run on the banks much like the
1930s, the current account deficit would become
unserviceable, the budget deficit would go into default,
and so on. Your basic 3rd world economic crisis
scenario.
"The United States economy is intimately tied to the
dollar's role as reserve currency. This doesn't mean
that the U.S. couldn't function otherwise, but that the
transition would have to be gradual to avoid such
dislocations (and the ultimate result of this would
probably be the U.S. and the E.U. switching roles in the
global economy)."
Although the above scenario is unlikely, and most assuredly
undesirable, under certain economic conditions it is plausible. In
fact, one of the conditions that could create such an environment
is a near unilateral U.S. led war in the Middle East. For example,
a large spike in oil prices could create huge problems for the
imperiled Japanese banking system, the world's largest holder of
U.S. dollar reserves. Unfortunately the current Bush
administration has chosen a military option instead of a
multilateral conference on monetary reform to resolve these
issues. In the aftermath of toppling Saddam it is clear the U.S.
will keep a large and permanent military force in the Persian
Gulf. Indeed, there is no talk of an `exit strategy,' as the
military will be needed to protect the newly installed regime, and
to send a message to other OPEC producers that they too might
receive `regime change' if they convert their oil payments to
euros.
An interesting yet again underreported story from last year
relates to another OPEC `Axis of Evil' country, Iran, who is
vacillating on pricing their oil export in the euro currency.
"Iran's proposal to receive payments for crude oil sales
to Europe in euros instead of U.S. dollars is based
primarily on economics, Iranian and industry sources
said.
"But politics are still likely to be a factor in any
decision, they said, as Iran uses the opportunity to hit
back at the U.S. government, which recently labeled it
part of an `axis of evil.'
"The proposal, which is now being reviewed by the
Central Bank of Iran, is likely to be approved if
presented to the country's parliament, a parliamentary
representative said.
"`There is a very good chance MPs will agree to this
idea . . . now that the euro is stronger, it is more
logical,' the parliamentary representative said."[6]
Moreover, and perhaps most telling, during 2002 the majority of
reserve funds in Iran's central bank were shifted to euros. It
appears imminent they intend to switch oil payments to euros.
"More than half of [Iran] the country's assets in the
Forex Reserve Fund have been converted to euro, a member
of the Parliament Development Commission, Mohammad
Abasspour announced. He noted that higher parity rate of
euro against the US dollar will give the Asian
countries, particularly oil exporters, a chance to usher
in a new chapter in ties with European Union's member
countries.
"He said that the United States dominates other
countries through its currency, noting that given the
superiority of the dollar against other hard currencies,
the US monopolizes global trade. The lawmaker expressed
hope that the competition between euro and dollar would
eliminate the monopoly in global trade."[7]
After toppling Saddam, this administration may decide that Iran's
disloyalty to the dollar qualifies them as the next target in the
`war on terror.' Iran's interest in switching to the euro as their
currency for oil exports is well documented. Perhaps U.S.
operations against Iran will be mostly covert, but this MSNBC
article alludes to ultimate objectives of the neo-conservatives.
"While still wrangling over how to overthrow Iraq's
Saddam Hussein, the Bush administration is already
looking for other targets. President Bush has called for
the ouster of Palestinian leader Yasir Arafat. Now some
in the administration -- and allies at D.C. think tanks
-- are eyeing Iran and even Saudi Arabia. As one senior
British official put it: `Everyone wants to go to
Baghdad. Real men want to go to Tehran.'"[8]
Aside from the geopolitical risks regarding Saudi Arabia and Iran,
another risk factor is actually Japan. Perhaps the biggest gamble
in a protracted Iraq war may be Japan's weak economy.[9] If the
war creates prolonged oil high prices ($45 per barrel over several
months), or a short but massive oil price spike ($80 to $100 per
barrel), some analysts believe Japan's fragile economy would
collapse. Japan is quite hypersensitive to oil prices, and if its
banks default, the collapse of the second largest economy would
set in motion a sequence of events that could prove quite damaging
to the U.S. economy. There is little doubt the Iraq war plan is
designed to be a quick victory, with the U.S. military securing
Iraq's vital oil fields at the very onset of hostilities.
Nonetheless, other risks might arise if the Iraq war goes poorly
or becomes prolonged. It is possible that civil unrest may unfold
in Iran, Saudi Arabia or other OPEC members in the Middle East.
Such events could foster the very situation this administration is
trying to prevent: another OPEC member switching to euros as their
oil transaction currency standard.
Incidentally, the final `Axis of Evil' country, North Korea,
recently decided to officially drop the dollar and begin using
euros for trade, effective Dec. 7, 2002.[10] Unlike the
OPEC-producers, North Korea's switch will have negligible economic
impact, but it illustrates the geopolitical fallout of President
Bush's harsh rhetoric. Much more troubling is North Korea's recent
action following the oil embargo of their country. They are in
dire need of oil and food; and in an act of desperation they have
re-activated their pre-1994 nuclear program. The re-processing
uranium fuel rods appear to be taking place, and it appears their
strategy is to prompt negotiations with the U.S. regarding food
and oil. The CIA estimates that North Korea could produce 4-6
nuclear weapons by the second half of 2003. Ironically, this
crisis over North Korea's nuclear program further confirms the
fraudulent premise for which this war with Saddam was entirely
contrived.
During the 1990s the world viewed the U.S. as a rather
self-absorbed but essentially benevolent superpower. Military
actions in Iraq (1990-91 & 1998), Serbia and Kosovo (1999) were
undertaken with NATO cooperation and UN involvement, thereby
affording these operations with a sufficient level of
international legitimacy. President Clinton also worked to reduce
tensions in Northern Ireland and attempted to negotiate a
resolution to the Israeli-Palestinian conflict. With the exception
of the Middle East, our superpower status was viewed as mostly
benign. Our trade imbalances were tolerated, and balanced fiscal
policies provided confidence.
However, in both the pre and post 9/11 intervals, the `America
first' policies of the Bush administration, with its unwillingness
to honor International Treaties, along with their aggressive
militarisation of foreign policy has significantly damaged our
reputation abroad. Following 9/11, it appears that President
Bush's `warmongering rhetoric' has created global tensions -- as
we are now viewed as a belligerent superpower willing to apply
unilateral military force without U.N. approval. Moreover, this
administrations failure to actively engage in negotiations
regarding the Israeli/Palestinian conflict is unfortunate.
Lamentably, the tremendous amount of international sympathy we
witnessed in the immediate aftermath of the September 11th tragedy
has been replaced with fear and anger at our government. This
administration's bellicosity has changed the worldview, and
`anti-Americanism' is proliferating even among our closest
allies.[11]
Equally alarming, and completely unreported in the US media, are
significant monetary shifts in the reserve funds of foreign
governments away from the dollar with movements towards the
euro.[12][13][14] It appears the world community may lack faith
in the Bush administration's flawed economic policies, and along
with OPEC, seem poised to respond with economic retribution if the
U.S. government is regarded as an uncontrollable and dangerous
superpower. Despite the absence of media coverage, the
plausibility of slowly abandoning the dollar standard for the euro
is real. An article by Hazel Henderson outlines the dynamics and
the potential outcomes:
"The most likely end to US hegemony may come about
through a combination of high oil prices (brought about
by US foreign policies toward the Middle East) and
deeper devaluation of the US dollar (expected by many
economists). Some elements of this scenario:
1. US global over-reach in the `war on terrorism'
already leading to deficits as far as the eye can
see -- combined with historically-high US trade
deficits -- lead to a further run on the dollar.
This and the stock market doldrums make the US less
attractive to the world's capital.
2. More developing countries follow the lead of
Venezuela and China in diversifying their currency
reserves away from dollars and balanced with euros.
Such a shift in dollar-euro holdings in Latin
America and Asia could keep the dollar and euro
close to parity.
3. OPEC could act on some of its internal discussions
and decide (after concerted buying of euros in the
open market) to announce at a future meeting in
Vienna that OPEC's oil will be re-denominated in
euros, or even a new oil-backed currency of their
own. A US attack on Iraq sends oil to
[eurodollar symbol]40 (euros) per barrel.
4. The Bush Administration's efforts to control the
domestic political agenda backfires. Damage over
the intelligence failures prior to 9/11 and
warnings of imminent new terrorist attacks
precipitate a further stock market slide.
5. All efforts by Democrats and the 57% of the US
public to shift energy policy toward renewables,
efficiency, standards, higher gas taxes, etc. are
blocked by the Bush Administration and its fossils
fuel industry supporters. Thus, the USA remains
vulnerable to energy supply and price shocks.
6. The EU recognizes its own economic and political
power as the euro rises further and becomes the
world's other reserve currency. The G-8 pegs the
euro and dollar into a trading band -- removing
these two powerful currencies from speculators
trading screens (a "win-win" for everyone!). Tony
Blair persuades Brits of this larger reason for the
UK to join the euro.
7. Developing countries lacking dollars or "hard"
currencies follow Venezuela's lead and begin
bartering their undervalued commodities directly
with each other in computerized swaps and counter
trade deals. President Chavez has inked 13 such
country barter deals on its oil, e.g., with Cuba in
exchange for Cuban health paramedics who are
setting up clinics in rural Venezuelan villages.
The result of this scenario? The USA could no longer run
its huge current account trade deficits or continue to
wage open-ended global war on terrorism or evil. The USA
ceases pursuing unilateralist policies. A new US
administration begins to return to its multilateralist
tradition, ceases its obstruction and rejoins the UN and
pursues more realistic international cooperation."[15]
As for the events currently taking place in Venezuela, items #2
and #7 on the above list may allude to why the Bush administration
quickly endorsed the failed military-led coup of Hugo Chavez in
April 2002. Although the coup collapsed after 2 days with Chavez
being restored to power, various reports suggest the CIA and a
rather embarrassed Bush administration approved and may have been
actively involved with the civilian/military coup plotters.
"George W. Bush's administration was the failed coup's
primary loser, underscoring its bankrupt hemispheric
policy. Now it is slowly filtering out that in recent
months White House officials met with key coup figures,
including Carmona. Although the administration insists
that it explicitly objected to any extra-constitutional
action to remove Chavez, comments by senior U.S.
officials did little to convey this. . . .
"The CIA's role in a 1971 Chilean strike could have
served as the working model for generating economic and
social instability in order to topple Chavez. In the
truckers' strike of that year, the agency secretly
orchestrated and financed the artificial prolongation of
a contrived work stoppage in order to economically
asphyxiate the leftist Salvador Allende government.
"This scenario would have had CIA operatives acting in
liaison with the Venezuelan military, as well as with
opposition business and labor leaders, to convert a
relatively minor afternoon-long work stoppage by senior
management into a nearly successful coup de grâce."[16]
Interestingly, according to an article by Michael Ruppert,
Venezuelan's ambassador Francisco Mieres-Lopez apparently floated
the idea of switching to the euro approximately one year before
the failed coup attempt. Furthermore, there is some evidence that
the U.S. is still active in its attempts to overthrow the
democratically elected Chavez administration. In December 2002 a
Uruguayan government official exposed the ongoing covert CIA
operations in Venezuela:
"Uruguayan EP-FA congressman Jose Nayardi says he has
information that far-reaching plan have been put into
place by the CIA and other North American intelligence
agencies to overthrow Venezuelan President Hugo Chavez
Frias within the next 72 hours. . . .
Nayardi says he has received copies of top-secret
communications between the Bush administration in
Washington and the government of Uruguay requesting the
latter's cooperation to support white collar executives
and trade union activists to `break down levels of
intransigence within the Chavez Frias
administration.'"[17]
Venezuela is the fourth largest producer of oil, and the corporate
elites whose political power runs unfettered in the Bush/Cheney
oligarchy appear interested in privatizing Venezuela's oil
industry. Furthermore, the establishment might be concerned that
Chavez's `barter deals' with 12 Latin American countries and Cuba
are effectively cutting the U.S. dollar out of the vital oil
transaction currency cycle. Commodities are being traded among
these countries in exchange for Venezuela's oil, thereby reducing
reliance on fiat dollars. If these unique oil transactions
proliferate, they could create more devaluation pressure on the
dollar by removing it from its crucial `petro-recycling' role.
Continuing attempts to remove Hugo Chavez appear likely.
The U.S. economy has acquired significant structural imbalances,
including our record-high $503 billion trade account deficit (5%
of GDP), a $6.9 trillion dollar deficit (60% of GDP), and the
recent return to annual budget deficits in the hundreds of
billions. These imbalances are exacerbated by the Bush
administration's ideologically driven tax and budget policies,
which are creating enormous deficits for the rest of this decade.
These factors would significantly devalue the currency of any
other nation under the "rules of economics.' Why is the dollar
still the predominant currency despite these structural
imbalances, and why does it appear immune from our twin deficits?
While many Americans assume the strength of the U.S. dollar merely
rests on our economic output (GDP), the ruling elites understand
that the dollar's strength is founded on two fundamentally unique
advantages relative to all other hard currencies.
The reality is that the "safe harbor" status of the U.S. dollar
since 1945 rests on it being the international reserve currency.
Thus it has assumed the role of sole currency for global oil
transactions (ie. `petrodollar'). The U.S. prints hundreds of
billions of fiat dollars, which U.S. consumers provide to other
nations via the purchase of imported goods. These dollars become
"petro-dollars" when are then used by those nation states to
purchase oil/energy from OPEC producers (except Iraq, to some
degree Venezuela, and perhaps Iran in the near future).
Approximately $600 to $800 billion `petrodollars' are annually
from OPEC and invested back into the U.S. via Treasury Bills or
other dollar-denominated assets such as U.S. stocks, bonds, real
estate, etc. This recycling bolsters the dollar's international
liquidity value.
According to research by Dr. David Spiro, in 1974 the Nixon
administration negotiated assurances from Saudi Arabia to price
oil in dollars only, and invest their surplus oil proceeds in U.S.
Treasury Bills. In return the U.S. would protect the Saudi regime.
According to his book, The Hidden Hand of American Hegemony:
Petrodollar Recycling and International Markets[18], these
purchases were done in relative secrecy. These agreements created
the phenomenon known as "petrodollar recycling." In effect, global
oil consumption via OPEC provides a healthy subsidy to the U.S.
economy. Hence, the Europeans created the euro to compete with the
dollar as an alternative international reserve currency. Obviously
the E.U. would also like oil priced in euros as well, as this
would reduce or eliminate their currency risk for oil purchases.
The `old rules' for valuation of the U.S. dollar currency and
economic power were based on our flexible market, free flow of
trade goods, high per worker productivity, manufacturing output/
trade surpluses, government oversight of accounting methodologies
(ie. SEC), developed infrastructure, education system, and of
course total cash flow and profitability. Our superior military
power afforded some additional confidence in the dollar. While
many of these factors remain present, over the last two decades we
have diluted some of the `safe harbor' economic fundamentals.
Despite vast imbalances and structural problems that are
escalating within the U.S. economy, since 1974 the dollar as the
monopoly oil currency created `new rules'. The following excerpts
from an Asia Times article discusses the virtues of our
petrodollar hegemony (or vices from the perspective of developing
nations, whose debt is denominated in dollars).
"Ever since 1971, when US president Richard Nixon took
the dollar off the gold standard (at $35 per ounce) that
had been agreed to at the Bretton Woods Conference at
the end of World War II, the dollar has been a global
monetary instrument that the United States, and only the
United States, can produce by fiat. The dollar, now a
fiat currency, is at a 16-year trade-weighted high
despite record US current-account deficits and the
status of the US as the leading debtor nation. The US
national debt as of April 4 was $6.021 trillion against
a gross domestic product (GDP) of $9 trillion.
"World trade is now a game in which the US produces
dollars and the rest of the world produces things that
dollars can buy. The world's interlinked economies no
longer trade to capture a comparative advantage; they
compete in exports to capture needed dollars to service
dollar-denominated foreign debts and to accumulate
dollar reserves to sustain the exchange value of their
domestic currencies. To prevent speculative and
manipulative attacks on their currencies, the world's
central banks must acquire and hold dollar reserves in
corresponding amounts to their currencies in
circulation. The higher the market pressure to devalue a
particular currency, the more dollar reserves its
central bank must hold. This creates a built-in support
for a strong dollar that in turn forces the world's
central banks to acquire and hold more dollar reserves,
making it stronger. This phenomenon is known as dollar
hegemony, which is created by the geopolitically
constructed peculiarity that critical commodities, most
notably oil, are denominated in dollars. Everyone
accepts dollars because dollars can buy oil. The
recycling of petro-dollars is the price the US has
extracted from oil-producing countries for US tolerance
of the oil-exporting cartel since 1973.
"By definition, dollar reserves must be invested in US
assets, creating a capital-accounts surplus for the US
economy. Even after a year of sharp correction, US stock
valuation is still at a 25-year high and trading at a 56
percent premium compared with emerging markets.
". . . The US capital-account surplus in turn finances
the US trade deficit. Moreover, any asset, regardless of
location, that is denominated in dollars is a US asset
in essence. When oil is denominated in dollars through
US state action and the dollar is a fiat currency, the
US essentially owns the world's oil for free. And the
more the US prints greenbacks, the higher the price of
US assets will rise. Thus a strong-dollar policy gives
the US a double win."[19]
This unique geo-political agreement with Saudi Arabia in 1974 has
worked to our favor for the past 30 years, as this arrangement has
eliminated our currency risk for oil, raised the entire asset
value of all dollar denominated assets/properties, and allowed the
Federal Reserve to create a truly massive debt and credit
expansion (or `credit bubble' in the view of some economists).
These structural imbalances in the U.S. economy are sustainable as
long as:
1. Nations continue to demand and purchase oil for their
energy/survival needs
2. the world's monopoly currency for global oil transactions
remains the US dollar
3. the three internationally traded crude oil markers remain
denominated in US dollars
These underlying factors, along with the `safe harbor' reputation
of U.S. investments afforded by the dollar's reserve currency
status propelled the U.S. to economic and military hegemony in the
post-World War II period. However, the introduction of the euro is
a significant new factor, and appears to be the primary threat to
U.S. economic hegemony. Moreover, in December 2002 ten additional
countries were approved for full membership into the E.U. Barring
any surprise movements, in 2004 this will result in an aggregate
E.U. GDP of $9.6 trillion and 450 million people, directly
competing with the U.S. economy ($10.5 trillion GDP, 280 million
people).
Especially interesting is a speech given by Mr Javad Yarjani, the
Head of OPEC's Petroleum Market Analysis Department, in a visit to
Spain in April 2002. His speech dealt entirely with the subject of
OPEC oil transaction currency standard with respect to both the
dollar and the euro. The following excerpts from this OPEC
executive provide insights into the conditions that would create
momentum for an OPEC currency switch to the euro. Indeed, his
candid analysis warrants careful consideration given that two of
the requisite variables he outlines for the switch have taken
place since this speech in Spring 2002. Articles regarding the
euro and its potential to purchase oil are discussed in the
European and Asian media, but have been completely unreported in
the U.S.
". . . The question that comes to mind is whether the
euro will establish itself in world financial markets,
thus challenging the supremacy of the US dollar, and
consequently trigger a change in the dollar's dominance
in oil markets. As we all know, the mighty dollar has
reigned supreme since 1945, and in the last few years
has even gained more ground with the economic dominance
of the United States, a situation that may not change in
the near future. By the late 90s, more than four-fifths
of all foreign exchange transactions, and half of all
world exports, were denominated in dollars. In addition,
the US currency accounts for about two thirds of all
official exchange reserves. The world's dependency on US
dollars to pay for trade has seen countries bound to
dollar reserves, which are disproportionably higher than
America's share in global output. The share of the
dollar in the denomination of world trade is also much
higher than the share of the US in world trade.
"Having said that, it is worthwhile to note that in the
long run the euro is not at such a disadvantage versus
the dollar when one compares the relative sizes of the
economies involved, especially given the EU enlargement
plans. Moreover, the Euro-zone has a bigger share of
global trade than the US and while the US has a huge
current account deficit, the euro area has a more, or
balanced, external accounts position. One of the more
compelling arguments for keeping oil pricing and
payments in dollars has been that the US remains a large
importer of oil, despite being a substantial crude
producer itself. However, looking at the statistics of
crude oil exports, one notes that the Euro-zone is an
even larger importer of oil and petroleum products than
the US. . . .
". . . From the EU's point of view, it is clear that
Europe would prefer to see payments for oil shift from
the dollar to the euro, which effectively removed the
currency risk. It would also increase demand for the
euro and thus help raise its value. Moreover, since oil
is such an important commodity in global trade, in term
of value, if pricing were to shift to the euro, it could
provide a boost to the global acceptability of the
single currency. There is also very strong trade links
between OPEC Member Countries (MCs) and the Euro-zone,
with more than 45 percent of total merchandise imports
of OPEC MCs coming from the countries of the Euro-zone,
while OPEC MCs are main suppliers of oil and crude oil
products to Europe. . . .
"Of major importance to the ultimate success of the
euro, in terms of the oil pricing, will be if Europe's
two major oil producers -- the United Kingdom and Norway
join the single currency. Naturally, the future
integration of these two countries into the Euro-zone
and Europe will be important considering they are the
region's two major oil producers in the North Sea, which
is home to the international crude oil benchmark, Brent.
This might create a momentum to shift the oil pricing
system to euros. . . .
"In the short-term, OPEC MCs, with possibly a few
exceptions, are expected to continue to accept payment
in dollars. Nevertheless, I believe that OPEC will not
discount entirely the possibility of adopting euro
pricing and payments in the future. The Organization,
like many other financial houses at present, is also
assessing how the euro will settle into its life as a
new currency. The critical question for market players
is the overall value and stability of the euro, and
whether other countries within the Union will adopt the
single currency.
"It is quite possible that as the bilateral trade
increases between the Middle East and the European
Union, it could be feasible to price oil in euros
considering Europe is the main economic partner of that
region. This would foster further ties between these
trading blocs by increasing commercial exchange, and by
helping attract much-needed European investment to the
Middle East.
"In the long-term, perhaps one question that comes to
mind is could a dual system operate simultaneously?
Could one pricing system apply to the Western Hemisphere
in dollars and for the rest of the world in euros? This
will remain the test for the euro, should the currency
gain ground in the market of oil transactions
". . . Should the euro challenge the dollar in strength,
which essentially could include it in the denomination
of the oil bill, it could be that a system may emerge
which benefits more countries in the long-term. Perhaps
with increased European integration and a strong
European economy, this may become a reality. Time may be
on your side. I wish the euro every success."[20]
Based on this important speech, momentum for OPEC to consider
switching to the euro will grow once the E.U. expands in May 2004
to 450 million people with the inclusion of 10 additional member
states. The aggregate GDP will increase from $7 trillion to $9.6
trillion. This enlarged European Union (EU) will be an oil
consuming purchasing population 33% larger than the U.S., and over
half of OPEC crude oil will be sold to the EU as of mid-2004. This
does not include other potential E.U./euro entrants such as the
U.K., Norway, Denmark and Sweden. It should be noted that since
late 2002, the euro has been trading at parity or above the
dollar, and analysts predict the dollar will continue its downward
trending in 2003 relative to the euro.
It appears the final two pivotal items that would create the OPEC
transition to euros will be based on (1) if and when Norway's
Brent crude is re-dominated in euros and (2) when the U.K. adopts
the euro. Regarding the later, Tony Blair is lobbying heavily for
the U.K. to adopt the euro, and their adoption would seem imminent
within this decade. If and when the U.K. adopts the euro currency
I suspect a concerted effort will be quickly mounted to establish
the euro as an international reserve currency. Again, I offer the
following information from an astute individual who analyzes these
international monetary matters very carefully:
"The pivotal vote will probably be Sweden, where
approval this next autumn of adopting the euro also
would give momentum to the Danish government's strong
desire to follow suit. Polls in Denmark now indicate
that the euro would pass with a comfortable margin and
Norwegian polls show a growing majority in favor of EU
membership. Indeed, with Norway having already
integrated most EU economic directives through the EEA
partnership and with their strongly appreciated
currency, their accession to the euro would not only be
effortless, but of great economic benefit.
"As go the Swedes, so probably will go the Danes &
Norwegians. It's the British who are the real obstacle
to building momentum for the euro as international
transaction & reserve currency. So long as the United
Kingdom remains apart from the euro, reducing exchange
rate costs between the euro and the British pound
remains their obvious priority. British adoption (a
near-given in the long run) would mount significant
pressure toward repegging the Brent crude benchmark --
which is traded on the International Petroleum Exchange
in London -- and the Norwegians would certainly have no
objection whatsoever that I can think of, whether or not
they join the European Union.
"Finally, the maneuvers toward reducing the global
dominance of the dollar are already well underway and
have only reason to accelerate so far as I can see. An
OPEC pricing shift would seem rather unlikely prior 2004
-- barring political motivations (ie. from anxious OPEC
members) or a disorderly collapse of the dollar (ie.
Japanese bank collapse due to high oil prices following
a prolonged Iraq conflict) but appears quite viable to
take place before the end of the decade."
In other words, beginning around 2004-2008, from a purely
economic, trade and monetary perspective, it will become logical
for some OPEC producers to transition to the euro for oil pricing.
Of course that will reduce the dollar's international
demand/liquidity value, and hurt the U.S.'s ability to fund its
massive debt unless U.S. policy makers begin to make difficult
fiscal and monetary changes right away -- or use our massive
military power to force events upon OPEC . . .
Facing these potentialities, I hypothesize that President Bush
intends to topple Saddam in 2003 in a pre-emptive attempt to
initiate massive Iraqi oil production in far excess of OPEC
quotas, to reduce global oil prices, and thereby dismantle OPEC's
price controls. The end-goal of the neo-conservatives is
incredibly bold yet simple in purpose, to use the `war on terror'
as the premise to finally dissolve OPEC's decision-making process,
thus ultimately preventing the cartel's inevitable switch to
pricing oil in euros. How would the Bush administration break-up
the OPEC cartel's price controls in a post-Saddam Iraq? First, the
newly installed U.S. ruler (Gen. Garner) will convert Iraq's oil
exports back to the dollar standard. Moreover, according to a
Washington Post article just before the Iraq war, one of the
pre-determined decisions of the "Iraqi interim authority" in a
postwar economy is to drop the Iraq dinar, and covert Iraq to the
U.S. dollar.
"The exact role of the authority, when it would begin to
take over government functions, and who would be part of
it are still to be determined, according to other senior
administration officials. But they did suggest that in
running a postwar Iraqi economy, the U.S. plans to
substitute U.S. dollars for the Iraqi currency that
bears a likeness of President Saddam Hussein."[21]
Obviously the `dollarization' of Iraq would apply to the vital oil
transaction currency issue, but I do not expect that crucial
"detail" to be discussed in the U.S. media. Following the war,
with the U.S. military protecting the oil fields, the new ruling
junta will undertake the necessary steps to significantly increase
production of Iraq oil -- well beyond OPEC's 2 million barrel per
day quota. Analysts have predicted that raising Iraq's oil
production back to pre-1990 levels will take between several
months or two years. Nonetheless, geostrategists such as Henry
Kissenger suggested in 1973 that the US should invade the Middle
East, and disband the OPEC cartel. Mr. Robert Dreyfuss discussed
the history of these goals in his article "The Thirty Year
Itch."[22] Dr. Nayyer Ali offers a succinct analysis of how Iraq's
underutilized oil reserves will not be a `profit-maker' for the
U.S. government, but will fulfill the more important Geostrategic
goal of providing the crucial economic instrument to leverage and
dissolve OPEC's price controls, thus fulfilling the long
sought-after goal of the neo-conservatives to disband the OPEC
cartel:
". . . Despite this vast pool of oil, Iraq has never
produced at a level proportionate to the reserve base.
Since the Gulf War, Iraq's production has been limited
by sanctions and allowed sales under the oil for food
program (by which Iraq has sold 60 billion dollars worth
of oil over the last 5 years) and what else can be
smuggled out. This amounts to less than 1 billion
barrels per year. If Iraq were reintegrated into the
world economy, it could allow massive investment in its
oil sector and boost output to 2.5 billion barrels per
year, or about 7 million barrels a day.
"Total world oil production is about 75 million barrels,
and OPEC combined produces about 25 million barrels.
"What would be the consequences of this? There are two
obvious things.
"First would be the collapse of OPEC, whose strategy of
limiting production to maximize price will have finally
reached its limit. An Iraq that can produce that much
oil will want to do so, and will not allow OPEC to limit
it to 2 million barrels per day. If Iraq busts its
quota, then who in OPEC will give up 5 million barrels
of production? No one could afford to, and OPEC would
die. This would lead to the second major consequence,
which is a collapse in the price of oil to the 10-dollar
range per barrel. The world currently uses 25 billion
barrels per year, so a 15-dollar drop will save
oil-consuming nations 375 billion dollars in crude oil
costs every year.
". . . The Iraq war is not a moneymaker. But it could be
an OPEC breaker. That however is a long-term outcome
that will require Iraq to be successfully reconstituted
into a functioning state in which massive oil sector
investment can take place."[23]
The American people are oblivious to the potential economic risks
regarding the Iraq war. The Bush administration believes that by
toppling Saddam they will remove the juggernaut, thus allowing the
US to control Iraqi's huge oil reserves, and finally break-up and
dissolve the 10 remaining countries in OPEC. However, U.S.
occupation of Iraq could exacerbate tensions within OPEC or
perhaps Iran, providing further impetus for momentum for pricing
oil in euros.
This last issue is undoubtedly a significant gamble even in the
best-case scenario of a relatively quick and painless war that
topples Saddam and leaves Iraq's oil fields intact. Undoubtedly,
the OPEC cartel could feel threatened by the goal of the
neo-conservatives to break-up OPEC's price controls ($22-$28 per
barrel). Perhaps the Bush administration's ambitious goal of
flooding the oil market with Iraqi crude may work, but I have
doubts. Will OPEC simply tolerate quota-busting Iraqi oil
production, thus delivering to them a lesson in self-inflicted
hara-kiri (suicide)? Contrarily, OPEC could meet in Vienna and in
an act of self-preservation re-denominate the oil currency to the
euro. Although unlikely, such a decision would mark the end of
U.S. dollar hegemony, and thus the end of our precarious economic
superpower status. Again, I offer the analysis of an astute
observer regarding the colossal gamble this administration is
undertaking:
"One of the dirty little secrets of today's
international order is that the rest of the globe could
topple the United States from its hegemonic status
whenever they so choose with a concerted abandonment of
the dollar standard. This is America's preeminent,
inescapable Achilles Heel for now and the foreseeable
future.
"That such a course hasn't been pursued to date bears
more relation to the fact that other Westernized, highly
developed nations haven't any interest to undergo the
great disruptions which would follow -- but it could
assuredly take place in the event that the consensus
view coalesces of the United States as any sort of
`rogue' nation. In other words, if the dangers of
American global hegemony are ever perceived as a greater
liability than the dangers of toppling the international
order. The Bush administration and the neo-conservative
movement has set out on a multiple-front course to
ensure that this cannot take place, in brief by a
graduated assertion of military hegemony atop the
existent economic hegemony."
Regrettably, under this administration we have returned to massive
deficit spending, and the lack of strong SEC enforcement has
further eroded investor confidence. Indeed, the flawed economic
and tax policies and of the Bush administration resulting in years
of projected deficits may be exacerbating the weakness of the
dollar, if not outright hastening some countries to diversify
their central bank reserve funds with euros as an alternative to
the dollar. From a foreign policy perspective, the terminations of
numerous international treaties and disdain for international
cooperation via the U.N. and NATO have angered even our closest
allies.
In September 2002, Dr. Paul Isbell wrote an excellent analysis
regarding the quiet "tectonic shifts" underway with respect the
dollar and euro. In his essay he asked, "What can Europe do to
consciously prepare the way for the day when this tectonic shift
in monetary relations becomes undeniably obvious?"[24]
Unfortunately, today we are witnessing this clash of US/EU
financial interests in the form of the upcoming Iraq war over
Saddam's switch to a "petroeuro." Instead of leading a pre-emptive
war in Iraq, the US should be pursuing a multilateral treaty,
perhaps mediated by the UN that establishes a dual-currency
standard for OPEC oil pricing.
Synopsis
It would appear that any attempt by OPEC member states in the
Middle East or Latin America to transition to the euro as their
oil transaction currency standard shall be met with either overt
U.S. military actions or covert U.S. intelligence agency
interventions. Under the guise of the perpetual `war on terror'
the Bush administration is manipulating the American people about
the unspoken but very real macroeconomic reasons for this upcoming
war with Iraq. This war in Iraq will not be based on any threat
from Saddam's old WMD program, or from terrorism. This war will be
over the global currency of oil. A war intended to prevent oil
from being priced in euros.
Sadly, the U.S. has become largely ignorant and complacent. Too
many of us are willing to be ruled by fear and lies, rather than
by persuasion and truth. Will we allow our government to initiate
the dangerous `pre-emptive doctrine' by waging an unpopular war in
Iraq, while we refuse to acknowledge that Saddam does not pose an
imminent threat to the United States? Furthermore, we seem unable
to address the structural imbalances in our economy due to massive
debt manipulation, unaffordable 2001 tax cuts, record levels of
trade deficits, unsustainable credit expansion, corporate
accounting abuses, near zero personal savings, record personal
indebtedness, and our reliance and over consumption of Middle
Eastern oil.
Regardless of whatever Dr. Blix finds or does not find in Iraq
regarding WMD, it appears that President Bush is determined to
pursue his `pre-emptive' imperialist war to secure a large portion
of the earth's remaining hydrocarbons, and ultimately use Iraq's
underutilized oil to destroy the OPEC cartel. Will this gamble
work? That remains to be seen. However, the history of warfare is
replete with unintended consequences. It is plausible that the
aftermath of the Iraq war and a U.S. occupation of Iraq could
increase Al-Qaeda sponsored terrorism against U.S. targets, or
more likely create guerilla warfare in a post-war Iraq. Moreover,
continued U.S. unilateralism could create economic retribution
from the international community or OPEC.
The question we as Americans must ask -- Can the US military
control by force all oil-producing nations and dictate their oil
export transaction currency? In brief, the answer is no. Will we
forfeit any pretense of practicing free-market capitalism while we
enforce a military command economy for global oil transactions? Is
it morally defensible to deploy our brave but naïve young soldiers
around the globe to enforce U.S. dollar hegemony for global oil
transactions via the barrels of their guns? Will we allow
imperialist conquest of the Middle East to feed our excessive oil
consumption, while ignoring the duplicitous overthrowing of a
democratically elected government in Latin America? Is it
acceptable for a U.S. President to threaten military force upon
OPEC nation state(s) because of their sovereign choice of currency
regarding their oil exports? I concur with Dr. Peter Dale Scott's
sentiments on this question:
". . . hopefully decent Americans will protest the
notion that it is appropriate to rain missiles and bombs
upon civilians of another country, who have had little
or nothing to do with this (financial) crisis of
America's own making."
"A multilateral approach to these core problems is the
only way to proceed. The US is strong enough to dominate
the world militarily. Economically it is in decline,
less and less competitive, and increasingly in debt. The
Bush peoples' intention appears to be to override
economic realities with military ones, as if there were
no risk of economic retribution. They should be mindful
of Britain's humiliating retreat from Suez in 1956, a
retreat forced on it by the United States as a condition
for propping up the failing British pound.[25]
Lastly, how can we effectively thwart the threat of international
Al Qaeda terrorism if we alienate so many of our European allies?
Paradoxically, this administration's flawed economic policies and
belligerent foreign policies may hasten the outcome they hope to
prevent -- further OPEC momentum towards the euro. Furthermore,
using U.S. military and/or the threat of force is a rather
unwieldy instrument for Geostrategy, and as such it is unlikely to
indefinitely thwart some OPEC members from acting on their
`internal discussions' regarding a switch to euros. Informed U.S.
patriots realize this administration's failed economic policies in
conjunction with their militant Imperialist overreach is proving
not only detrimental to our international stature, but also
threatens our economy and civil liberties. Thus, remaining silent
is not only misguided, but false patriotism. We must not stand
silent and watch our country continue these imperialist policies.
The US must not become an isolated `rogue' superpower, relying on
brute force, thereby motivating other nations to abandon the
dollar standard -- and with the mere stroke of a pen -- slay our
superpower status?
This need not be our fate. When will we demand that our government
begin the long and difficult journey towards energy conservation,
development of renewable energy sources, and sustained balanced
budgets to allow real deficit reduction? When will we repeal the
clearly unaffordable 2001 tax cuts to facilitate a balanced fiscal
budget, enforce corporate accounting laws, and substantially
reinvest in our manufacturing and export sectors to gradually but
earnestly move our economy from a trade account deficit position
back into a trade account surplus position?
Indeed, over the last two decades, the significant loss of U.S.
manufacturing capability to foreign competition has adversely
affected our ability to maintain a sustainable economy. The "New
Economy" paradigm of the 1990s has created a false `service sector
economy' that simply cannot sustain the U.S.'s economic and
military power status in a competitive globalized economy.
Undoubtedly, we must make these and many more difficult structural
changes to our economy if we are to restore and maintain our
international "safe harbor" investment status.
Furthermore, it would seem imperative that our government begins
discussions with the G7 nations to reform the global monetary
system. We must adopt our economy to accommodate the inevitable
ascendance of the euro as an alternative international reserve
currency. I concur with those enlightened economists who recommend
the U.S. begin the process of convening the next `Bretton Woods
Conference.' The U.S. government should compromise and agree to
the euro becoming the next international reserve currency. A
compromise on the euro/oil issues via a multilateral treaty with a
gradual phase-in of a dual-OPEC currency transaction standard
seems inevitable. It would also seem prudent to investigate a
third `Asia bloc' of the Yen/Yuan as reserve currency options to
give balance to the global monetary system.
While these multilateral reforms may lower our excessive oil
consumption, force the US government to engage in fiscally
responsible policies, and reduce some of our global military
presence, perhaps these adjustments could also reduce some of the
animosity towards U.S. foreign policies. Secondly, it is hoped
such reforms could improve the quality of our lives, and that of
our children by motivating the U.S. to finally become more energy
efficient. Creating balanced domestic fiscal polices, rebuilding
alliances with the E.U./world community and energy reform are in
the long-term national security interests of the U.S. Global Peak
oil is a challenge to humanity itself, and will require an
unprecedented amount of international cooperation and coordination
to overcome this history-making event. Furthermore, global
monetary reform is not only necessary, but could mitigate future
armed or economic warfare over oil, ultimately fostering a more
stable, safer, and prosperous global economy in the 21st century.
Unfortunately, the proposed multilateral conference on monetary
reform and energy reform is viewed as abhorrent to the current
neoconservative movement, which is premised upon the US as the
"Pre-eminent" global Empire.[26] Even a cursory reading of the
neoconservative agenda as outlined in the Project for a New
American Century (PNAC) policy document illustrates their
idealistic goal is US global dominance -- both militarily and
economically. Indeed, the Bush administration's entrenched
political ideology appears quite incompatible with multilateral
economic reform. The neoconservatives seem to view compromise as
antithetical. Ultimately We the People must demand a new
administration. We need responsible leaders who are willing to
return to balanced budgets, conservative fiscal policies, and to
our traditions of engaging in multilateral foreign policies while
seeking broad international cooperation.
Equally important, we must bear in mind the wisdom of founding
fathers like Thomas Jefferson who insisted that a free press is
vital, as it is often the only mechanism to protect democracy. The
American people are not aware of the issues outlined in this essay
because the US mass media has been reduced to approximately six
large media conglomerates that filter 90% of the information that
flows within the U.S. Sadly, part of today's dilemma lays not only
within Congress but also a handful of elitist,
imperialist-oriented media conglomerates that have failed in their
Constitutional obligations to inform the People. Critical
information about the Iraq war was only available via the
Internet, which should not be our only source of real, unfiltered
news.
Finally, despite the media reporting otherwise, the current wave
of `global anti-Americanism' is not against the American people or
against American values -- but against the hypocrisy of militant
American Imperialism. I respectfully submit the current polices of
the neoconservative movement as expressed through various PNAC
documents, their manipulation of the citizenry through fear, and
the application of unilateral U.S. military force is treasonous
not only to the American Public, but incompatible to the very
fundamental principles that founded our nation.
It has been said that the vast majority of wars are fought over
resources and economics, and even so-called "religious wars"
usually have economics or access to resources as a hidden motive.
The Iraq war is no different from other modern wars except it
appears to usher in `oil currency' as a new paradigm for warfare.
However, the world community may not tolerate an imperialist U.S.
Hyper-Power that ignores International Law while using military
force to conquer sovereign nations. Indeed, the facts suggest
additional oil-producing nation states will eventually exercise
their sovereign right by pricing their oil exports in euros
instead of dollars.
I will reiterate the fundamental issue facing our country -- Can
the US military and intelligence agencies control the governments
in all oil-producing nations -- as well as their oil export
currencies? In brief, the answer is no. The question becomes how
many countries will we allow our government to overthrow under the
false pretext of the next "war on terror?" Additionally, how much
international "blowback" against the US and its citizens would
such a Geostrategy create? Likewise, if President Bush pursues an
unprovoked and basically unilateral war against Iraq, the
historians will not be kind to him or his administration. Their
agenda is clear to the world community, but when will US patriots
become cognizant of their modus operandi?
"It is the absolute right of the State to supervise the
formation of public opinion."
"If you tell a lie big enough and keep repeating it,
people will eventually come to believe it."
"The lie can be maintained only for such time as the
State can shield the people from the political, economic
and/or military consequences of the lie. It thus becomes
vitally important for the State to use all of its powers
to repress dissent, for the truth is the mortal enemy of
the lie, and thus by extension, the truth is the
greatest enemy of the State."
-- Dr. Joseph Goebbels, German Minister of Propaganda,
1933-1945
# # #
Background on Hydrocarbons and US Geostrategy
To understand US Geostrategy one needs to have a realistic
appreciation of the importance of hydrocarbons, the phenomenon
referred to as Peak Oil, and the importance of Iraq's oil reserves
with respect to these issues. I should note that two types of data
exist regarding oil reserves, "political data" and "technical
data." Politicians, the media, and economists use political data,
whereas governments, their intelligence agencies, and geologist
use the much more accurate, and much more guarded, technical data.
One important issue not understood by the general population is
the impending geological phenomenon known as "Peak Oil." It is
extremely unfortunate that our corporate-controlled media
conglomerates do not report on the significance of global Peak
Oil. It would seem the European community is openly discussing
this issue, and trying to make preparations to reduce their
overall energy consumption.
Contrarily, the U.S. government is making preparations for more
unilateral wars in an effort to control the worlds' hydrocarbons
-- and the oil currency.[27] The Pentagon has contemplated a
"5-year, 7-war plan."[28] Regarding Peak Oil, Michael Ruppert's
controversial website offers several articles: From the
Wilderness. Although some of these articles are overwrought, their
analysis does illustrate how the expanding `war on terror' follows
wherever US Geostrategic concerns are regarding hydrocarbons
reserves or pipelines (West Africa, South America, etc).
This crucial concept of Peak Oil was first illustrated in
bell-shaped curves by U.S. geophysicist M. King Hubbert, who in
1956 correctly predicted U.S. oil production would peak in 1971.
Each oil field in the world follows a more or less bell-shaped
curve, and the composite view of the world's thousands of oil
fields is one gigantic, ragged edged looking bell-shaped curve.
The best source of data regarding global oil production is form
Petroconsultants Inc out of Zurich. They maintain the largest
private databases of the 40,000 oil fields in the world. It is
rumored that the CIA is their biggest client, and that something
in their 1995 report might have predicted global Peak Oil unless
the Caspian Sea region contained an extensive amount of untapped
oil. Unfortunately the reports by Petroconsultants Inc. cost
approx. $35,000, and non-disclosure statements are required for
their rather exclusive clientele. Undoubtedly the Bush/Cheney
administration is aware of the issues surrounding Peak Oil.
Perhaps acknowledge of this issue is related to their plans to
invade Iraq, which predate Saddam's switch to the euro by years.
To date the two most authoritative books I have reviewed regarding
technical oil production data and Peak Oil are the following; The
Party's Over: Oil, War and the Fate of Industrial Societies (2003)
by Richard Heinberg[29], and Hubbert's Peak; The Impeding World
Oil Shortage (2001) by Kenneth Deffeyes[30]. Highly respected
geologist Colin Campbell has also researched this issue
extensively[31]. Using Hubbert's methodology to measure global oil
production, contemporary geologists have forecast that global Peak
Oil will occur around 2010. Though veteran geologists such as
Kenneth Deffeyes have now concluded that Peak Oil will most likely
occur between 2004 and 2008. The following illustrates his
sentiments:
"My own opinion is that the peak in world oil production
may even occur before 2004. What happens if I am wrong?
I would be delighted to be proved wrong. It would mean
that we have a few additional years to reduce our
consumption of crude oil. However, it would take a lot
of unexpectedly good news to postpone the peak to
2010.[32]
The following information will briefly discuss U.S. Geostrategic
issues regarding Iraq's oil reserves. Other than the core driver
of the dollar versus euro currency threat, the other issue related
to the upcoming war with Iraq appears related to some
disappointing geological findings regarding the Caspian Sea
region. Since the mid-to-late 1990s the Caspian Sea region of
Central Asia was thought to hold approximately 200 billion barrels
of untapped oil (the later would be comparable to Saudi Arabia's
reserve base)."[33] Based on an early feasibility study by Enron,
the easiest and cheapest way to bring this oil to market would be
a pipeline from Kazakhstan, through Afghanistan to the Pakistan
border at Malta. In the late 1990s not only was the Enron
Corporation relying on cheap liquefied natural gas from the
Caspian Sea region for their power plan in India, but also large
energy companies such as Unocal and Halliburton.
"I cannot think of a time when we have had a region
emerge as suddenly to become as strategically
significant as the Caspian." -- Former CEO of
Halliburton, Dick Cheney 1998
In fact, these Caspian region oil reserves were a central
component of Vice President Cheney's energy plan released in May
2001. According to his report, the U.S. will import 90% of its oil
by 2020, and thus tapping into the reserves in the Caspian Sea
region was viewed as a U.S. strategic goal that would help meet
our growing energy demand, and also reduce our dependence on oil
from the Middle East.[34] It is for similar reasons that I believe
Tony Blair endorsed the Iraq war. The U.K. has no oil reserves
other than the North Sea. Unfortunately, the North Sea oil fields
belonging to the U.K. reached peak production in the year 2000.
I suspect the decline in the North Sea output from 2001 to present
day is quite disconcerting to the British government, as it is
much more rapid than one would expect. Like the U.S., the U.K.
will soon import the majority of its oil, perhaps Blair agreed to
the invasion given that British Petroleum (BP) has been the only
non-US oil company that has received oil exploration rights in the
post-Saddam Iraq. Of course the U.K. has not yet ascended to the
euro. Because global oil production seems to have leveled off in
2000, Richard Heinberg recently suggested that we might have
reached a "Peak Oil Plateau."[35] The following graph illustrates
global Peak Oil.
[Reg. Oil&Nat. Gas Liquids]
Once Peak Oil is reached, the supply of oil/energy will begin an
irreversible decline, along with a corresponding irreversible
increase in price despite growing demand from industrialized and
developing nations. Despite various claims by environmental
groups, there is simply no readily available substitute for oil
regarding transportation, nor do the alternatives produce the
power output of oil. Eventually substitutes for oil may become
available, but only if we begin international cooperation on a
truly unprecedented scale, and avoid "global oil warfare."
Although the records from Vice President Cheney's spring 2001
energy meetings are still secret, there is one individual who was
present during some of those meetings and is willing to publicly
discuss Peak Oil. Mr. Matthew Simmons, who was a key advisor to
the Bush Administration, and participated on Vice President
Cheney's 2001 Energy Task Force. Mr. Simmons is an investment
banker in Texas, and CEO of Simmons and Co. International,
handling an investment portfolio of $56 billion. In May 2003 Mr.
Simmons stated the following at a conference for the Association
of the Study of Peak Oil & Gas (ASPO) in Paris, France.
"I think basically that now, that peaking of oil will
never be accurately predicted until after the fact. But
the event will occur, and my analysis is leaning me more
by the month, the worry that peaking is at hand; not
years away. If it turns out I'm wrong, then I'm wrong.
But if I'm right, the unforeseen consequences are
devastating. But unfortunately the world has no Plan B
if I'm right. The facts are too serious to ignore. Sadly
the pessimist-optimist debate started too late."[36]
Regarding US Geostrategy in Afghanistan, according to the French
book, The Forbidden Truth,[37] the Bush administration ignored the
U.N. sanctions that had been imposed upon the Taliban and entered
into negotiations with the supposedly `rogue regime' from February
2, 2001 to August 6, 2001. According to this book, the Taliban
were apparently not very cooperative based on the statements of
Pakistan's former ambassador, Mr. Naik. He reports that the U.S.
threatened a `military option' in the summer of 2001 if the
Taliban did not acquiesce to our demands. Fortuitous for Cheney's
energy plan, Bin Laden delivered to us 9/11/01. The pre-positioned
U.S. military, along with the CIA providing cash to the Northern
Alliance leaders, led the invasion of Afghanistan and the Taliban
were routed. The pro-western Karzai government was ushered in. The
pipeline project was now back on track in early 2002, well, sort
of . . .
After three exploratory wells were built and analyzed, it was
reported that the Caspian region holds only approximately 10 to 20
billion barrels of oil (although it does have a lot of natural
gas)."[38] The oil is also of poor quality, with high sulfur
content. Subsequently, several major companies have now dropped
their plans for the pipeline citing the massive project was no
longer profitable. Unfortunately, this recent realization about
the Caspian Sea region has serious implications for the U.S.,
India, China, Asia and Europe, as the amount of available
hydrocarbons for industrialized and developing nations has been
decreased downward by 20%. (Remaining global estimates reduced
from 1.2 trillion barrels to approx. 1.0 trillion)[39][40].
The following graph illustrates Global Peak Oil, sometimes
referred to as the "Big Rollover."
[World liquids production]
It is widely reported as factual that Iraq has 11% of the world's
total oil reserves (112 billion barrels). However, no geological
surveys have been conducted in Iraq since the 1970s. The Russians,
French, and Chinese were eager to lease Iraq's unexplored fields,
which may contain up to 200 billion barrels[39]. In January 2002
President Bush asked General Tommy Franks to construct an invasion
plan for Iraq. Under the threat of "mushroom clouds," our prime
nemesis, Bin Laden, was skillfully replaced by the OSP into our
new public enemy #1, Saddam Hussein.
For those who would like to review how depleting hydrocarbon
reserves could adversely erode our civil liberties and democratic
processes, retired U.S. Special Forces officer Stan Goff offers a
sobering analysis in his essay: "The Infinite War and Its
Roots".[41] Likewise, for those who wish to review some of the
unspeakable evidence surrounding the September 11th tragedy, Gore
Vidal's controversial book, Dreaming War offers a thorough
introduction.[42] Finally, The War on Freedom: How and Why America
was Attacked, September 11, 2001 by British political scientist
Nafeez Mosaddeq Ahmed methodically presents disconcerting
questions about the 9/11 tragedy and U.S. geostrategy regarding
Afghanistan.[43]
References
1. Rangwala, Glen, `Claims and evaluations of Iraq's proscribed
weapons,' February 25, 2003
2. FAIR Fairness & Accuracy, `Media Advisory: Star Witness On
Iraq Said Weapons Were Destroyed,' February 27, 2003
(Official UNSCOM/IAEA Document); See also Barry, John,
"Exclusive: The Defector's Secrets, Newsweek, March 3, 2003
3. London, Heidi Kingstone, "Middle East: Trouble in the House
of Saud," The Jerusalem Report, January 13, 2003
4. Recknagel, Charles, "Iraq: Baghdad Moves to Euro," Radio Free
Europe, November 1, 2000
5. Islam, Faisal, "Iraq nets handsome profit by dumping dollar
for euro," The Observer, February 16, 2003
6. "Economics Drive Iran Euro Oil Plan, Politics Also Key,"
IranExpert, August 23, 2002
7. "Forex Fund Shifting to Euro," Iran Financial News, August
25, 2002
8. Gutman, Roy & Barry, John, "Beyond Baghdad: Expanding Target
List: Washington looks at overhauling the Islamic and Arab
world," Newsweek, August 11, 2002
9. Costello, Tom, "Japan's Economy at Risk of Collapse," MSNBC
News, December 11, 2002
10. Gluck, Caroline, "North Korea embraces the euro," BBC News,
December 1, 2002
11. "What the World Thinks in 2002 -- How Global Publics View:
Their Lives, Their Countries, The World, America," The Pew
Research Center For The People & The Press, December 4, 2002
12. "Euro continues to extend its global influence,"
europartnership.com, January 7, 2002
13. Garnaut, John, "US Dollar Losing Its Position As Asia's
Reserve Currency," July 17, 2002
14. "Canada sells gold, keeps shift into euro reserves," Forbes,
January 6, 2003
15. Henderson, Hazel, "Beyond Bush's Unilateralism: Another
Bi-Polar World or A New Era of Win-Win?" InterPress Service,
June 2002
16. Birms, Larry & Volberding, Alex, "U.S. is the Primary Loser
in Failed Venezuelan Coup," Newsday, April 21, 2002
17. "USA intelligence agencies revealed in plot to oust
Venezuela's President," vheadline.com, December 12, 2002
18. Spiro, David E., The Hidden Hand of American Hegemony:
Petrodollar Recycling and International Markets, Cornell
University Press (1999)
19. Liu, Henry C K, "US dollar hegemony has got to go," Asia
Times, April 11, 2002
20. "The Choice of Currency for the Denomination of the Oil
Bill," Speech given by Javad Yarjani, Head of OPEC's
Petroleum Market Analysis Dept, on The International Role of
the Euro (Invited by the Spanish Minister of Economic Affairs
during Spain's Presidency of the EU), April 14, 2002, Oviedo,
Spain
21. Walsh, Edward, "U.S. Sketches Plan for Postwar `Iraqi Interim
Authority'," Washington Post, March 15, 2003
22. Dreyfus, Robert, "The Thirty Year Itch,' Mother Jones
Magazine, March/April 2003
23. Nayyer, Dr. Ali, "Iraq and Oil," PakistanLink, December 13,
2002
24. Isbell, Paul, "The Shifting Geopolitics of the Euro," Real
Instituto El Cano, September 23, 2002
25. Scott, Dr. Peter Dale, "Bush Deep Reason's for the War on
Iraq: Oil, Petrodollars, and the OPEC Euro Question,"
February 15, 2003
26. Project for a New American Century (PNAC); See Rebuilding
America's Defenses: Strategy, Forces and Resources For a New
Century, September 2000
27. "US plan for military action against Iran complete," Sidney
Morning Herald, May 30, 2003
28. Clark, Wesley, Waging Modern War: Iraq, Terrorism, and the
American Empire, Public Affairs (2003)
29. Heinberg, Richard, The Party's Over: Oil, War and the Fate of
Industrial Societies, New Society Publishers (2003)
30. Deffeyes, Kenneth S, Hubbert's Peak: The Impending World Oil
Shortage, Princeton University Press (2001)
31. Campbell, Colin, Founder, The Association for the Study of
Peak Oil & Gas (ASPO)
32. Dreffeyes, Hubbert's Peak, op. cit.; See sample chapter
33. Pfeiffer, Dale Allen, "Much Ado about Nothing -- Whither the
Caspian Riches? Over the Last 24 Months Hoped For Caspian Oil
Bonanza Has Vanished With Each New Well Drilled -- Global
Implications Are Frightening," From The Wilderness, December
5, 2002
34. National Energy Policy: Report of the National Energy Policy
Development Group, whitehouse.gov, May 2001
35. Heinberg, Richard, "The Petroleum Plateau," Muse Letter No.
#135, May 2003
36. Revealing Statements from a Bush Insider about Peak Oil and
Natural Gas Depletion, From The Wilderness, Matthew Simmons
Transcript, June 12, 2003
37. Jean Charles-Briscard & Guillaume Dasquie, The Forbidden
Truth: U.S.-Taliban Secret Oil Diplomacy, Saudi Arabia and
the Failed Search for bin Laden, Nation Books (2002)
o Interview: Donahue With Jean-Charles Brisard
o The French Connection - Paris Reporters Say Bush
Threatened War Last Summer, Village Voice, January 2-8,
2002
o Three Reviews of the book
38. Ruppert, Michael, "The Unseen Conflict -- War Plans, Backroom
Deals, Leverage and Strategy -- Securing What's Left of the
Planet's Oil Is and Has Always Been the Bottom Line," From
The Wilderness, October 18, 2002
39. Ruppert, Michael, FTW Interview: "Colin Campbell on Oil --
Perhaps the World's Foremost Expert on Oil and the Oil
Business Confirms the Ever More Apparent Reality of the
Post-9-11 World," From The Wilderness, October 23, 2002
40. Paul, James A, "Iraq: the Struggle for Oil," Global Policy
Forum, December 2002
41. Golf, Stan, "The Infinite War and its Roots," From The
Wilderness, August 27, 2002
42. Vidal, Gore, Dreaming War: Blood for Oil & the Cheney-Bush
Junta, Nation Books, 2002. His essay, "The Enemy Within" was
first printed in the UK Observer, October 27, 2002
43. Ahmed, Nafeez, The War on Freedom: How and Why America was
Attacked, September 11, 2001, Tree of Life Publications
(2002)
Addendum: Notable International Monetary Movements
(Late January 2003)
After completing this essay in mid-January 2003, I began to read
about some interesting international monetary developments and the
related opinions of analysts. These recent developments warrant
inclusion as an addendum. The following two articles relate to the
rapid devaluation of the dollar in late January relative to the
euro. This occurred in the week immediately preceding President
Bush's State of the Union address. Both of these articles suggest
that Russia -- a traditional holder of dollar reserves -- may be
linking `political overtones' to their exchanges of dollars for
euros. The following article may illustrate things to come if
President Bush continues on his present unilateral position on
Iraq.
"The dollar remained on the ropes on Thursday, buffeted
by some hawkish remarks from the US administration about
the standoff with Iraq. It was also stung by a pointed
signal from Russia's central bank that the appeal of
dollar-denominated assets is waning.
"Oleg Vyugin, first deputy chairman at the Russian
central bank, said the bank plans to cut the share of US
dollars in its foreign exchange reserves and increase
the share of other currencies. . . .
"Some analysts questioned whether there may be political
overtones to Vyugin's remarks, that could be related to
the widening rift between the US and some other
potential allies about how to persuade Iraq to comply
with UN weapons' inspectors requirements.
"Although Russia's own foreign exchange reserves are
fairly small by comparison with the world's biggest
central banks, the question is, `Will other central
banks follow and what does this do to the ability of the
US to finance its current account deficit?' said Marc
Chandler, chief currency strategist with HSBC in New
York.
"That deficit is currently around 5% of gross domestic
product and proving to be an increasingly heavy
millstone around the dollar's neck."[44]
Although global currency exchanges are notoriously volatile, it is
interesting to note the following day (January 25th) some analysts
reiterated that these monetary movements may be related not only
to the current geo-political tensions, but may also indicate
political motivations. Is this perhaps a `warning shot over the
bow' for the Bush administration regarding their position on Iraq?
These monetary movements by various central banks illustrate
trouble for the dollar.
"All of a sudden, the dollar's supposedly slow and
gradual decline isn't looking so slow, or gradual.
"In fact the speed of the dollar's slide, against the
euro in particular, has taken even the most seasoned
analysts by surprise: a Dow Jones Newswires foreign
exchange survey just ten days ago showed the major
currency trading banks forecasting the euro climbing to
$1.06 by the middle of February and not coming near
$1.10 until the end of the year.
"Instead, the euro has leaped to highs of around $1.0850
on Friday and has already gained 4% on the dollar this
year, leaving strategists increasingly scrambling to
update their forecasts. The Swiss franc keeps reaching
fresh four-year highs, and the dollar is on the ropes
against sterling and a host of other key rivals.
"Perhaps a more important barometer of broader
confidence in U.S. markets is the Treasurys market. With
the dollar falling, gold spiking and stocks under
pressure, Treasurys continue to retain their safe haven
appeal.
"But there are warning signals here, too, that are
beginning to get more attention. This week, the Russian
central bank said it was lowering the U.S. asset portion
of its foreign exchange reserves -- in other words
selling Treasurys -- calling the dollar a low-yielding
currency.
"Analysts believe some of the large Asian central banks
-- that between them hold the lion's share of the
world's dollar reserves -- are also considering
rejigging their Treasury holdings. A U.S.-led war in
Iraq could further accelerate that trend.
"Indeed, some political analysts believe that U.S.
policy over Iraq may already be having a direct impact
on holdings of U.S. assets, particularly with much of
the rest of the world so opposed to war. `It's hard for
me to believe that the flow of capital cannot help but
be affected by how the U.S. is perceived around the
world,' said Larry Greenberg, an international economist
at Ried Thunberg & Co. in Westport, Conn.
"`Today if you have the U.S. acting (in Iraq) against
world opinion, there could be an even faster pullback
out of dollar-denominated assets,' said Joseph Quinlan,
global economist with Johns Hopkins University, in
Washington. `How we go to war influences the rate of
decline of the dollar' he said."[45]
The day after the above article, the UK Observer's Will Hutton
wrote a forceful article against Bush's unilaterism. This article
further emphasizes the unfortunate economic imbalances of the U.S.
economy, and suggests the potential geo-political fallout of a
unilaterist war or an unstable aftermath in Iraq could create a
significant divestiture of dollar denominated assets.
"The US's economic position is far too vulnerable to
allow it to go war without cast-iron multilateral
support that could underpin it economically as well as
diplomatically and militarily. The multi-lateralism Bush
scorns is, in truth, an economic necessity. . . .
"On latest estimates, its net liabilities to the rest
the world are more than $2.7 trillion, nearly 30 per
cent of GDP, a scale of indebtedness associated with
basket-case economies in Latin America.
"Its industrial base is so uncompetitive that it
consistently imports more than it exports; its
current-account deficit, the gap between all its current
foreign earnings and foreign spending, is now a stunning
5 per cent of GDP, continuing a trend that has lasted
for more than 25 years and which is the cause of all
that foreign debt. As a national community, it has
virtually ceased to save so that government and
individuals alike live on credit.
To finance the current-account deficit, a reflection of
the lack of saving, the US relies on foreigners
supplying it with the foreign currency it can't earn
itself. . . .
"But if foreigners got windy about the prospects for
share and property prices and stopped buying, or began
to withdraw some of the trillions they have invested in
the US economy, then the dollar would collapse. Already,
it has fallen nearly 10 per cent against the euro over
the last six weeks, but that could just be the
beginning. Economists at the Federal Reserve have
estimated that the dollar needs to fall by 30 per cent
to bring the flow of imports and exports into balance,
but in today's markets such a fall doesn't happen
gradually. It happens precipitately.
"If America and Britain spurn a second UN Resolution and
go to war with the active opposition of key members of
the Security Council like France and Russia, be sure the
flow of dollars into the US will slow down dramatically,
and be sure there will be a stampede of foreigners
trying to sell. Shares on Wall Street that Bush is so
anxious to prop up are still massively overvalued.
Against this background, there could be a devastating
sell-off, with all the depressing knock-on consequences
for American consumer confidence and business
investment.
"What the markets were signaling last week was that this
is sufficiently within the bounds of possibility that it
was worth taking precautionary action, hence the
selling. If the war was over in a few weeks, the risks
would be containable, and there will be some shares well
worth buying at today's prices. But if the war was
prolonged or the subsequent peace unstable, then the
pressure on the dollar and Wall Street could become very
severe indeed, reinforcing the depressive influences on
an economy where the underlying imbalances are so
extraordinary.
"The US approach has been unilateralist here as
everywhere else: it does what it likes as it likes, a
policy that is now showing its limits. Bush needs badly
to change course, which Tony Blair should be urging on
him. The UN process needs to be respected and
reinforced, not least to reassure the markets, and
better systems of economic governance need to be put in
place. The US's military capacity may allow
unilateralism; its soft economic underbelly, we are
discovering, does not."[46]
These articles indicate that many central banks are reducing their
reliance on dollars, and quite possibly sending a message about
their opposition to the U.S.'s position on Iraq. Mr. Hutton is
correct; our current economic structure simply cannot afford a
significant divesture of foreign investments, nor can the indebted
US consumer and corporate sectors absorb such disruptions.
Although these currency movements are typically described as
purely economically derived decisions, it would be naïve to
suggest that geopolitics and global tensions have not played a
role in the broad movement away from the dollar. The world has no
interest in challenging the US militarily, but given our debt
levels, we have become quite vulnerable from an economic
perspective. . Hence, it is inadvisable for President Bush to
pursue an aggressive, unilateral application of U.S. military
force without broad U.N./international support.
European Commentary on the Essay:
`The Real Reasons for the Upcoming War With Iraq'
To finish, in January 2003, Mr. Coílín Nunan reviewed a draft of my
essay on an Internet forum. He subsequently published an
exceptional summary on an Irish website (www.feasta.org).
Hopefully our efforts will facilitate public awareness, and
stimulate a more honest debate on the Iraq issues. Below are
| |
