"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
war.
First, why is there virtually no international support to topple Saddam? If
Iraq's WMD program truly possessed the threat level that President Bush has
repeatedly purported, why is there no international coalition to militarily
disarm Saddam?
Secondly, despite over 300 unfettered U.N inspections to date, there has
been no evidence reported of a reconstituted Iraqi WMD program.
Third, and despite Bush's rhetoric, the CIA has not found any links between
Saddam Hussein and Al Qaeda. To the contrary, some analysts believe it is far
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 aware of North Korea's nuclear program violations. Kim Jong II
is processing uranium in order to produce nuclear weapons this year. 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
program? Strangely, Donald Rumsfeld suggested that if Saddam were
"exiled" we could avoid an Iraq war? Confused yet?
Well, I'm going to give their game away - the core driver for toppling
Saddam is actually the euro currency. Although completely suppressed in the
U.S. media, the answer to the Iraq enigma is simple yet shocking. The upcoming
war in Iraq war is mostly about how the ruling class at Langley and the Bush
oligarchy view hydrocarbons at the geo-strategic level, and the overarching
macroeconomic threats to the U.S. dollar from the euro. The Real Reason for
this upcoming war is this administration's goal of preventing further 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.
This lengthy essay will discuss the macroeconomics of the "petro-dollar"
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 astute and anonymous friend 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
80 cents), and has actually made off like a bandit considering the dollar's
steady depreciation against the euro." (Note: the dollar declined 15%
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).
Furthermore, despite Saudi Arabia being our 'client state,' the Saudi
regime appears increasingly weak/ threatened from massive civil unrest. Some
analysts believe a "Saudi Revolution" might be plausible in the
aftermath of an unpopular U.S. invasion of Iraq (ie. Iran circa 1979) (1).
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 grab Saudi's oil fields in the event of a 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'll 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 censored by the U.S. media as
well as the Bush administration & Federal Reserve 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 war in Iraq. This quasi "state secret" can be found on a
Radio Free Europe article discussing Saddam's switch for his oil sales from
dollars to the euros on Nov. 6, 2000 (2).
"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."
At the time of the switch many analysts were surprised that Saddam was
willing to give up millions 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. The euro has gained roughly 17%
against the dollar in that time, 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. What
would happen if OPEC made a sudden 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)."
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
"exit strategy" in Iraq, as the military will be needed to protect
the newly installed Iraqi regime, and perhaps send a message to other OPEC
producers that they might receive "regime change" if they too move
to euros for their oil exports.
Another underreported story from this summer regarding the other OPEC 'Axis
of Evil' country and their interest in the selling oil in euros, Iran. (3)
"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."
More over, and perhaps most telling, during 2002 the majority of reserve funds
in Iran's central bank have been shifted to euros. It appears imminent that
Iran intends to switch to euros for their oil currency (4)
"More than half of 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."
Indeed, after toppling Saddam, this administration may decide that Iran is
the next target in the "war on terror." Iran's interest in switching
to the euro as their standard transaction currency for oil exports is well
documented. Perhaps this recent MSNBC article illustrates the objectives of
the neo conservatives (5).
"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."
Aside from these political 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 (6). 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 would prove devastating to the U.S. economy. Indeed,
Japan's fall in an Iraq war could create the economic dislocations that begin
in the Pacific Rim but quickly spread to Europe and Russia. The Russian
government lacks the controls to thwart a disorderly run on the dollar, and
such an event could ultimately force and OPEC switch to euros.
Additionally, other risks might arise if the Iraq war goes poorly or
becomes prolonged, as it is possible that civil unrest may unfold in Kuwait or
other OPEC members including Venezuela, as the latter may switch to euros just
as Saddam did in November 2000. Thereby fostering the very situation this
administration is trying to prevent, another OPEC member switching to euros as
their oil transaction currency.
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 (7). Unlike the OPEC-producers, their switch
will have negligible economic impact, but it illustrates the geopolitical
fallout of the 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. Processing uranium appears to be taking place
at a rapid pace, 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.
Unfortunately, neo conservatives such as George Bush, Dick Cheney, Donald
Rumsfeld, Paul Wolfowitz and Richard Pearle fail to grasp that Newton's Law
applies equally to both physics and the geo-political sphere as well:
"For every action there is an equal but opposite
reaction."
During the 1990s the world viewed the U.S. as a rather self-absorbed but
essentially benevolent superpower. Military actions in Iraq (90-91' &
98'), Serbia and Kosovo (99') were undertaken with both U.N. and NATO
cooperation and thus afforded international legitimacy. President Clinton also
worked to reduce tensions in Northern Ireland and attempted to negotiate a
resolution to the Israeli-Palestinian conflict.
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. Lamentably,
the tremendous amount of international sympathy that 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 haschanged the
worldview, and "anti-Americanism" is proliferating even among our
closest allies (8).
Even more alarming, and completely unreported in the U.S media, are some
monetary shifts in the reserve funds of foreign governments away from the
dollar with movements towards the euro (China, Venezuela, some OPEC producers
and last week Russia flushed some of their dollars for euros) (9). It appears
that the world community may lack faith in the Bush administration's economic
policies, and along with OPEC, seems poised to respond with economic
retribution if the U.S. government is regarded as an uncontrollable and
dangerous superpower. The plausibility of abandoning the dollar standard for
the euro is growing. An interesting U.K. article outlines the dynamics and the
potential outcomes ('Beyond Bush's Unilateralism: Another Bi-Polar World or A
New Era of Win-Win?')(10) -
"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 �,40
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 fossil 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."
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, various reports suggest the CIA and a rather
embarrassed Bush administration approved and may have been actively involved
with the civilian/military coup plotters. (11)
"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 Houseofficials 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 grace."
Interestingly, according to an article by Michael Ruppert, Venezuelan's
ambassador Francisco Mieres-Lopez apparently floated the idea of switching to
the euro as their oil currency standard approximately one year before the
failed coup attempt... Furthermore, there is evidence that the CIA is still
active in its attempts to overthrow the democratically elected Chavez
administration. In fact, this past December a Uruguayan government official
recently exposed the ongoing covert CIA operations in Venezuela (12):
"Uruguayan EP-FA congressman Jose Bayardi says he has information
that far-reaching plan have been put into place by the CIA and other North
American intelligence agencies tooverthrow Venezuelan President Hugo Chavez
Frias"
"Bayardi 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"
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. Continuing attempts by
the CIA to remove Hugo Chavez appear likely.
The U.S. economy has acquired several problems, including as our
record-high trade account deficit (almost 5% of GDP), $6.3 trillion dollar
deficit (55% of GDP), and the recent return to annual budget deficits in the
hundreds of billions. These are factors that would devalue the currency of any
nation under the "old rules." Why is the dollar still strong despite
these structural flaws? Well, the elites understand that the strength of the
dollar does not merely rest on our economic output per se. The dollar posses
two unique advantages relative to all other hard currencies.
The reality is that the strength of the dollar since 1945 rests on being
the international reserve currency and thus fiat currency for global oil
transactions (ie. "petro-dollar"). The U.S. prints hundreds of
billions of these fiat petro-dollars, which are then used by nation states to
purchase oil/energy from OPEC producers (except Iraq, to some degree
Venezuela, and perhaps Iran in the near future). These petro-dollars are then
re-cycled from OPEC back into the U.S. via Treasury Bills or other
dollar-denominated assets such as U.S. stocks, real estate, etc.
The "old rules" for valuation of our 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. While many of these
factors remain present, over the last two decades we have diluted some of
these "safe harbor" fundamentals. Despite imbalances and some
structural problems that are escalating within the U.S. economy, the dollar as
the fiat oil currency created "new rules". The following exerts from
an Asia Times article discusses the virtues of our fiat oil currency and
dollar hegemony (or vices from the perspective of developing nations, whose
debt is denominated in dollars). (13)
"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."
This unique geo-political agreement with Saudi Arabia has worked to our
favor for the past 30 years, as this arrangement has 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 current 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 fiat reserve currency for global oil transactions remain the U.S.
dollar (and dollar only)
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.
More over, in December 2002 ten additional
countries were approved for full membership into the E.U. In 2004 this will
result in an aggregate 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 (April 2002).
He speech dealt entirely on the subject of OPEC oil transaction currency
standard with respect to both the dollar and the euro. The following exerts
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
early 2002. These vital stories are discussed in the European media, but have
been censored by our own mass media (14)
"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."
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."
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 E.U. 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 entrants such as the U.K., Norway, Denmark and Sweden. I
should note that since this speech the euro has been trading at parity or
above the dollar since late 2002, and analysts predict the dollar will
continue its downward trending in 2003 relative to the euro.
Further, if or when the U.K. adopts the euro currency, that development
could provide critical motivation for OPEC to the make the transition to
euros. It appears the final two pivotal items that would create the OPEC
transition to euros will be based on if and when Norway's Brent crude is
re-dominated in euros, and 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. Again, I offer the following
information from my astute acquaintance who analyzes these matters very
carefully regarding the euro:
"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. motivations of OPEC members) or a disorderly
collapse of the dollar (ie. prolonged high oil prices due to Iraq war causes
Japanese bank collapse)- but appears quite viable to take place before the end
of the decade."
In otherwords, around 2005, from an economic and monetary perspectivem, it
will be logical for OPEC to switch to the euro for oil pricing. Of course that
will devalue the dollar, and hurt the US economy unless it begins making some
structual changes - or use its massive military power to force events upon the
OPEC states...
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
regime (apparently a U.S. General for the first several months) will convert
Iraq back to the dollar standard.
Next, with the U.S. military protecting the oil fields, the Bush junta will
undertake the necessary steps to rapidly increase production of Iraq oil,
quintupling Iraq's current output - and well beyond OPEC's 2 million barrel
per day quota.
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 it will serve as the crucial economic instrument used
by the Bush junta to leverage and hopefully dissolve OPEC's price controls,
thus causing the neo conservative's long sought goal of collapsing the OPEC
cartel (15):
"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."
The American people are largely oblivious to the economic risks regarding
President Bush's upcoming war. Not only is Japan's economy at grave risk from
a spike in oil prices, but additional risks relate to Iran and Venezuela as
well, either of whom could move to the euros, thus providing further momentum
for OPEC to act on their "internal discussions" and switch to the
euro as the fiat currency for oil. 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.
This last issue is undoubtedly a significant gamble even in the best-case
scenario of a quick and relatively painless war that topples Saddam and leaves
Iraq's oil fields intact. Undoubtedly, the OPEC cartel could feel threatened
by the Bush junta's stated goal of breaking-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. Such a decision by would mark the
end of U.S. dollar hegemony, and thus the end of our precarious economic
superpower status. Again, I offer the astute analysis of my expert friend
regarding the colossal gamble this administration is about to undertake:
"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 (or, alternately, if an 'every man for himself' crisis as
discussed above spirals out of control and forces their hand). 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.
The paradox I've illustrated with this one narrow scenario is that the
quixotic course itself may very well bring about the feared outcome that it
means to preempt. We shall see!"
Under this administration we have returned to massive deficit spending, and
the lack of strong SEC enforcement has further eroded investor confidence.
Regrettably, the flawed economic and tax policies and of the Bush
administration may be exacerbating the weakness of the dollar, if not outright
accelerating 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 UN and NATO have angered even our closest
allies.
Lastly, and despite President Bush's attempt to use the threat of applying
military force to OPEC producers who may wish to switch to the euro for their
oil payments, it appears their belligerent neo conservative policies may
paradoxically bring about the dire outcome they hope to prevent - an OPEC
currency switch to euros.
The American people are not aware of such information due to the U.S. mass
media, which has been reduced to a handful of consumption/entertainment and
profit-oriented conglomerates that filter the flow of information in the U.S.
Indeed, the Internet provides the only source of unfiltered "real
news."
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 have nothing to with any threat from Saddam's
old WMD program. This war will be over the global currency of oil.
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?
We seem unable to address the structural weakness of our economy due to
massive debt manipulation, unaffordable 2001 tax cuts, massive current account
deficits, trade deficits, corporate accounting abuses, unsustainable credit
expansion, near zero personal savings, record personal indebtedness, and our
dependence and over consumption of cheap Middle Eastern oil. How much longer
can we reliably import our oil from middle eastern states that dislike or
despise us because of our biased foreign policy towards Israel?
Lastly, we must bear in mind Jefferson's insistence that a free press is
our best, and perhaps only mechanism to protect democracy, and part of today's
dilemma lies within the U.S. media conglomerates that have failed to inform
the People.
Regardless of whatever Dr. Blix finds or doesn't 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 then use Iraq's underutilized oil to
destroy the OPEC cartel. Will this gamble work? Undeniably our nation may
suffer not only from economic retribution, but also from increased Al-Qaeda
sponsored terrorism as well. Will we stand idle and watch CNN, as our
government becomes an international pariah by discarding International Law as
it wages a unilateral war in Iraq?
Is it morally defensible to deploy our brave but na�ve young soldiers
around the globe to enforce U.S. dollar hegemony for global oil transactions -
via the barrel of their guns? Will we allow imperialist conquest in the Middle
East to feed our excessive energy consumption, while ignoring the duplicitous
overthrowing of a democratically elected government in Latin America? Shall we
accept the grave price of an unjust war over the currency of oil? We must not
stand silent and watchour country become a 'rogue' superpower, relying on
brute force, thereby forcing the industrialized nations or OPEC to abandon the
dollar standard - thus with the mere stroke of a pen - slay the U.S. Empire?
Informed citizens believe this administration is pushing us towards that
dire outcome. Remaining silent is not only misguided, but false patriotism.
This need not be our fate. When will we demand that our government begin
the long and difficult journey towards energy conservation, the development of
renewable energy sources, and sustained balanced budgets to allow real deficit
reduction? When will we repeal of the unaffordable 2001 tax cuts to create a
balanced budget, enforce corporate accounting laws, and substantially reinvest
in our manufacturing and export sectors to move our economy from a trade
account deficit position back into a trade account surplus position?
Undoubtedly, we must make these and many more painful structural changes to
our economy if we are to restore our "safe harbor" investment
status.
Ultimately we will have to make sacrifices by reducing our excessive energy
consumption that we have become accustomed to as a society. It is imperative
that our government also begins economic and monetary reforms immediately. We
must adopt our economy to accommodate the inevitable competition to the dollar
from the euro as an alternative international reserve currency and oil
transaction currency. The Bush administration's seemingly entrenched political
ideology appears quite incompatible with these necessary economic reforms.
Ultimately We the People must demand a new and more responsible
administration. We need leaders who are willing to return balanced,
conservative fiscal policies, and to our traditions of engaging in
multilateral foreign policies while seeking broad international cooperation.
It has been said that all wars are fought over resources or
ideology/religion. It appears that this administration may soon add
"currency wars" as a third paradigm. I fear that the world community
will not tolerate a U.S. Empire that uses its military power to conquer
sovereign nations who decide to sell their oil products in euros instead of
dollars. Likewise, if President Bush pursues an essentially unilateral war
against Iraq, I suspect the historians will not be kind to his administration.
Their agenda is clear to the world community, but when will U.S. patriots
become cognizant of their modus operandi?
"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."
- Joseph Goebbels, German Minister of Propaganda, 1933-1945
Background Information on Hydrocarbons
To understand hydrocarbons and how we got to this desperate place in Iraq,
I have listed four articles in the Reference Section from Michael Ruppert's
controversial website: 'From the Wilderness.' Although some of Ruppert's
articles are overwrought from time to time, their research detailing the
issues of hydrocarbons, and the interplay between energy and the Bush junta's
perpetual "war on terror" is quite informative.
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 the
Caspian Sea region. Since the mid-late 1990s the Caspian Sea region of Central
Asiawas thought to hold approx. 200 billion barrels of untapped oil (the later
would be comparable to Saudi Arabia's reserve base)(16). 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 1998 then CEO of Halliburton, Dick Cheney,
expressed much interest in building that pipeline.
In fact, these 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 strategic goal that would help meet our
growing energy demand, and also reduce our dependence on oil from the Middle
East (17).
According to the French book, The Forbidden Truth (18), 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 the Bush administration and Cheney's energy plan, Bin Laden
delivered to us 9/11. 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...
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) (16). 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%. (Globalestimates reduced from 1.2 trillion to
approx. 1 trillion) (18, 19). The Bush administration quickly turned its
attention to a known quantity, Iraq, with it proven reserves totaling 11% of
the world's oil reserves. Our greatest nemesis, Bin Laden, was quickly
replaced with our new public enemy #1, Saddam Hussein...
For those who would like to review the impact of depleting hydrocarbon
reserves from the geo-political perspective, and the potential ramifications
to how this may ultimately create an erosion of 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' (20).
Likewise, for those who wish to review the unspeakable evidence surrounding
the September 11th tragedy, the controversial essay "The Enemy
Within" by the famous American writer Gore Vidal offers a thorough
introduction. Although published in Italy and a major UK newspaper, The
Observer, you will not read Gore Vidal's controversial essay in the U.S.
media. Note: Gore Vidal's latest book, 'Dreaming War' features this as the
opening essay (21). Finally, 'The War on Freedom" by British political
scientist Nafeez Ahmed asks disconcerting questions about the 9/11 tragedy
(22).
Footnotes:
(1)London, Heidi Kingstone, 'Middle
East: Trouble in the House of Saud' (January 13, 2003)http://www.jrep.com/Mideast/Article-0.html
(2)Recknagel, Charles, 'Iraq: Baghdad Moves to Euro'
(November 1, 2000)
http://www.rferl.org/nca/features/2000/11/01112000160846.asp
(3)Gutman, Roy & Barry, John, Beyond Baghdad:
Expanding Target List: Washington looks at overhauling the Islamic and Arab
world (August 11, 2002)
http://www.unansweredquestions.net/timeline/2002/newsweek081102.html
(4)'Economics Drive Iran Euro Oil Plan, Politics Also Key'
(August 2002)
http://www.iranexpert.com/2002/economicsdriveiraneurooil23august.htm
(5)'Forex Fund Shifting to Euro,' Iran Financial News, (August 25, 2002)
http://www.payvand.com/news/02/aug/1080.html
(6)Costello, Tom, 'Japan's Economy at Risk of Collapse' (December 11, 2002)
http://www.msnbc.com/news/845708.asp?0cl=cR
(7) Gluck, Caroline, 'North Korea embraces the euro' (December 1, 2002)
http://news.bbc.co.uk/1/hi/world/asia-pacific/2531833.stm
(8) 'What the World Thinks in 2002 : How Global Publics View: Their Lives,
Their Countries, The World, America' (2002)
http://people-press.org/reports/display.php3?ReportID=165
(9) 'Euro continues to extend its global influence' (January 7, 2002)
http://www.europartnership.com/news/02jan07.htm
(10) Henderson, Hazel, 'Beyond Bush's Unilateralism: Another Bi-Polar World
or A New Era of Win-Win?' (June 2002)
http://www.hazelhenderson.com/Bush's%20unilateralism.htm
(11) Birms, Larry & Volberding, Alex, 'U.S. is the Primary Loser in
Failed Venezuelan Coup,' Newsday (April 21, 2002)
http://www.coha.org/COHA%20_in%20_the_news/Articles%202002/newsday_04_21_02_us__venezuela.htm
(12) 'USA intelligence agencies revealed in plot to oust Venezuela's
President,' (Dec 12, 2002)
http://www.vheadline.com/0212/14248.asp
(link now dead)
(13) Liu, Henry C K, 'US Dollar hegemony has got to go,' (Asia Times, April
11, 2002)
http://www.atimes.com/global-econ/DD11Dj01.html
(14) 'The Choice of Currency for the Denomination of the Oil Bill,' Speech
given by Javad Yarjani, Head of OPEC's Marketing Analysis Department (April,
2002)
http://www.opec.org/NewsInfo/Speeches/sp2002/spAraqueSpainApr14.htm
(15) Dr. Ali, Nayyer, 'Iraq and Oil,' (December 13, 2002)
http://www.pakistanlink.com/nayyer/12132002.html
(16) Pfeiffer, Dale, 'Much Ado about Nothing -- Whither the Caspian Riches?
' (December 5, 2002) http://www.fromthewilderness.com/free/ww3/120502_caspian.html
(17) Ruppert, Michael, 'The Unseen Conflict,' (October 18, 2002)
http://www.fromthewilderness.com/free/ww3/101802_the_unseen.html
(18) 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.
(19) Ruppert, Michael, 'Colin Campbell on Oil.'(October 23, 2002)
http://www.fromthewilderness.com/free/ww3/102302_campbell.html
(20) Golf, Stan, 'The Infinite War and its Roots,'
http://www.fromthewilderness.com/free/ww3/082702_infinite_war.html
(21) 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's Observer (Oct 27, 2002)
http://www.ratical.org/ratville/CAH/EnemyWithin.html
(22) Ahmed, Nafeez, 'The War on Freedom: How and Why America was Attacked,
September 11, 2001', Tree of Life Publications, 2002.
