Petrodollars Vs. Petroeuros!

This is a complex issue that many, no doubt, will find hard to understand. The reason for war in the middle east boils down to economics and the devaluation of the U.S. dollar. To understand the beginning of this tale one must go back to the 1960's and the formation of an organization known as The Organization of Petroleum Exporting Countries or OPEC.

"The Organization of Petroleum Exporting Countries (OPEC) was established in Baghdad, Iraq, in 1960. It's Members are Algeria, Ecuador, Indonesia, the Islamic Republic of Iran, Iraq, Kuwait, Nigeria, Qatar, Saudi Arabia, Socialist People's Libyan Jamahiriya, the United Arab Emirates and Venezuela."
(http://www.opec.org)

Since the sixty's the member nations have fluctuated and today it's member and potential members are as follows: "Angola (January 1, 2007), Libya (December 1962), Nigeria (July 1971), Algeria (1969), Iran (September 1960), Iraq (September 1960) (Excluded from OPEC production quotas since 1998), Kuwait (September, 1960), Qatar (December 1961), Saudi Arabia (September 1960), United Arab Emirates (November 1967), Ecuador (1963-1993, since 2007), Venezuela (September 1960), Indonesia (December 1962; membership under review as Indonesia is no longer considered a net oil exporter by OPEC). Former Members ,Gabon (full member from 1975 to 1995). Prospective Members, Bolivia, Mexico, Sudan and Syria have been invited by OPEC to join. The Sudan is currently seeking membership." (http://en.wikipedia.org/wiki/OPEC)

During the formation of OPEC an American based trade organization was established to facilitate the trade for crude oil from OPEC to all the consuming nations. It was decided, with the help of some of the OPEC countries, that all trade would be conducted in the American Dollar. The terms used to describe the money used in this exchange are Petrocurrency or Petrodollar. Since the Dollar is not backed by any real or concrete commodity, such as Gold and Silver, Oil has taken their place. Any country that wanted crude oil from OPEC had to purchase it in American Dollars. That arrangement facilitated the need for other consuming nations to purchase large reserves of American currency. The end result was the bolstering of the Dollar against all other currencies.

Here is where we come to a problem. Saddam Hussein challenged this arrangement and America, with their Dollar so closely tied to Crude Oil, took notice.

"A bizarre political statement by Saddam Hussein has earned Iraq a windfall of hundreds of million of euros. In October 2000 Iraq insisted on dumping the US dollar - 'the currency of the enemy' - for the more multilateral euro...

...It was seen as economically bad because the entire global oil trade is conducted in dollars,' says Fadhil Chalabi, executive director of the Centre for Global Energy Studies. The marked appreciation of the euro, higher interest rates, and the ability to pay mainly European suppliers in euros is believed to have made hundreds of millions for the Iraqi oil-for-food program. UN officials insist that this benefit helps to pay for humanitarian aid, war reparations, and the cost of weapons inspectors. (http://observer.guardian.co.uk/iraq/story/0,,896344,00.html)

This facilitated our need to go into Iraq and install a government friendly to U.S. interests and to again tie Iraq's crude oil to the American Dollar, hence Operation Iraqi Freedom.

To further establish the link between crude oil and the use of force to secure the American currency as the only currency used in the trade of crude oil, I submit the following:

"The dollar is the most important international reserve currency, followed by the euro. The euro inherited this status from the German mark, and since its introduction, has increased its standing considerably, mostly at the expense of the dollar. Despite the dollar's recent losses to the euro, it is still by far the major international reserve currency, with an accumulation more than double that of the euro.

In August 2007, two scholars affiliated with the government of the People's Republic of China threatened to sell its substantial reserves in American dollars in response to pressure that they exercise fair trade. The Chinese government denied that selling dollar-denominated assets would be an official policy in the foreseeable future.

Former Federal Reserve Chairman Alan Greenspan said in September 2007 that the euro could replace the U.S. dollar as the world's primary reserve currency. It is "absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency."
http://en.wikipedia.org/wiki/U.S._dollar

"At the present time, the U.S. dollar remains the world's foremost reserve currency, primarily held in $100 denominations. The majority of U.S. notes are actually held outside the United States, known as eurodollars (not to be confused with the euro) regardless of the location. Economist Paul Samuelson and others maintain that the overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate and the flow of trade to readjust. Milton Friedman at his death believed this to be the case but, more recently, Paul Samuelson has said he now believes that at some stage in the future these pressures will precipitate a run against the U.S. dollar with serious global financial consequences.
(http://en.wikipedia.org/wiki/U.S._dollar)

One of the reasons was an interest rate reduction by the Federal Reserve in September 18, 2007, that raised the euro's value significantly and caused the dollar to fall below €0.70 one month later, marking a new record low. Economists like Alan Greenspan suggest that another reason for the continued fall of the dollar's value is its decreasing role as the world's reserve currency. Chinese officials signaled plans to diversify the nation's $1.43 trillion reserves in response to a falling U.S. currency which also set the dollar under pressure. (http://en.wikipedia.org/wiki/U.S._dollar)

Even OPEC openly states there stance in relation to the falling Dollar:

"Since currently worldwide oil sales are denominated in U.S. dollars, changes in the value of the dollar against other world currencies affect OPEC's decisions on how much oil to produce. For example, when the dollar falls relative to the other currencies, OPEC-member states receive smaller revenues in other currencies for their oil, causing substantial cuts in their purchasing power. After the introduction of the euro, pre-invasion Iraq decided it wanted to be paid for its oil in euros instead of US dollars causing OPEC to consider changing its oil exchange currency to euros. Member states Iran and Venezuela have undergone similar shifts from the dollar to the euro."
(http://en.wikipedia.org/wiki/OPEC)

"The weaker dollar also supported prices, encouraging new investment in the futures market from non-dollar investors."

"...Also, the oil industry is more integrated than it used to be, vertically and horizontally, and major advances in such areas as communications, technology, and dialogue and cooperation have eased some of the barriers and structural rigidities that existed in the past...Let me close by referring briefly to the important issue of dialogue, which is fundamental to achieving balance within the oil industry. Many advances have been recently made in dialogue. OPEC has formal dialogues with the EU, China, IEA and others. OPEC is also actively involved within the International Energy Forum, which is based in Riyadh and constitutes a key component of producer-consumer dialogue. This evolution is conducive to establishing a consensus on, at least, the major issues that concern all parties - such as market stability, security of demand and supply, investment, and sustainable development." (http://www.opec.org/opecna/Speeches/2007/SGEnergyCharter.htm)

In a brilliant paper written by William R. Clark, he warns the world of what is to come:

"It is not yet clear if a US military expedition will occur in a desperate attempt to maintain petrodollar supremacy. Regardless of the recent National Intelligence Estimate that down-played Iran's potential nuclear weapons program, it appears increasingly likely the Bush administration may use the specter of nuclear weapon proliferation as a pretext for an intervention, similar to the fears invoked in the previous WMD campaign regarding Iraq.

If recent stories are correct regarding Cheney's plan to possibly use a another 9/11 terrorist attack as the pretext or casus belli for a US aerial attack against Iran, this would confirm the Bush administration is prepared to undertake a desperate military strategy to thwart Iran's nuclear ambitions, while simultaneously attempting to prevent the Iranian oil Bourse from initiating a euro-based system for oil trades.

However, as members of the UN Security Council; China, Russia and EU nations such as France and Germany would likely veto any US-sponsored UN Security Resolution calling the use of force without solid proof of Iranian culpability in a major terrorist attack.
A unilateral US military strike on Iran would isolate the US government in the eyes of the world community, and it is conceivable that such an overt action could provoke other industrialized nations to strategically abandon the dollar en masse.

Indeed, such an event would create pressure for OPEC or Russia to move towards a petroeuro system in an effort to cripple the US economy and its global military presence."
(http://www.globalresearch.ca/index.php?context=viewArticle&code=CLA20060210&articleId=1937)

The last paragraph alone should send chills down your spine. So, what are the reasons for the invasion of Iraq and the pending invasion of Iran? Look a little closer and beyond the rhetoric espoused by the White House. Look at the World Dominance of the Dollar, in that lies the real truth. Let us all hope for the best in the coming years, but it doesn't look good for the Unites States of America. If anyone really has a interest in this subject I recommend the above mentioned article in it's entirety. It explains in great detail our current and future world predicament.

Research Material:

The hidden hand of American hegemony : petrodollar recycling and international markets / David E. Spiro. Ithaca, NY : Cornell University Press, 1999. xiv, 177 p. ; 25 cm. LOC call # HG3883.A67 S64 1999 Footnotes: [1] Ron Suskind, The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O' Neill, Simon & Schuster publishers (2004)

Richard A. Clarke, Against All Enemies: Inside America's War on Terror, Free Press (2004)

William Clark, "Revisited - The Real Reasons for the Upcoming War with Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth," January 2003 (updated January 2004) www.ratical.org/ratville/CAH/RRiraqWar.html

Peter Philips, Censored 2004, The Top 25 Censored News Stories, Seven Stories Press, (2003) General website for Project Censored: www.projectcensored.org/ Story #19: U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq www.projectcensored.org/publications/2004/19.html

Carol Hoyos and Kevin Morrison, "Iraq returns to the international oil market," Financial Times, June 5, 2003

Faisal Islam, "Iraq nets handsome profit by dumping dollar for euro," [UK] Guardian, February 16, 2003 observer.guardian.co.uk/iraq/story/0,12239,896344,00.html

"Oil bourse closer to reality," IranMania.com, December 28, 2004.

"Iran oil bourse wins authorization," Tehran Times, July 26, 2005

"War-Gaming the Mullahs: The U.S. weighs the price of a pre-emptive strike," Newsweek, September 27 issue, 2004. Online: www.msnbc.msn.com/id/6039135/site/newsweek/

James Fallows, "Will Iran be Next?," Atlantic Monthly, December 2004, pgs. 97 - 110

Seymour Hersh, "The Coming Wars," The New Yorker, January 24th - 31st issue, 2005, pgs. 40-47 Posted online January 17, 2005. Online: www.newyorker.com/fact/content/?050124fa_fact

Philip Giraldi, "In Case of Emergency, Nuke Iran," American Conservative, August 1, 2005

Dafina Linzer, "Iran Is Judged 10 Years From Nuclear Bomb U.S. Intelligence Review Contrasts With Administration Statements," Washington Post, August 2, 2005; Page A01

C. Shivkumar, "Iran offers oil to Asian union on easier terms," The Hindu Business Line (June 16, 2003). www.thehindubusinessline.com/bline/2003/06/17/stories/2003061702380500.htm

Terry Macalister, "Iran takes on west's control of oil trading," The [UK] Guardian, June 16, 2004 www.guardian.co.uk/business/story/0,3604,1239644,00.html

"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) www.opec.org/NewsInfo/Speeches/sp2002/spAraqueSpainApr14.htm

"Iran's oil bourse expects to start by early 2006," Reuters, October 5, 2004 www.iranoilgas.com

"Russia shifts to euro as foreign currency reserves soar," AFP, June 9, 2003 www.cdi.org/russia/johnson/7214-3.cfm

"China to diversify foreign exchange reserves," China Business Weekly, May 8, 2004 www.chinadaily.com.cn/english/doc/2004-05/08/content_328744.htm

Richard S. Appel, "The Repercussions from the Yuan's Revaluation," kitco.com, July 27, 2005 www.kitco.com/ind/appel/jul272005.html

"China, Iran sign biggest oil & gas deal," China Daily, October 31, 2004. Online: www.chinadaily.com.cn/english/doc/2004-10/31/content_387140.htm

Analysis of Abu Musa Island, www.globalsecurity.org www.globalsecurity.org/wmd/world/iran/abu-musa.htm

"Terror & regime change: Any US invasion of Iran will have terrible consequences," News Insight: Public Affairs Magazine, June 11, 2004 www.indiareacts.com/archivedebates/nat2.asp?recno=908&ctg=World

Sammy Salama and Karen Ruster, "A Preemptive Attack on Iran's Nuclear Facilities: Possible Consequences," Monterry Institute of International Studies, August 12, 2004 (updated September 9, 2004) cns.miis.edu/pubs/week/040812.htm

Ron Suskind, The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O' Neill, Simon & Schuster publishers (2004)