Note to readers:
I would like to thank the hundreds of people from all over the world that emailed me positive feedback throughout 2003 with respect to my research and Internet based essay on the Iraq war. Based on your overwhelmingly positive feedback and my own sense of patriotic duty, I am currently writing a book based on this research. Additionally, I am also working with a former government economist to construct an empirical model studying the possible effects of the dollar's valuation in response to a euro currency pricing mechanism for OPEC producers. The results of will hopefully be included in the proposed forthcoming book, tentatively entitled: Petrodollar Warfare: Oil, Iraq, and the Future of the Dollar (Available Fall 2004).
For those who are already familiar with my original pre-war essay from January and March 2003, you may want to skip the opening parts of this essay and review the expanded section explaining the importance of Hydrocarbons regarding Peak oil and US Geostrategy, and then review my somewhat lengthy update from January 1, 2004. The main flaw from my original essay a year ago was an excessive focus on the macroeconomic perspectives of the Iraq war. In this essay, and in the forthcoming book, I have attempted to remedy this deficiency by including a detailed analysis of the oil depletion/geostrategic aspects, which appear to be second coalescing factor that lead to the Iraq war. For comments email: wrc92@aol.com.
Summary
Although completely unreported by the U.S. media and government, the answer to the Iraq enigma is simple yet shocking -- it is in large part an oil currency war. One of the core reasons for this upcoming war is this administration's goal of preventing further Organization of the Petroleum Exporting Countries (OPEC) momentum towards the euro as an oil transaction currency standard. However, in order to pre-empt OPEC, they need to gain geo-strategic control of Iraq along with its 2nd largest proven oil reserves. The second coalescing factor that is driving the Iraq war is the quiet acknowledgement by respected oil geologists and possibly this administration is the impending phenomenon known as Global "Peak Oil." This is projected to occur around 2010, with Iraq and Saudi Arabia being the final two nations to reach peak oil production. The issue of Peak Oil has been added to the scope of this essay, along with the macroeconomics of `petrodollar recycling' and the unpublicized but genuine challenge to U.S. dollar hegemony from the euro as an alternative oil transaction currency. The author advocates graduated reform of the global monetary system including a dollar/euro currency `trading band' with reserve status parity, a dual OPEC oil transaction standard, and multilateral treaties via the UN regarding energy reform. Such reforms could potentially reduce future oil currency and oil warfare. The essay ends with a reflection and critique of current US economic and foreign policies. What happens in the 2004 US elections will have a large impact on the 21st century.
Revisited -- The Real Reasons for the Upcoming War With Iraq:
A Macroeconomic and Geostrategic Analysis of the Unspoken Truth"If a nation expects to be ignorant and free, it expects what never was and never will be . . . The People cannot be safe without information. When the press is free, and every man is able to read, all is safe."
Those words by Thomas Jefferson embody the unfortunate state of affairs that have beset our nation. As our government prepares to go to war with Iraq, our country seems unable to answer even the most basic questions about this upcoming conflict. First, why is there a lack of a broad international coalition for toppling Saddam? If Iraq's old weapons of mass destruction (WMD) program truly possessed the threat level that President Bush has repeatedly purported, why are our historic allies not joining a coalition to militarily disarm Saddam? Secondly, despite over 400 unfettered U.N inspections, there has been no evidence reported that Iraq has reconstituted its WMD program. Indeed, the Bush administration's claims about Iraq's WMD capability appear demonstrably false. [1] [2] Third, and despite President Bush's repeated claims, the CIA has not found any links between Saddam Hussein and Al Qaeda. To the contrary, some intelligence analysts believe it is more likely Al Qaeda might acquire an unsecured former Soviet Union Weapon(s) of Mass Destruction, or potentially from sympathizers within a destabilized Pakistan.
Moreover, immediately following Congress's vote on the Iraq Resolution, we suddenly became informed of North Korea's nuclear program violations. Kim Jong Il is processing uranium in order to produce nuclear weapons this year. (It should be noted that just after coming into office President Bush was informed in January 2001of North Korea's suspected nuclear program). Despite the obvious contradictions, President Bush has not provided a rationale answer as to why Saddam's seemingly dormant WMD program possesses a more imminent threat that North Korea's active nuclear weapons program. Millions of people in the U.S. and around the world are asking the simple question: "Why attack Iraq now?" Well, behind all the propaganda is a simple truth -- one of the core drivers for toppling Saddam is actually the euro currency, the --
.
Although apparently suppressed in the U.S. media, one of the answers to the Iraq enigma is simple yet shocking. The upcoming war in Iraq war is mostly about how the CIA, the Federal Reserve and the Bush/Cheney administration view hydrocarbons at the geo-strategic level, and the unspoken but overarching macroeconomic threats to the U.S. dollar from the euro. The Real Reasons for this upcoming war is this administration's goal of preventing further OPEC momentum towards the euro as an oil transaction currency standard, and to secure control of Iraq's oil before the onset of Peak Oil (predicted to occur around 2010). However, in order to pre-empt OPEC, they need to gain geo-strategic control of Iraq along with its 2nd largest proven oil reserves. This essay will discuss the macroeconomics of the `petrodollar' and the unpublicized but real threat to U.S. economic hegemony from the euro as an alternative oil transaction currency. The following is how an individual very well versed in the nuances of macroeconomics alluded to the unspoken truth about this upcoming war with Iraq:
"The Federal Reserve's greatest nightmare is that OPEC will switch its international transactions from a dollar standard to a euro standard. Iraq actually made this switch in Nov. 2000 (when the euro was worth around 82 cents), and has actually made off like a bandit considering the dollar's steady depreciation against the euro. (Note: the dollar declined 17% against the euro in 2002.)
"The real reason the Bush administration wants a puppet government in Iraq -- or more importantly, the reason why the corporate-military-industrial network conglomerate wants a puppet government in Iraq -- is so that it will revert back to a dollar standard and stay that way." (While also hoping to veto any wider OPEC momentum towards the euro, especially from Iran -- the 2nd largest OPEC producer who is actively discussing a switch to euros for its oil exports)."
Although a collective switch by OPEC would be extremely unlikely barring a major panic on the U.S. dollar, it would appear that a gradual transition is quite plausible. Furthermore, despite Saudi Arabia being our `client state,' the Saudi regime appears increasingly weak/threatened from massive civil unrest. Some analysts believe civil unrest might unfold in Saudi Arabia, Iran and other Gulf states in the aftermath of an unpopular U.S. invasion and occupation of Iraq [3]. Undoubtedly, the Bush administration is acutely aware of these risks. Hence, the neo-conservative framework entails a large and permanent military presence in the Persian Gulf region in a post-Saddam era, just in case we need to surround and control Saudi's large Ghawar oil fields in the event of a Saudi coup by an anti-western group. But first back to Iraq.
"Saddam sealed his fate when he decided to switch to the euro in late 2000 (and later converted his $10 billion reserve fund at the U.N. to euros) -- at that point, another manufactured Gulf War become inevitable under Bush II. Only the most extreme circumstances could possibly stop that now and I strongly doubt anything can -- short of Saddam getting replaced with a pliant regime.
"Big Picture Perspective: Everything else aside from the reserve currency and the Saudi/Iran oil issues (i.e. domestic political issues and international criticism) is peripheral and of marginal consequence to this administration. Further, the dollar-euro threat is powerful enough that they will rather risk much of the economic backlash in the short-term to stave off the long-term dollar crash of an OPEC transaction standard change from dollars to euros. All of this fits into the broader Great Game that encompasses Russia, India, China."
This information about Iraq's oil currency is not discussed by the U.S. media or the Bush administration as the truth could potentially curtail both investor and consumer confidence, reduce consumer borrowing/spending, create political pressure to form a new energy policy that slowly weans us off Middle-Eastern oil, and of course stop our march towards a war with Iraq. This quasi `state secret' is addressed in a Radio Free Europe article that discussed Saddam's switch for his oil sales from dollars to the euros, to be effective November 6, 2000:
"Baghdad's switch from the dollar to the euro for oil trading is intended to rebuke Washington's hard-line on sanctions and encourage Europeans to challenge it. But the political message will cost Iraq millions in lost revenue. RFE/RL correspondent Charles Recknagel looks at what Baghdad will gain and lose, and the impact of the decision to go with the European currency." [4]
At the time of the switch many analysts were surprised that Saddam was willing to give up approximately $270 million in oil revenue for what appeared to be a political statement. However, contrary to one of the main points of this November 2000 article, the steady depreciation of the dollar versus the euro since late 2001 means that Iraq has profited handsomely from the switch in their reserve and transaction currencies. Indeed, The Observer surprisingly divulged these facts in a recent article entitled: `Iraq nets handsome profit by dumping dollar for euro,' (February 16, 2003).
"A bizarre political statement by Saddam Hussein has earned Iraq a windfall of hundreds of millions of euros. In October 2000 Iraq insisted upon dumping the US Dollar -- `the currency of the enemy' -- for the more multilateral euro." [5]
Although Iraq's oil currency switch appears to be completely censored by the U.S. media conglomerates, this UK article illustrates that the euro has gained almost 25% against the dollar since late 2001, which also applies to the $10 billion in Iraq's U.N. `oil for food' reserve fund that was previously held in dollars has also gained that same percent value since the switch. It was reported in 2003 that Iraq's UN reserve fund had swelled from $10 billion dollars to
"Otherwise, the effect of an OPEC switch to the euro would be that oil-consuming nations would have to flush dollars out of their (central bank) reserve funds and replace these with euros. The dollar would crash anywhere from 20-40% in value and the consequences would be those one could expect from any currency collapse and massive inflation (think Argentina currency crisis, for example). You'd have foreign funds stream out of the U.S. stock markets and dollar denominated assets, there'd surely be a run on the banks much like the 1930s, the current account deficit would become unserviceable, the budget deficit would go into default, and so on. Your basic 3rd world economic crisis scenario.
"The United States economy is intimately tied to the dollar's role as reserve currency. This doesn't mean that the U.S. couldn't function otherwise, but that the transition would have to be gradual to avoid such dislocations (and the ultimate result of this would probably be the U.S. and the E.U. switching roles in the global economy)."
Although the above scenario is unlikely, and most assuredly undesirable, under certain economic conditions it is plausible. In fact, one of the conditions that could create such an environment is a near unilateral U.S. led war in the Middle East. For example, a large spike in oil prices could create huge problems for the imperiled Japanese banking system, the world's largest holder of U.S. dollar reserves. Unfortunately the current Bush administration has chosen a military option instead of a multilateral conference on monetary reform to resolve these issues. In the aftermath of toppling Saddam it is clear the U.S. will keep a large and permanent military force in the Persian Gulf. Indeed, there is no talk of an `exit strategy,' as the military will be needed to protect the newly installed regime, and to send a message to other OPEC producers that they too might receive `regime change' if they convert their oil payments to euros.
An interesting yet again underreported story from last year relates to another OPEC `Axis of Evil' country, Iran, who is vacillating on pricing their oil export in the euro currency.
"Iran's proposal to receive payments for crude oil sales to Europe in euros instead of U.S. dollars is based primarily on economics, Iranian and industry sources said.
"But politics are still likely to be a factor in any decision, they said, as Iran uses the opportunity to hit back at the U.S. government, which recently labeled it part of an `axis of evil.'
"The proposal, which is now being reviewed by the Central Bank of Iran, is likely to be approved if presented to the country's parliament, a parliamentary representative said.
"`There is a very good chance MPs will agree to this idea . . . now that the euro is stronger, it is more logical,' the parliamentary representative said." [6]
Moreover, and perhaps most telling, during 2002 the majority of reserve funds in Iran's central bank were shifted to euros. It appears imminent they intend to switch oil payments to euros.
"More than half of [Iran] the country's assets in the Forex Reserve Fund have been converted to euro, a member of the Parliament Development Commission, Mohammad Abasspour announced. He noted that higher parity rate of euro against the US dollar will give the Asian countries, particularly oil exporters, a chance to usher in a new chapter in ties with European Union's member countries.
"He said that the United States dominates other countries through its currency, noting that given the superiority of the dollar against other hard currencies, the US monopolizes global trade. The lawmaker expressed hope that the competition between euro and dollar would eliminate the monopoly in global trade." [7]
After toppling Saddam, this administration may decide that Iran's disloyalty to the dollar qualifies them as the next target in the `war on terror.' Iran's interest in switching to the euro as their currency for oil exports is well documented. Perhaps U.S. operations against Iran will be mostly covert, but this MSNBC article alludes to ultimate objectives of the neo-conservatives.
"While still wrangling over how to overthrow Iraq's Saddam Hussein, the Bush administration is already looking for other targets. President Bush has called for the ouster of Palestinian leader Yasir Arafat. Now some in the administration -- and allies at D.C. think tanks -- are eyeing Iran and even Saudi Arabia. As one senior British official put it: `Everyone wants to go to Baghdad. Real men want to go to Tehran.'" [8]
Aside from the geopolitical risks regarding Saudi Arabia and Iran, another risk factor is actually Japan. Perhaps the biggest gamble in a protracted Iraq war may be Japan's weak economy. [9] If the war creates prolonged oil high prices ($45 per barrel over several months), or a short but massive oil price spike ($80 to $100 per barrel), some analysts believe Japan's fragile economy would collapse. Japan is quite hypersensitive to oil prices, and if its banks default, the collapse of the second largest economy would set in motion a sequence of events that could prove quite damaging to the U.S. economy. There is little doubt the Iraq war plan is designed to be a quick victory, with the U.S. military securing Iraq's vital oil fields at the very onset of hostilities.
Nonetheless, other risks might arise if the Iraq war goes poorly or becomes prolonged. It is possible that civil unrest may unfold in Iran, Saudi Arabia or other OPEC members in the Middle East. Such events could foster the very situation this administration is trying to prevent: another OPEC member switching to euros as their oil transaction currency standard.
Incidentally, the final `Axis of Evil' country, North Korea, recently decided to officially drop the dollar and begin using euros for trade, effective Dec. 7, 2002. [10] Unlike the OPEC-producers, North Korea's switch will have negligible economic impact, but it illustrates the geopolitical fallout of President Bush's harsh rhetoric. Much more troubling is North Korea's recent action following the oil embargo of their country. They are in dire need of oil and food; and in an act of desperation they have re-activated their pre-1994 nuclear program. The re-processing uranium fuel rods appear to be taking place, and it appears their strategy is to prompt negotiations with the U.S. regarding food and oil. The CIA estimates that North Korea could produce 4-6 nuclear weapons by the second half of 2003. Ironically, this crisis over North Korea's nuclear program further confirms the fraudulent premise for which this war with Saddam was entirely contrived.
During the 1990s the world viewed the U.S. as a rather self-absorbed but essentially benevolent superpower. Military actions in Iraq (1990-91 & 1998), Serbia and Kosovo (1999) were undertaken with NATO cooperation and UN involvement, thereby affording these operations with a sufficient level of international legitimacy. President Clinton also worked to reduce tensions in Northern Ireland and attempted to negotiate a resolution to the Israeli-Palestinian conflict. With the exception of the Middle East, our superpower status was viewed as mostly benign. Our trade imbalances were tolerated, and balanced fiscal policies provided confidence.
However, in both the pre and post 9/11 intervals, the `America first' policies of the Bush administration, with its unwillingness to honor International Treaties, along with their aggressive militarisation of foreign policy has significantly damaged our reputation abroad. Following 9/11, it appears that President Bush's `warmongering rhetoric' has created global tensions -- as we are now viewed as a belligerent superpower willing to apply unilateral military force without U.N. approval. Moreover, this administrations failure to actively engage in negotiations regarding the Israeli/Palestinian conflict is unfortunate. Lamentably, the tremendous amount of international sympathy we witnessed in the immediate aftermath of the September 11th tragedy has been replaced with fear and anger at our government. This administration's bellicosity has changed the worldview, and `anti-Americanism' is proliferating even among our closest allies. [11]
Equally alarming, and completely unreported in the US media, are significant monetary shifts in the reserve funds of foreign governments away from the dollar with movements towards the euro. [12] [13] [14] It appears the world community may lack faith in the Bush administration's flawed economic policies, and along with OPEC, seem poised to respond with economic retribution if the U.S. government is regarded as an uncontrollable and dangerous superpower. Despite the absence of media coverage, the plausibility of slowly abandoning the dollar standard for the euro is real. An article by Hazel Henderson outlines the dynamics and the potential outcomes:
"The most likely end to US hegemony may come about through a combination of high oil prices (brought about by US foreign policies toward the Middle East) and deeper devaluation of the US dollar (expected by many economists). Some elements of this scenario:
- US global over-reach in the `war on terrorism' already leading to deficits as far as the eye can see -- combined with historically-high US trade deficits -- lead to a further run on the dollar. This and the stock market doldrums make the US less attractive to the world's capital.
- More developing countries follow the lead of Venezuela and China in diversifying their currency reserves away from dollars and balanced with euros. Such a shift in dollar-euro holdings in Latin America and Asia could keep the dollar and euro close to parity.
- OPEC could act on some of its internal discussions and decide (after concerted buying of euros in the open market) to announce at a future meeting in Vienna that OPEC's oil will be re-denominated in euros, or even a new oil-backed currency of their own. A US attack on Iraq sends oil to
40 (euros) per barrel.
- The Bush Administration's efforts to control the domestic political agenda backfires. Damage over the intelligence failures prior to 9/11 and warnings of imminent new terrorist attacks precipitate a further stock market slide.
- All efforts by Democrats and the 57% of the US public to shift energy policy toward renewables, efficiency, standards, higher gas taxes, etc. are blocked by the Bush Administration and its fossils fuel industry supporters. Thus, the USA remains vulnerable to energy supply and price shocks.
- The EU recognizes its own economic and political power as the euro rises further and becomes the world's other reserve currency. The G-8 pegs the euro and dollar into a trading band -- removing these two powerful currencies from speculators trading screens (a "win-win" for everyone!). Tony Blair persuades Brits of this larger reason for the UK to join the euro.
- Developing countries lacking dollars or "hard" currencies follow Venezuela's lead and begin bartering their undervalued commodities directly with each other in computerized swaps and counter trade deals. President Chavez has inked 13 such country barter deals on its oil, e.g., with Cuba in exchange for Cuban health paramedics who are setting up clinics in rural Venezuelan villages.
The result of this scenario? The USA could no longer run its huge current account trade deficits or continue to wage open-ended global war on terrorism or evil. The USA ceases pursuing unilateralist policies. A new US administration begins to return to its multilateralist tradition, ceases its obstruction and rejoins the UN and pursues more realistic international cooperation." [15]
As for the events currently taking place in Venezuela, items #2 and #7 on the above list may allude to why the Bush administration quickly endorsed the failed military-led coup of Hugo Chavez in April 2002. Although the coup collapsed after 2 days with Chavez being restored to power, various reports suggest the CIA and a rather embarrassed Bush administration approved and may have been actively involved with the civilian/military coup plotters.
"George W. Bush's administration was the failed coup's primary loser, underscoring its bankrupt hemispheric policy. Now it is slowly filtering out that in recent months White House officials met with key coup figures, including Carmona. Although the administration insists that it explicitly objected to any extra-constitutional action to remove Chavez, comments by senior U.S. officials did little to convey this. . . .
"The CIA's role in a 1971 Chilean strike could have served as the working model for generating economic and social instability in order to topple Chavez. In the truckers' strike of that year, the agency secretly orchestrated and financed the artificial prolongation of a contrived work stoppage in order to economically asphyxiate the leftist Salvador Allende government.
"This scenario would have had CIA operatives acting in liaison with the Venezuelan military, as well as with opposition business and labor leaders, to convert a relatively minor afternoon-long work stoppage by senior management into a nearly successful coup de grâce." [16]
Interestingly, according to an article by Michael Ruppert, Venezuelan's ambassador Francisco Mieres-Lopez apparently floated the idea of switching to the euro approximately one year before the failed coup attempt. Furthermore, there is some evidence that the U.S. is still active in its attempts to overthrow the democratically elected Chavez administration. In December 2002 a Uruguayan government official exposed the ongoing covert CIA operations in Venezuela:
"Uruguayan EP-FA congressman Jose Nayardi says he has information that far-reaching plan have been put into place by the CIA and other North American intelligence agencies to overthrow Venezuelan President Hugo Chavez Frias within the next 72 hours. . . .
Nayardi says he has received copies of top-secret communications between the Bush administration in Washington and the government of Uruguay requesting the latter's cooperation to support white collar executives and trade union activists to `break down levels of intransigence within the Chavez Frias administration.'" [17]
Venezuela is the fourth largest producer of oil, and the corporate elites whose political power runs unfettered in the Bush/Cheney oligarchy appear interested in privatizing Venezuela's oil industry. Furthermore, the establishment might be concerned that Chavez's `barter deals' with 12 Latin American countries and Cuba are effectively cutting the U.S. dollar out of the vital oil transaction currency cycle. Commodities are being traded among these countries in exchange for Venezuela's oil, thereby reducing reliance on fiat dollars. If these unique oil transactions proliferate, they could create more devaluation pressure on the dollar by removing it from its crucial `petro-recycling' role. Continuing attempts to remove Hugo Chavez appear likely.
The U.S. economy has acquired significant structural imbalances, including our record-high $503 billion trade account deficit (5% of GDP), a $6.9 trillion dollar deficit (60% of GDP), and the recent return to annual budget deficits in the hundreds of billions. These imbalances are exacerbated by the Bush administration's ideologically driven tax and budget policies, which are creating enormous deficits for the rest of this decade. These factors would significantly devalue the currency of any other nation under the "rules of economics.' Why is the dollar still the predominant currency despite these structural imbalances, and why does it appear immune from our twin deficits? While many Americans assume the strength of the U.S. dollar merely rests on our economic output (GDP), the ruling elites understand that the dollar's strength is founded on two fundamentally unique advantages relative to all other hard currencies.
The reality is that the "safe harbor" status of the U.S. dollar since 1945 rests on it being the international reserve currency. Thus it has assumed the role of sole currency for global oil transactions (ie. `petrodollar'). The U.S. prints hundreds of billions of fiat dollars, which U.S. consumers provide to other nations via the purchase of imported goods. These dollars become "petro-dollars" when are then used by those nation states to purchase oil/energy from OPEC producers (except Iraq, to some degree Venezuela, and perhaps Iran in the near future). Approximately $600 to $800 billion `petrodollars' are annually from OPEC and invested back into the U.S. via Treasury Bills or other dollar-denominated assets such as U.S. stocks, bonds, real estate, etc. This recycling bolsters the dollar's international liquidity value.
According to research by Dr. David Spiro, in 1974 the Nixon administration negotiated assurances from Saudi Arabia to price oil in dollars only, and invest their surplus oil proceeds in U.S. Treasury Bills. In return the U.S. would protect the Saudi regime. According to his book, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets [18], these purchases were done in relative secrecy. These agreements created the phenomenon known as "petrodollar recycling." In effect, global oil consumption via OPEC provides a healthy subsidy to the U.S. economy. Hence, the Europeans created the euro to compete with the dollar as an alternative international reserve currency. Obviously the E.U. would also like oil priced in euros as well, as this would reduce or eliminate their currency risk for oil purchases.
The `old rules' for valuation of the U.S. dollar currency and economic power were based on our flexible market, free flow of trade goods, high per worker productivity, manufacturing output/ trade surpluses, government oversight of accounting methodologies (ie. SEC), developed infrastructure, education system, and of course total cash flow and profitability. Our superior military power afforded some additional confidence in the dollar. While many of these factors remain present, over the last two decades we have diluted some of the `safe harbor' economic fundamentals. Despite vast imbalances and structural problems that are escalating within the U.S. economy, since 1974 the dollar as the monopoly oil currency created `new rules'. The following excerpts from an Asia Times article discusses the virtues of our petrodollar hegemony (or vices from the perspective of developing nations, whose debt is denominated in dollars).
"Ever since 1971, when US president Richard Nixon took the dollar off the gold standard (at $35 per ounce) that had been agreed to at the Bretton Woods Conference at the end of World War II, the dollar has been a global monetary instrument that the United States, and only the United States, can produce by fiat. The dollar, now a fiat currency, is at a 16-year trade-weighted high despite record US current-account deficits and the status of the US as the leading debtor nation. The US national debt as of April 4 was $6.021 trillion against a gross domestic product (GDP) of $9 trillion.
"World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy. The world's interlinked economies no longer trade to capture a comparative advantage; they compete in exports to capture needed dollars to service dollar-denominated foreign debts and to accumulate dollar reserves to sustain the exchange value of their domestic currencies. To prevent speculative and manipulative attacks on their currencies, the world's central banks must acquire and hold dollar reserves in corresponding amounts to their currencies in circulation. The higher the market pressure to devalue a particular currency, the more dollar reserves its central bank must hold. This creates a built-in support for a strong dollar that in turn forces the world's central banks to acquire and hold more dollar reserves, making it stronger. This phenomenon is known as dollar hegemony, which is created by the geopolitically constructed peculiarity that critical commodities, most notably oil, are denominated in dollars. Everyone accepts dollars because dollars can buy oil. The recycling of petro-dollars is the price the US has extracted from oil-producing countries for US tolerance of the oil-exporting cartel since 1973.
"By definition, dollar reserves must be invested in US assets, creating a capital-accounts surplus for the US economy. Even after a year of sharp correction, US stock valuation is still at a 25-year high and trading at a 56 percent premium compared with emerging markets.
". . . The US capital-account surplus in turn finances the US trade deficit. Moreover, any asset, regardless of location, that is denominated in dollars is a US asset in essence. When oil is denominated in dollars through US state action and the dollar is a fiat currency, the US essentially owns the world's oil for free. And the more the US prints greenbacks, the higher the price of US assets will rise. Thus a strong-dollar policy gives the US a double win." [19]
This unique geo-political agreement with Saudi Arabia in 1974 has worked to our favor for the past 30 years, as this arrangement has eliminated our currency risk for oil, raised the entire asset value of all dollar denominated assets/properties, and allowed the Federal Reserve to create a truly massive debt and credit expansion (or `credit bubble' in the view of some economists). These structural imbalances in the U.S. economy are sustainable as long as:
- Nations continue to demand and purchase oil for their energy/survival needs
- the world's monopoly currency for global oil transactions remains the US dollar
- the three internationally traded crude oil markers remain denominated in US dollars
These underlying factors, along with the `safe harbor' reputation of U.S. investments afforded by the dollar's reserve currency status propelled the U.S. to economic and military hegemony in the post-World War II period. However, the introduction of the euro is a significant new factor, and appears to be the primary threat to U.S. economic hegemony. Moreover, in December 2002 ten additional countries were approved for full membership into the E.U. Barring any surprise movements, in 2004 this will result in an aggregate E.U. GDP of $9.6 trillion and 450 million people, directly competing with the U.S. economy ($10.5 trillion GDP, 280 million people).
Especially interesting is a speech given by Mr Javad Yarjani, the Head of OPEC's Petroleum Market Analysis Department, in a visit to Spain in April 2002. His speech dealt entirely with the subject of OPEC oil transaction currency standard with respect to both the dollar and the euro. The following excerpts from this OPEC executive provide insights into the conditions that would create momentum for an OPEC currency switch to the euro. Indeed, his candid analysis warrants careful consideration given that two of the requisite variables he outlines for the switch have taken place since this speech in Spring 2002. Articles regarding the euro and its potential to purchase oil are discussed in the European and Asian media, but have been completely unreported in the U.S.
". . . The question that comes to mind is whether the euro will establish itself in world financial markets, thus challenging the supremacy of the US dollar, and consequently trigger a change in the dollar's dominance in oil markets. As we all know, the mighty dollar has reigned supreme since 1945, and in the last few years has even gained more ground with the economic dominance of the United States, a situation that may not change in the near future. By the late 90s, more than four-fifths of all foreign exchange transactions, and half of all world exports, were denominated in dollars. In addition, the US currency accounts for about two thirds of all official exchange reserves. The world's dependency on US dollars to pay for trade has seen countries bound to dollar reserves, which are disproportionably higher than America's share in global output. The share of the dollar in the denomination of world trade is also much higher than the share of the US in world trade.
"Having said that, it is worthwhile to note that in the long run the euro is not at such a disadvantage versus the dollar when one compares the relative sizes of the economies involved, especially given the EU enlargement plans. Moreover, the Euro-zone has a bigger share of global trade than the US and while the US has a huge current account deficit, the euro area has a more, or balanced, external accounts position. One of the more compelling arguments for keeping oil pricing and payments in dollars has been that the US remains a large importer of oil, despite being a substantial crude producer itself. However, looking at the statistics of crude oil exports, one notes that the Euro-zone is an even larger importer of oil and petroleum products than the US. . . .
". . . From the EU's point of view, it is clear that Europe would prefer to see payments for oil shift from the dollar to the euro, which effectively removed the currency risk. It would also increase demand for the euro and thus help raise its value. Moreover, since oil is such an important commodity in global trade, in term of value, if pricing were to shift to the euro, it could provide a boost to the global acceptability of the single currency. There is also very strong trade links between OPEC Member Countries (MCs) and the Euro-zone, with more than 45 percent of total merchandise imports of OPEC MCs coming from the countries of the Euro-zone, while OPEC MCs are main suppliers of oil and crude oil products to Europe. . . .
"Of major importance to the ultimate success of the euro, in terms of the oil pricing, will be if Europe's two major oil producers -- the United Kingdom and Norway join the single currency. Naturally, the future integration of these two countries into the Euro-zone and Europe will be important considering they are the region's two major oil producers in the North Sea, which is home to the international crude oil benchmark, Brent. This might create a momentum to shift the oil pricing system to euros. . . .
"In the short-term, OPEC MCs, with possibly a few exceptions, are expected to continue to accept payment in dollars. Nevertheless, I believe that OPEC will not discount entirely the possibility of adopting euro pricing and payments in the future. The Organization, like many other financial houses at present, is also assessing how the euro will settle into its life as a new currency. The critical question for market players is the overall value and stability of the euro, and whether other countries within the Union will adopt the single currency.
"It is quite possible that as the bilateral trade increases between the Middle East and the European Union, it could be feasible to price oil in euros considering Europe is the main economic partner of that region. This would foster further ties between these trading blocs by increasing commercial exchange, and by helping attract much-needed European investment to the Middle East.
"In the long-term, perhaps one question that comes to mind is could a dual system operate simultaneously? Could one pricing system apply to the Western Hemisphere in dollars and for the rest of the world in euros? This will remain the test for the euro, should the currency gain ground in the market of oil transactions
". . . Should the euro challenge the dollar in strength, which essentially could include it in the denomination of the oil bill, it could be that a system may emerge which benefits more countries in the long-term. Perhaps with increased European integration and a strong European economy, this may become a reality. Time may be on your side. I wish the euro every success." [20]
Based on this important speech, momentum for OPEC to consider switching to the euro will grow once the E.U. expands in May 2004 to 450 million people with the inclusion of 10 additional member states. The aggregate GDP will increase from $7 trillion to $9.6 trillion. This enlarged European Union (EU) will be an oil consuming purchasing population 33% larger than the U.S., and over half of OPEC crude oil will be sold to the EU as of mid-2004. This does not include other potential E.U./euro entrants such as the U.K., Norway, Denmark and Sweden. It should be noted that since late 2002, the euro has been trading at parity or above the dollar, and analysts predict the dollar will continue its downward trending in 2003 relative to the euro.
It appears the final two pivotal items that would create the OPEC transition to euros will be based on (1) if and when Norway's Brent crude is re-dominated in euros and (2) when the U.K. adopts the euro. Regarding the later, Tony Blair is lobbying heavily for the U.K. to adopt the euro, and their adoption would seem imminent within this decade. If and when the U.K. adopts the euro currency I suspect a concerted effort will be quickly mounted to establish the euro as an international reserve currency. Again, I offer the following information from an astute individual who analyzes these international monetary matters very carefully:
"The pivotal vote will probably be Sweden, where approval this next autumn of adopting the euro also would give momentum to the Danish government's strong desire to follow suit. Polls in Denmark now indicate that the euro would pass with a comfortable margin and Norwegian polls show a growing majority in favor of EU membership. Indeed, with Norway having already integrated most EU economic directives through the EEA partnership and with their strongly appreciated currency, their accession to the euro would not only be effortless, but of great economic benefit.
"As go the Swedes, so probably will go the Danes & Norwegians. It's the British who are the real obstacle to building momentum for the euro as international transaction & reserve currency. So long as the United Kingdom remains apart from the euro, reducing exchange rate costs between the euro and the British pound remains their obvious priority. British adoption (a near-given in the long run) would mount significant pressure toward repegging the Brent crude benchmark -- which is traded on the International Petroleum Exchange in London -- and the Norwegians would certainly have no objection whatsoever that I can think of, whether or not they join the European Union.
"Finally, the maneuvers toward reducing the global dominance of the dollar are already well underway and have only reason to accelerate so far as I can see. An OPEC pricing shift would seem rather unlikely prior 2004 -- barring political motivations (ie. from anxious OPEC members) or a disorderly collapse of the dollar (ie. Japanese bank collapse due to high oil prices following a prolonged Iraq conflict) but appears quite viable to take place before the end of the decade."
In other words, beginning around 2004-2008, from a purely economic, trade and monetary perspective, it will become logical for some OPEC producers to transition to the euro for oil pricing. Of course that will reduce the dollar's international demand/liquidity value, and hurt the U.S.'s ability to fund its massive debt unless U.S. policy makers begin to make difficult fiscal and monetary changes right away -- or use our massive military power to force events upon OPEC . . .
Facing these potentialities, I hypothesize that President Bush intends to topple Saddam in 2003 in a pre-emptive attempt to initiate massive Iraqi oil production in far excess of OPEC quotas, to reduce global oil prices, and thereby dismantle OPEC's price controls. The end-goal of the neo-conservatives is incredibly bold yet simple in purpose, to use the `war on terror' as the premise to finally dissolve OPEC's decision-making process, thus ultimately preventing the cartel's inevitable switch to pricing oil in euros. How would the Bush administration break-up the OPEC cartel's price controls in a post-Saddam Iraq? First, the newly installed U.S. ruler (Gen. Garner) will convert Iraq's oil exports back to the dollar standard. Moreover, according to a Washington Post article just before the Iraq war, one of the pre-determined decisions of the "Iraqi interim authority" in a postwar economy is to drop the Iraq dinar, and covert Iraq to the U.S. dollar.
"The exact role of the authority, when it would begin to take over government functions, and who would be part of it are still to be determined, according to other senior administration officials. But they did suggest that in running a postwar Iraqi economy, the U.S. plans to substitute U.S. dollars for the Iraqi currency that bears a likeness of President Saddam Hussein." [21]
Obviously the `dollarization' of Iraq would apply to the vital oil transaction currency issue, but I do not expect that crucial "detail" to be discussed in the U.S. media. Following the war, with the U.S. military protecting the oil fields, the new ruling junta will undertake the necessary steps to significantly increase production of Iraq oil -- well beyond OPEC's 2 million barrel per day quota. Analysts have predicted that raising Iraq's oil production back to pre-1990 levels will take between several months or two years. Nonetheless, geostrategists such as Henry Kissenger suggested in 1973 that the US should invade the Middle East, and disband the OPEC cartel. Mr. Robert Dreyfuss discussed the history of these goals in his article "The Thirty Year Itch." [22] Dr. Nayyer Ali offers a succinct analysis of how Iraq's underutilized oil reserves will not be a `profit-maker' for the U.S. government, but will fulfill the more important Geostrategic goal of providing the crucial economic instrument to leverage and dissolve OPEC's price controls, thus fulfilling the long sought-after goal of the neo-conservatives to disband the OPEC cartel:
". . . Despite this vast pool of oil, Iraq has never produced at a level proportionate to the reserve base. Since the Gulf War, Iraq's production has been limited by sanctions and allowed sales under the oil for food program (by which Iraq has sold 60 billion dollars worth of oil over the last 5 years) and what else can be smuggled out. This amounts to less than 1 billion barrels per year. If Iraq were reintegrated into the world economy, it could allow massive investment in its oil sector and boost output to 2.5 billion barrels per year, or about 7 million barrels a day.
"Total world oil production is about 75 million barrels, and OPEC combined produces about 25 million barrels.
"What would be the consequences of this? There are two obvious things.
"First would be the collapse of OPEC, whose strategy of limiting production to maximize price will have finally reached its limit. An Iraq that can produce that much oil will want to do so, and will not allow OPEC to limit it to 2 million barrels per day. If Iraq busts its quota, then who in OPEC will give up 5 million barrels of production? No one could afford to, and OPEC would die. This would lead to the second major consequence, which is a collapse in the price of oil to the 10-dollar range per barrel. The world currently uses 25 billion barrels per year, so a 15-dollar drop will save oil-consuming nations 375 billion dollars in crude oil costs every year.
". . . The Iraq war is not a moneymaker. But it could be an OPEC breaker. That however is a long-term outcome that will require Iraq to be successfully reconstituted into a functioning state in which massive oil sector investment can take place." [23]
The American people are oblivious to the potential economic risks regarding the Iraq war. The Bush administration believes that by toppling Saddam they will remove the juggernaut, thus allowing the US to control Iraqi's huge oil reserves, and finally break-up and dissolve the 10 remaining countries in OPEC. However, U.S. occupation of Iraq could exacerbate tensions within OPEC or perhaps Iran, providing further impetus for momentum for pricing oil in euros.
This last issue is undoubtedly a significant gamble even in the best-case scenario of a relatively quick and painless war that topples Saddam and leaves Iraq's oil fields intact. Undoubtedly, the OPEC cartel could feel threatened by the goal of the neo-conservatives to break-up OPEC's price controls ($22-$28 per barrel). Perhaps the Bush administration's ambitious goal of flooding the oil market with Iraqi crude may work, but I have doubts. Will OPEC simply tolerate quota-busting Iraqi oil production, thus delivering to them a lesson in self-inflicted hara-kiri (suicide)? Contrarily, OPEC could meet in Vienna and in an act of self-preservation re-denominate the oil currency to the euro. Although unlikely, such a decision would mark the end of U.S. dollar hegemony, and thus the end of our precarious economic superpower status. Again, I offer the analysis of an astute observer regarding the colossal gamble this administration is undertaking:
"One of the dirty little secrets of today's international order is that the rest of the globe could topple the United States from its hegemonic status whenever they so choose with a concerted abandonment of the dollar standard. This is America's preeminent, inescapable Achilles Heel for now and the foreseeable future.
"That such a course hasn't been pursued to date bears more relation to the fact that other Westernized, highly developed nations haven't any interest to undergo the great disruptions which would follow -- but it could assuredly take place in the event that the consensus view coalesces of the United States as any sort of `rogue' nation. In other words, if the dangers of American global hegemony are ever perceived as a greater liability than the dangers of toppling the international order. The Bush administration and the neo-conservative movement has set out on a multiple-front course to ensure that this cannot take place, in brief by a graduated assertion of military hegemony atop the existent economic hegemony."
Regrettably, under this administration we have returned to massive deficit spending, and the lack of strong SEC enforcement has further eroded investor confidence. Indeed, the flawed economic and tax policies and of the Bush administration resulting in years of projected deficits may be exacerbating the weakness of the dollar, if not outright hastening some countries to diversify their central bank reserve funds with euros as an alternative to the dollar. From a foreign policy perspective, the terminations of numerous international treaties and disdain for international cooperation via the U.N. and NATO have angered even our closest allies.
In September 2002, Dr. Paul Isbell wrote an excellent analysis regarding the quiet "tectonic shifts" underway with respect the dollar and euro. In his essay he asked, "What can Europe do to consciously prepare the way for the day when this tectonic shift in monetary relations becomes undeniably obvious?" [24] Unfortunately, today we are witnessing this clash of US/EU financial interests in the form of the upcoming Iraq war over Saddam's switch to a "petroeuro." Instead of leading a pre-emptive war in Iraq, the US should be pursuing a multilateral treaty, perhaps mediated by the UN that establishes a dual-currency standard for OPEC oil pricing.
Synopsis
It would appear that any attempt by OPEC member states in the Middle East or Latin America to transition to the euro as their oil transaction currency standard shall be met with either overt U.S. military actions or covert U.S. intelligence agency interventions. Under the guise of the perpetual `war on terror' the Bush administration is manipulating the American people about the unspoken but very real macroeconomic reasons for this upcoming war with Iraq. This war in Iraq will not be based on any threat from Saddam's old WMD program, or from terrorism. This war will be over the global currency of oil. A war intended to prevent oil from being priced in euros.
Sadly, the U.S. has become largely ignorant and complacent. Too many of us are willing to be ruled by fear and lies, rather than by persuasion and truth. Will we allow our government to initiate the dangerous `pre-emptive doctrine' by waging an unpopular war in Iraq, while we refuse to acknowledge that Saddam does not pose an imminent threat to the United States? Furthermore, we seem unable to address the structural imbalances in our economy due to massive debt manipulation, unaffordable 2001 tax cuts, record levels of trade deficits, unsustainable credit expansion, corporate accounting abuses, near zero personal savings, record personal indebtedness, and our reliance and over consumption of Middle Eastern oil.
Regardless of whatever Dr. Blix finds or does not find in Iraq regarding WMD, it appears that President Bush is determined to pursue his `pre-emptive' imperialist war to secure a large portion of the earth's remaining hydrocarbons, and ultimately use Iraq's underutilized oil to destroy the OPEC cartel. Will this gamble work? That remains to be seen. However, the history of warfare is replete with unintended consequences. It is plausible that the aftermath of the Iraq war and a U.S. occupation of Iraq could increase Al-Qaeda sponsored terrorism against U.S. targets, or more likely create guerilla warfare in a post-war Iraq. Moreover, continued U.S. unilateralism could create economic retribution from the international community or OPEC.
The question we as Americans must ask -- Can the US military control by force all oil-producing nations and dictate their oil export transaction currency? In brief, the answer is no. Will we forfeit any pretense of practicing free-market capitalism while we enforce a military command economy for global oil transactions? Is it morally defensible to deploy our brave but naïve young soldiers around the globe to enforce U.S. dollar hegemony for global oil transactions via the barrels of their guns? Will we allow imperialist conquest of the Middle East to feed our excessive oil consumption, while ignoring the duplicitous overthrowing of a democratically elected government in Latin America? Is it acceptable for a U.S. President to threaten military force upon OPEC nation state(s) because of their sovereign choice of currency regarding their oil exports? I concur with Dr. Peter Dale Scott's sentiments on this question:
". . . hopefully decent Americans will protest the notion that it is appropriate to rain missiles and bombs upon civilians of another country, who have had little or nothing to do with this (financial) crisis of America's own making."
"A multilateral approach to these core problems is the only way to proceed. The US is strong enough to dominate the world militarily. Economically it is in decline, less and less competitive, and increasingly in debt. The Bush peoples' intention appears to be to override economic realities with military ones, as if there were no risk of economic retribution. They should be mindful of Britain's humiliating retreat from Suez in 1956, a retreat forced on it by the United States as a condition for propping up the failing British pound. [25]
Lastly, how can we effectively thwart the threat of international Al Qaeda terrorism if we alienate so many of our European allies?
Paradoxically, this administration's flawed economic policies and belligerent foreign policies may hasten the outcome they hope to prevent -- further OPEC momentum towards the euro. Furthermore, using U.S. military and/or the threat of force is a rather unwieldy instrument for Geostrategy, and as such it is unlikely to indefinitely thwart some OPEC members from acting on their `internal discussions' regarding a switch to euros. Informed U.S. patriots realize this administration's failed economic policies in conjunction with their militant Imperialist overreach is proving not only detrimental to our international stature, but also threatens our economy and civil liberties. Thus, remaining silent is not only misguided, but false patriotism. We must not stand silent and watch our country continue these imperialist policies. The US must not become an isolated `rogue' superpower, relying on brute force, thereby motivating other nations to abandon the dollar standard -- and with the mere stroke of a pen -- slay our superpower status?
This need not be our fate. When will we demand that our government begin the long and difficult journey towards energy conservation, development of renewable energy sources, and sustained balanced budgets to allow real deficit reduction? When will we repeal the clearly unaffordable 2001 tax cuts to facilitate a balanced fiscal budget, enforce corporate accounting laws, and substantially reinvest in our manufacturing and export sectors to gradually but earnestly move our economy from a trade account deficit position back into a trade account surplus position?
Indeed, over the last two decades, the significant loss of U.S. manufacturing capability to foreign competition has adversely affected our ability to maintain a sustainable economy. The "New Economy" paradigm of the 1990s has created a false `service sector economy' that simply cannot sustain the U.S.'s economic and military power status in a competitive globalized economy. Undoubtedly, we must make these and many more difficult structural changes to our economy if we are to restore and maintain our international "safe harbor" investment status.
Furthermore, it would seem imperative that our government begins discussions with the G7 nations to reform the global monetary system. We must adopt our economy to accommodate the inevitable ascendance of the euro as an alternative international reserve currency. I concur with those enlightened economists who recommend the U.S. begin the process of convening the next `Bretton Woods Conference.' The U.S. government should compromise and agree to the euro becoming the next international reserve currency. A compromise on the euro/oil issues via a multilateral treaty with a gradual phase-in of a dual-OPEC currency transaction standard seems inevitable. It would also seem prudent to investigate a third `Asia bloc' of the Yen/Yuan as reserve currency options to give balance to the global monetary system.
While these multilateral reforms may lower our excessive oil consumption, force the US government to engage in fiscally responsible policies, and reduce some of our global military presence, perhaps these adjustments could also reduce some of the animosity towards U.S. foreign policies. Secondly, it is hoped such reforms could improve the quality of our lives, and that of our children by motivating the U.S. to finally become more energy efficient. Creating balanced domestic fiscal polices, rebuilding alliances with the E.U./world community and energy reform are in the long-term national security interests of the U.S. Global Peak oil is a challenge to humanity itself, and will require an unprecedented amount of international cooperation and coordination to overcome this history-making event. Furthermore, global monetary reform is not only necessary, but could mitigate future armed or economic warfare over oil, ultimately fostering a more stable, safer, and prosperous global economy in the 21st century.
Unfortunately, the proposed multilateral conference on monetary reform and energy reform is viewed as abhorrent to the current neoconservative movement, which is premised upon the US as the "Pre-eminent" global Empire. [26] Even a cursory reading of the neoconservative agenda as outlined in the Project for a New American Century (PNAC) policy document illustrates their idealistic goal is US global dominance -- both militarily and economically. Indeed, the Bush administration's entrenched political ideology appears quite incompatible with multilateral economic reform. The neoconservatives seem to view compromise as antithetical. Ultimately We the People must demand a new administration. We need responsible leaders who are willing to return to balanced budgets, conservative fiscal policies, and to our traditions of engaging in multilateral foreign policies while seeking broad international cooperation.
Equally important, we must bear in mind the wisdom of founding fathers like Thomas Jefferson who insisted that a free press is vital, as it is often the only mechanism to protect democracy. The American people are not aware of the issues outlined in this essay because the US mass media has been reduced to approximately six large media conglomerates that filter 90% of the information that flows within the U.S. Sadly, part of today's dilemma lays not only within Congress but also a handful of elitist, imperialist-oriented media conglomerates that have failed in their Constitutional obligations to inform the People. Critical information about the Iraq war was only available via the Internet, which should not be our only source of real, unfiltered news.
Finally, despite the media reporting otherwise, the current wave of `global anti-Americanism' is not against the American people or against American values -- but against the hypocrisy of militant American Imperialism. I respectfully submit the current polices of the neoconservative movement as expressed through various PNAC documents, their manipulation of the citizenry through fear, and the application of unilateral U.S. military force is treasonous not only to the American Public, but incompatible to the very fundamental principles that founded our nation.
It has been said that the vast majority of wars are fought over resources and economics, and even so-called "religious wars" usually have economics or access to resources as a hidden motive. The Iraq war is no different from other modern wars except it appears to usher in `oil currency' as a new paradigm for warfare. However, the world community may not tolerate an imperialist U.S. Hyper-Power that ignores International Law while using military force to conquer sovereign nations. Indeed, the facts suggest additional oil-producing nation states will eventually exercise their sovereign right by pricing their oil exports in euros instead of dollars.
I will reiterate the fundamental issue facing our country -- Can the US military and intelligence agencies control the governments in all oil-producing nations -- as well as their oil export currencies? In brief, the answer is no. The question becomes how many countries will we allow our government to overthrow under the false pretext of the next "war on terror?" Additionally, how much international "blowback" against the US and its citizens would such a Geostrategy create? Likewise, if President Bush pursues an unprovoked and basically unilateral war against Iraq, the historians will not be kind to him or his administration. Their agenda is clear to the world community, but when will US patriots become cognizant of their modus operandi?
"It is the absolute right of the State to supervise the formation of public opinion."
"If you tell a lie big enough and keep repeating it, people will eventually come to believe it."
"The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State."
-- Dr. Joseph Goebbels, German Minister of Propaganda, 1933-1945
# # #
Background on Hydrocarbons and US Geostrategy
To understand US Geostrategy one needs to have a realistic appreciation of the importance of hydrocarbons, the phenomenon referred to as Peak Oil, and the importance of Iraq's oil reserves with respect to these issues. I should note that two types of data exist regarding oil reserves, "political data" and "technical data." Politicians, the media, and economists use political data, whereas governments, their intelligence agencies, and geologist use the much more accurate, and much more guarded, technical data. One important issue not understood by the general population is the impending geological phenomenon known as "Peak Oil." It is extremely unfortunate that our corporate-controlled media conglomerates do not report on the significance of global Peak Oil. It would seem the European community is openly discussing this issue, and trying to make preparations to reduce their overall energy consumption.
Contrarily, the U.S. government is making preparations for more unilateral wars in an effort to control the worlds' hydrocarbons -- and the oil currency. [27] The Pentagon has contemplated a "5-year, 7-war plan." [28] Regarding Peak Oil, Michael Ruppert's controversial website offers several articles: From the Wilderness. Although some of these articles are overwrought, their analysis does illustrate how the expanding `war on terror' follows wherever US Geostrategic concerns are regarding hydrocarbons reserves or pipelines (West Africa, South America, etc).
This crucial concept of Peak Oil was first illustrated in bell-shaped curves by U.S. geophysicist M. King Hubbert, who in 1956 correctly predicted U.S. oil production would peak in 1971. Each oil field in the world follows a more or less bell-shaped curve, and the composite view of the world's thousands of oil fields is one gigantic, ragged edged looking bell-shaped curve. The best source of data regarding global oil production is form Petroconsultants Inc out of Zurich. They maintain the largest private databases of the 40,000 oil fields in the world. It is rumored that the CIA is their biggest client, and that something in their 1995 report might have predicted global Peak Oil unless the Caspian Sea region contained an extensive amount of untapped oil. Unfortunately the reports by Petroconsultants Inc. cost approx. $35,000, and non-disclosure statements are required for their rather exclusive clientele. Undoubtedly the Bush/Cheney administration is aware of the issues surrounding Peak Oil. Perhaps acknowledge of this issue is related to their plans to invade Iraq, which predate Saddam's switch to the euro by years.
To date the two most authoritative books I have reviewed regarding technical oil production data and Peak Oil are the following; The Party's Over: Oil, War and the Fate of Industrial Societies (2003) by Richard Heinberg [29], and Hubbert's Peak; The Impeding World Oil Shortage (2001) by Kenneth Deffeyes [30]. Highly respected geologist Colin Campbell has also researched this issue extensively [31]. Using Hubbert's methodology to measure global oil production, contemporary geologists have forecast that global Peak Oil will occur around 2010. Though veteran geologists such as Kenneth Deffeyes have now concluded that Peak Oil will most likely occur between 2004 and 2008. The following illustrates his sentiments:
"My own opinion is that the peak in world oil production may even occur before 2004. What happens if I am wrong? I would be delighted to be proved wrong. It would mean that we have a few additional years to reduce our consumption of crude oil. However, it would take a lot of unexpectedly good news to postpone the peak to 2010. [32]
The following information will briefly discuss U.S. Geostrategic issues regarding Iraq's oil reserves. Other than the core driver of the dollar versus euro currency threat, the other issue related to the upcoming war with Iraq appears related to some disappointing geological findings regarding the Caspian Sea region. Since the mid-to-late 1990s the Caspian Sea region of Central Asia was thought to hold approximately 200 billion barrels of untapped oil (the later would be comparable to Saudi Arabia's reserve base)." [33] Based on an early feasibility study by Enron, the easiest and cheapest way to bring this oil to market would be a pipeline from Kazakhstan, through Afghanistan to the Pakistan border at Malta. In the late 1990s not only was the Enron Corporation relying on cheap liquefied natural gas from the Caspian Sea region for their power plan in India, but also large energy companies such as Unocal and Halliburton.
"I cannot think of a time when we have had a region emerge as suddenly to become as strategically significant as the Caspian." -- Former CEO of Halliburton, 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.
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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."
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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]
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"The Choice of Currency for the Denomination of the Oil Bill," Speech given by Javad Yarjani, Head of OPEC's Petroleum Market Analysis Dept, on The International Role of the Euro (Invited by the Spanish Minister of Economic Affairs during Spain's Presidency of the EU), April 14, 2002, Oviedo, Spain
Walsh, Edward, "U.S. Sketches Plan for Postwar `Iraqi Interim Authority'," Washington Post, March 15, 2003
Dreyfus, Robert, "The Thirty Year Itch,' Mother Jones Magazine, March/April 2003
Nayyer, Dr. Ali, "Iraq and Oil," PakistanLink, December 13, 2002
Isbell, Paul, "The Shifting Geopolitics of the Euro," Real Instituto El Cano, September 23, 2002
Scott, Dr. Peter Dale, "Bush Deep Reason's for the War on Iraq: Oil, Petrodollars, and the OPEC Euro Question," February 15, 2003
Project for a New American Century (PNAC); See Rebuilding America's Defenses: Strategy, Forces and Resources For a New Century, September 2000
"US plan for military action against Iran complete," Sidney Morning Herald, May 30, 2003
Clark, Wesley, Waging Modern War: Iraq, Terrorism, and the American Empire, Public Affairs (2003)
Heinberg, Richard, The Party's Over: Oil, War and the Fate of Industrial Societies, New Society Publishers (2003)
Deffeyes, Kenneth S, Hubbert's Peak: The Impending World Oil Shortage, Princeton University Press (2001)
Campbell, Colin, Founder, The Association for the Study of Peak Oil & Gas (ASPO)
Dreffeyes, Hubbert's Peak, op. cit.; See sample chapter
Pfeiffer, Dale Allen, "Much Ado about Nothing -- Whither the Caspian Riches? Over the Last 24 Months Hoped For Caspian Oil Bonanza Has Vanished With Each New Well Drilled -- Global Implications Are Frightening," From The Wilderness, December 5, 2002
National Energy Policy: Report of the National Energy Policy Development Group, whitehouse.gov, May 2001
Heinberg, Richard, "The Petroleum Plateau," Muse Letter No. #135, May 2003
Revealing Statements from a Bush Insider about Peak Oil and Natural Gas Depletion, From The Wilderness, Matthew Simmons Transcript, June 12, 2003
Jean Charles-Briscard & Guillaume Dasquie, The Forbidden Truth: U.S.-Taliban Secret Oil Diplomacy, Saudi Arabia and the Failed Search for bin Laden, Nation Books (2002)
- Interview: Donahue With Jean-Charles Brisard
- The French Connection - Paris Reporters Say Bush Threatened War Last Summer, Village Voice, January 2-8, 2002
- Three Reviews of the book
Ruppert, Michael, "The Unseen Conflict -- War Plans, Backroom Deals, Leverage and Strategy -- Securing What's Left of the Planet's Oil Is and Has Always Been the Bottom Line," From The Wilderness, October 18, 2002
Ruppert, Michael, FTW Interview: "Colin Campbell on Oil -- Perhaps the World's Foremost Expert on Oil and the Oil Business Confirms the Ever More Apparent Reality of the Post-9-11 World," From The Wilderness, October 23, 2002
Paul, James A, "Iraq: the Struggle for Oil," Global Policy Forum, December 2002
Golf, Stan, "The Infinite War and its Roots," From The Wilderness, August 27, 2002
Vidal, Gore, Dreaming War: Blood for Oil & the Cheney-Bush Junta, Nation Books, 2002. His essay, "The Enemy Within" was first printed in the UK Observer, October 27, 2002
Ahmed, Nafeez, The War on Freedom: How and Why America was Attacked, September 11, 2001, Tree of Life Publications (2002)
Addendum: Notable International Monetary Movements
(Late January 2003)After completing this essay in mid-January 2003, I began to read about some interesting international monetary developments and the related opinions of analysts. These recent developments warrant inclusion as an addendum. The following two articles relate to the rapid devaluation of the dollar in late January relative to the euro. This occurred in the week immediately preceding President Bush's State of the Union address. Both of these articles suggest that Russia -- a traditional holder of dollar reserves -- may be linking `political overtones' to their exchanges of dollars for euros. The following article may illustrate things to come if President Bush continues on his present unilateral position on Iraq.
"The dollar remained on the ropes on Thursday, buffeted by some hawkish remarks from the US administration about the standoff with Iraq. It was also stung by a pointed signal from Russia's central bank that the appeal of dollar-denominated assets is waning.
"Oleg Vyugin, first deputy chairman at the Russian central bank, said the bank plans to cut the share of US dollars in its foreign exchange reserves and increase the share of other currencies. . . .
"Some analysts questioned whether there may be political overtones to Vyugin's remarks, that could be related to the widening rift between the US and some other potential allies about how to persuade Iraq to comply with UN weapons' inspectors requirements.
"Although Russia's own foreign exchange reserves are fairly small by comparison with the world's biggest central banks, the question is, `Will other central banks follow and what does this do to the ability of the US to finance its current account deficit?' said Marc Chandler, chief currency strategist with HSBC in New York.
"That deficit is currently around 5% of gross domestic product and proving to be an increasingly heavy millstone around the dollar's neck." [44]
Although global currency exchanges are notoriously volatile, it is interesting to note the following day (January 25th) some analysts reiterated that these monetary movements may be related not only to the current geo-political tensions, but may also indicate political motivations. Is this perhaps a `warning shot over the bow' for the Bush administration regarding their position on Iraq? These monetary movements by various central banks illustrate trouble for the dollar.
"All of a sudden, the dollar's supposedly slow and gradual decline isn't looking so slow, or gradual.
"In fact the speed of the dollar's slide, against the euro in particular, has taken even the most seasoned analysts by surprise: a Dow Jones Newswires foreign exchange survey just ten days ago showed the major currency trading banks forecasting the euro climbing to $1.06 by the middle of February and not coming near $1.10 until the end of the year.
"Instead, the euro has leaped to highs of around $1.0850 on Friday and has already gained 4% on the dollar this year, leaving strategists increasingly scrambling to update their forecasts. The Swiss franc keeps reaching fresh four-year highs, and the dollar is on the ropes against sterling and a host of other key rivals.
"Perhaps a more important barometer of broader confidence in U.S. markets is the Treasurys market. With the dollar falling, gold spiking and stocks under pressure, Treasurys continue to retain their safe haven appeal.
"But there are warning signals here, too, that are beginning to get more attention. This week, the Russian central bank said it was lowering the U.S. asset portion of its foreign exchange reserves -- in other words selling Treasurys -- calling the dollar a low-yielding currency.
"Analysts believe some of the large Asian central banks -- that between them hold the lion's share of the world's dollar reserves -- are also considering rejigging their Treasury holdings. A U.S.-led war in Iraq could further accelerate that trend.
"Indeed, some political analysts believe that U.S. policy over Iraq may already be having a direct impact on holdings of U.S. assets, particularly with much of the rest of the world so opposed to war. `It's hard for me to believe that the flow of capital cannot help but be affected by how the U.S. is perceived around the world,' said Larry Greenberg, an international economist at Ried Thunberg & Co. in Westport, Conn.
"`Today if you have the U.S. acting (in Iraq) against world opinion, there could be an even faster pullback out of dollar-denominated assets,' said Joseph Quinlan, global economist with Johns Hopkins University, in Washington. `How we go to war influences the rate of decline of the dollar' he said." [45]
The day after the above article, the UK Observer's Will Hutton wrote a forceful article against Bush's unilaterism. This article further emphasizes the unfortunate economic imbalances of the U.S. economy, and suggests the potential geo-political fallout of a unilaterist war or an unstable aftermath in Iraq could create a significant divestiture of dollar denominated assets.
"The US's economic position is far too vulnerable to allow it to go war without cast-iron multilateral support that could underpin it economically as well as diplomatically and militarily. The multi-lateralism Bush scorns is, in truth, an economic necessity. . . .
"On latest estimates, its net liabilities to the rest the world are more than $2.7 trillion, nearly 30 per cent of GDP, a scale of indebtedness associated with basket-case economies in Latin America.
"Its industrial base is so uncompetitive that it consistently imports more than it exports; its current-account deficit, the gap between all its current foreign earnings and foreign spending, is now a stunning 5 per cent of GDP, continuing a trend that has lasted for more than 25 years and which is the cause of all that foreign debt. As a national community, it has virtually ceased to save so that government and individuals alike live on credit.
To finance the current-account deficit, a reflection of the lack of saving, the US relies on foreigners supplying it with the foreign currency it can't earn itself. . . .
"But if foreigners got windy about the prospects for share and property prices and stopped buying, or began to withdraw some of the trillions they have invested in the US economy, then the dollar would collapse. Already, it has fallen nearly 10 per cent against the euro over the last six weeks, but that could just be the beginning. Economists at the Federal Reserve have estimated that the dollar needs to fall by 30 per cent to bring the flow of imports and exports into balance, but in today's markets such a fall doesn't happen gradually. It happens precipitately.
"If America and Britain spurn a second UN Resolution and go to war with the active opposition of key members of the Security Council like France and Russia, be sure the flow of dollars into the US will slow down dramatically, and be sure there will be a stampede of foreigners trying to sell. Shares on Wall Street that Bush is so anxious to prop up are still massively overvalued. Against this background, there could be a devastating sell-off, with all the depressing knock-on consequences for American consumer confidence and business investment.
"What the markets were signaling last week was that this is sufficiently within the bounds of possibility that it was worth taking precautionary action, hence the selling. If the war was over in a few weeks, the risks would be containable, and there will be some shares well worth buying at today's prices. But if the war was prolonged or the subsequent peace unstable, then the pressure on the dollar and Wall Street could become very severe indeed, reinforcing the depressive influences on an economy where the underlying imbalances are so extraordinary.
"The US approach has been unilateralist here as everywhere else: it does what it likes as it likes, a policy that is now showing its limits. Bush needs badly to change course, which Tony Blair should be urging on him. The UN process needs to be respected and reinforced, not least to reassure the markets, and better systems of economic governance need to be put in place. The US's military capacity may allow unilateralism; its soft economic underbelly, we are discovering, does not." [46]
These articles indicate that many central banks are reducing their reliance on dollars, and quite possibly sending a message about their opposition to the U.S.'s position on Iraq. Mr. Hutton is correct; our current economic structure simply cannot afford a significant divesture of foreign investments, nor can the indebted US consumer and corporate sectors absorb such disruptions. Although these currency movements are typically described as purely economically derived decisions, it would be naïve to suggest that geopolitics and global tensions have not played a role in the broad movement away from the dollar. The world has no interest in challenging the US militarily, but given our debt levels, we have become quite vulnerable from an economic perspective. . Hence, it is inadvisable for President Bush to pursue an aggressive, unilateral application of U.S. military force without broad U.N./international support.
European Commentary on the Essay:
`The Real Reasons for the Upcoming War With Iraq'To finish, in January 2003, Mr. Coílín Nunan reviewed a draft of my essay on an Internet forum. He subsequently published an exceptional summary on an Irish website (www.feasta.org). Hopefully our efforts will facilitate public awareness, and stimulate a more honest debate on the Iraq issues. Below are excerpts from his informative article "Oil, Currency, and the War on Iraq."
"One of the stated economic objectives, and perhaps the primary objective, when setting up the euro was to turn it into a reserve currency to challenge the dollar so that Europe too could get something for nothing.
"This however would be a disaster for the US. Not only would they lose a large part of their annual subsidy of effectively free goods and services, but countries switching to euro reserves from dollar reserves would bring down the value of the US currency. Imports would start to cost Americans a lot more and as increasing numbers of those holding dollars began to spend them, the US would have to start paying its debts by supplying in goods and services to foreign countries, thus reducing American living standards. As countries and businesses converted their dollar assets into euro assets, the US property and stock market bubbles would, without doubt, burst. The Federal Reserve would no longer be able to print more money to reflate the bubble, as it is currently openly considering doing, because, without lots of eager foreigners prepared to mop them up, a serious inflation would result which, in turn, would make foreigners even more reluctant to hold the US currency and thus heighten the crisis.
"There is though one major obstacle to this happening: oil. Oil is not just by far the most important commodity traded internationally, it is the lifeblood of all modern industrialised economies. If you don't have oil, you have to buy it. And if you want to buy oil on the international markets, you usually have to have dollars. Until recently all OPEC countries agreed to sell their oil for dollars only. So long as this remained the case, the euro was unlikely to become the major reserve currency: there is not a lot of point in stockpiling euros if every time you need to buy oil you have to change them into dollars. This arrangement also meant that the US effectively part-controlled the entire world oil market: you could only buy oil if you had dollars, and only one country had the right to print dollars -- the US.
"If on the other hand OPEC were to decide to accept euros only for its oil (assuming for a moment it were allowed to make this decision), then American economic dominance would be over. Not only would Europe not need as many dollars anymore, but Japan which imports over 80% of its oil from the Middle East would think it wise to convert a large portion of its dollar assets to euro assets (Japan is the major subsidizer of the US because it holds so many dollar investments). The US on the other hand, being the world's largest oil importer would have, to run a trade surplus to acquire euros. The conversion from trade deficit to trade surplus would have to be achieved at a time when its property and stock market prices were collapsing and its domestic supplies of oil and gas were contracting. It would be a very painful conversion.
"The purely economic arguments for OPEC converting to the euro, at least for a while, seem very strong. The Euro-zone does not run a huge trade deficit nor is it heavily indebted to the rest of the world like the US and interest rates in the Euro-zone are also significantly higher. The Euro-zone has a larger share of world trade than the US and is the Middle East's main trading partner. And nearly everything you can buy for dollars you can also buy for euros -- apart, of course, from oil . . .
"All of this is bad news for the US economy and the dollar. The fear for Washington will be that not only will the future price of oil not be right, but the currency might not be right either. Which perhaps helps explain why the US is increasingly turning to its second major tool for dominating world affairs: military force." [47]
Saving the American Experiment (March 10, 2003)
Considering the core economic challenges that our nation faces, and the deplorable oil currency war that I fear we are about to witness in Iraq, this author advocates that the global monetary system be reformed without delay. This would include the dollar and euro designated as equal international reserve currencies, and placed within an exchange band along with a dual-OPEC oil transaction currency standard. Additionally, the G7 nations should also explore a third reserve currency option regarding a yen/yuan bloc for Asia. Such reforms may lower our ability to fund massive deficits, consume excessive oil/energy, and project a global military force, but they could improve the quality of our lives and that of our children by reducing animosity towards the U.S. and force our government to pursue more fiscally responsible polices.
Given that 95% of the world's transportation system is dependent on depleting hydrocarbons, the urgency in which we must pursue new and alternative methods of energy production cannot be overstated. Indeed, it is plausible that if the US government effectively advocates energy reform regarding our own consumption levels, we as a nation could simultaneously pursue the crucial patriotic goal of enhancing the security of our nation by becoming one of the world's leaders in developing and implementing alternative energy sources. This is the missed opportunity that real US leadership could have provided in the aftermath of 9/11. We could have received an inspiring call to duty, challenging our nation to "go to the moon" by the end of this decade regarding energy policy, but instead the message was: "Unite. Go shopping, and don't be afraid to fly." Failing to rally the citizenry for truly patriotic purposes to strengthen our nation was perhaps one of the greatest missed opportunities since the end of the Cold War.
We need a real National Energy Policy instead of an "endless war on terrorism." Today's "blowback" is partly due to our ongoing support of corrupt Middle East regimes/dictatorships. [48] Creating a more equitable global monetary system while maintaining a strong transatlantic relationship with Europe is in the long-term national security interest of the U.S. Hopefully monetary and energy reform could mitigate future armed or economic warfare over oil, thus ultimately fostering a more stable, safer, and prosperous 21st century.
Tragically, President Bush's administration does not appear willing to initiate the arduous structural changes that our economy must undertake if we are to adapt and accommodate the euro as the second World reserve currency. Furthermore, this administration has not communicated to the People the urgent need for energy reform. Instead, they intend to enforce global dollar monopoly for oil transactions via the application of superior U.S. military force. My essay was written out of patriotic duty in an effort to illustrate that such a military-centric geostrategy for Empire has produced international isolation of the U.S., and may ultimately result in our economic failure. I firmly believe our nation will be better prepared to meet this decade's challenges if the citizenry is cognizant of why the worldview is coalescing against the U.S., why our nation is attempting by force to secure Iraq's oil, revert its oil currency back to the dollar, and install a permanent US military presence in the Persian Gulf region. We must not allow the militant imperialism of this administration to bring down the American Experiment.
"Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other . . . No nation could preserve its freedom in the midst of continual warfare."-- James Madison
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References: Addendum Section
Associated Press, "US Dollar on Shaky Ground," January 24, 2003
McCarthy, Grainne "Dollar's Decline Starting To Accelerate, Rattling Nerves," Dow Jones Newswire, January 25, 2003
Hutton, Will, "Why Bush is sunk without Europe," The Observer, January 26, 2003
Nunan, Coílín, "Oil, Currency, and the War on Iraq," Feasta.org, January 2003 (PDF)
Johnson, Chalmers, Blowback; The Cost and Consequences of American Empire, Owl Books (2003)
Post-War Commentary (January 1, 2004)
"Hussein has not developed any significant capability with respect to weapons of mass destruction. He is unable to project conventional power against his neighbors."--Colin Powell on February 24, 2001
"Our conservative estimate is that Iraq today has a stockpile of between 100 and 500 tons of chemical weapons agent. That is enough agent to fill 16,000 battlefield rockets. Even the low end of 100 tons of agent would enable Saddam Hussein to cause mass casualties across more than 100 square miles of territory, an area nearly five times the size of Manhattan."--Colin Powell at the UN on February 5, 2003
"Simply stated, there is no doubt that Saddam Hussein now has weapons of mass destruction,"--Dick Cheney on August 26, 2002.
"Intelligence leaves no doubt that Iraq continues to possess and conceal lethal weapons."--George W. Bush on March 18, 2003
"We are asked to accept Saddam decided to destroy those weapons. I say that such a claim is palpably absurd."--Tony Blair on March 18, 2003
"Why of course the people don't want war. . . . That is understood. But, after all, it is the leaders of the country who determine the policy, and it's always a simple matter to drag the people along whether it's a democracy, a fascist dictatorship, a parliament or a communist dictatorship . . . the people can always be brought to the bidding of the leaders. . . . All you have to do is tell them they are being attacked, and denounce the pacifists for lack of patriotism, and exposing the country to greater danger.--Hermann Goering, Nazi Reichsmarshal and Luftwaffe chief
at Nuremberg trials, 1945From the Roman Empire to today, the propaganda tactics for war as discussed by Hermann Goering remain effective. It is deplorable that even in the US or UK, people can always be "brought to the bidding of the leaders." It is New Years Day, almost nine months since the invasion of Iraq. The American people are slowly realizing how much they were misled about this war. Many books will be written about how these events unfolded, so I will only briefly summarize my general observations in a few opening paragraphs, and then return to the basic underlying Geostrategic and macroeconomic reasons for the Iraq war. First, it has emerged that a small clique of neoconservative ideologues and an Iraqi exile provided most of the fraudulent "intelligence data" that was publicized by the Executive Branch. This disinformation was apparent before the war, but now it is simply irrefutable. A brief synopsis of events follows.
Apparently in 2001-2002 the DIA and CIA were not giving Secretary of Defense Donald Rumsfeld intelligence information that would justify a US invasion of Iraq. In fact, it was well known to our intelligence agencies that Iraq's WMD was dormant, and as early as 1998 it was understood that Saddam had no ties to Al Qaeda. [49] To date, no professionals in the CIA, DIA, MI5 or MI6 have provided reliable evidence linking Saddam Hussein to bin Laden, Al Qaeda or to the September 11th attacks. [50] Undeterred, Donald Rumsfeld set up his own secretive and rather autonomous unnamed intelligence unit referred to simply as the "cell." This small group later merged into his other small "intelligence unit" called the Office of Special Plans (OSP).
The purpose of these "intelligence units" was to bypass the CIA and DIA, and to provide "faith-based intelligence" to Vice President Cheney and President Bush. The OSP's sole purpose was to promote the Iraq war. This group self-mockingly referred to themselves the "cabal". [51] The following is a slightly modified chart from the February 2004 edition of Mother Jones. [52]
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It is now obvious the main rationales for the Iraq war were developed by a rather unprecedented government conspiracy perpetrated by a small number of radical neoconservatives in the OSP, plus Iraqi exiles in the INC. In essence, the justification for invading of Iraq was a coordinated and transparent pack of fabrications and deceptions -- designed to create the requisite societal fear for an invasion. I suspect the OSP "cabal" will go down in history as the `Office of Special Propaganda.' It is disconcerting that 19 men were able to instill massive levels of irrational fear into the citizenry by creating visions of "mushroom clouds" and "1000 metric tons" of Anthrax.
Of course our elitist, corporate-controlled media dutifully repeated all this propaganda verbatim. Indeed, the 2002-2003 propaganda campaign by the OSP and the Bush administration was designed to portray an "imminent threat" to U.S. national security -- regardless of the facts. According to former intelligence professionals, members of the OSP are dangerous ideologues. The following is a review of the findings regarding the search for WMD, as of October 2003: [53]
Claims about Iraqi WMD vs. Actual Facts Precursor Chemicals: 3,307 tons Found: None Tabun, nerve agent Found: None Mustard agent Found: None