US Paper Money and Iran's Oil
by Scott Horton
www.antiwar.com, Feb 17, 2006
What is the basis of America's emnity
for Iraq, Iran and Syria? Is it that they might give WMD to The
Terrorists, are the enemies of the state of Israel, or live
on top of "our oil"? Is it the threat of a Global Islamo-Fascist
Caliphate, because they're "evil doers," or simply the
subjects of an American social engineering project to liberate
Some have concluded that Saddam Hussein's
real crime was denominating his oil sales in Euros in the fall
of the year 2000, saying his switch challenged the preeminence
of the US dollar.
There has been much debate lately on
the matter of Iran's plans to open their own mercantile exchange,
an oil bourse, and perhaps not coincidentally, talk of imminent
As John Pilger wrote earlier this week,
"[Blair] knows the real reasons
for an attack and the part Britain is likely to play. Next month,
Iran is scheduled to shift its petrodollars into a euro-based
bourse. The effect on the value of the dollar will be significant,
if not, in the long term, disastrous. At present the dollar is,
on paper, a worthless currency bearing the burden of a national
debt exceeding $8 trillion and a trade deficit of more than $600
billion. The cost of the Iraq adventure alone, according to the
Nobel Prizewinning economist Joseph Stiglitz, could be $2 trillion."
The idea is that if Iran opens their own
market and begins to denominate their oil sales in euros, it could
cause the different governments of the world to divest some of
their dollar holdings so that they can instead save euros for
the large transactions, and that this could threaten the hegemony
of the US dollar - which, of course, is just a lousy piece of
paper backed up by police power.
If the world were to abandon the US dollar
as the reserve currency, all those dollars would come floating
home, causing massive inflation.
The government of Syria announced they
were going to begin using euros for all their major international
transactions on Monday.
There is disagreement among experts as
to whether or not these moves by the last "rouge states"
are really enough to disrupt the dollar's supremacy. For example,
Antiwar.com regular contributor and Assistant Secretary of the
Treasury under Ronald Reagan, Paul Craig Roberts, wrote to AWC
director Eric Garris last weekend that he thought it unlikely:
"Oil is billed in dollars because the dollar is the world
reserve currency. The dollar is not the reserve currency because
oil is billed in dollars. The US is abusing the dollar's role
as reserve currency. When a trusted alternative appears, the dollar
is likely to lose its reserve currency role. Iran, however, cannot
cause that transition."
Perhaps the real question is not whether Iran can cause the transition,
but whether American politicians will let a major oil producing
country set a bad example in front of the others. The real trouble
for our criminal politicians is that, as PCR notes, "Today,
US war-making capability is dependent on the rest of the world
to finance it."
Ron Paul MD (R-TX), another Antiwar.com
regular contributor and the only economist of the free market
Austrian school in the US Congress, gave a speech [.wmv video
file] on the house floor Wednesday, February 15, titled "The
End of Dollar Hegemony," in which he explains how the Bretton
Woods aggreement established the dollar as the world reserve currency,
while at the same time transferring much of America's gold overseas,
which resulted in the government under Richard Nixon defaulting
in 1971, which ended forever the promise to pay gold to bearers
of US dollars on demand, and switching our currency to government-monopoly
money. At this point, Dr. Paul explains,
"Realizing the world was embarking
on something new and mind-boggling, elite
money managers, with especially strong support from U.S. authorities,
struck an agreement with OPEC to price oil in U.S. dollars exclusively
for all worldwide transactions. This gave the dollar a special
place among world currencies and in essence "backed"
the dollar with oil. In return, the U.S. promised to protect the
various oil-rich kingdoms in the Persian Gulf against threat of
invasion or domestic coup. This arrangement helped ignite the
radical Islamic movement among those who resented our influence
in the region. The arrangement gave the dollar artificial strength,
with tremendous financial benefits for the United States. It allowed
us to export our monetary inflation by buying oil and other goods
at a great discount as dollar influence flourished.
This post-Bretton Woods system was much
more fragile than the system that existed between 1945 and 1971.
Though the dollar/oil arrangement was helpful, it was not nearly
as stable as the pseudo-gold standard under Bretton Woods. It
certainly was less stable than the gold standard of the late 19th
After describing the role likely played
by Saddam's switch to the Euro in 2000 in the decision for "regime
change," Paul reminds us,
"In 2001, Venezuela's ambassador
to Russia spoke of Venezuela switching to the Euro for all their
oil sales. Within a year there was a coup attempt against Chavez,
reportedly with assistance from our CIA. After these attempts
to nudge the Euro toward replacing the dollar as the world's reserve
currency were met with resistance, the sharp fall of the dollar
against the Euro was reversed. These events may well have played
a significant role in maintaining dollar dominance.
It's become clear the U.S. administration
was sympathetic to those who plotted the overthrow of Chavez,
and was embarrassed by its failure. The fact that Chavez was democratically
elected had little influence on which side we supported."
"Though we don't occupy foreign countries
to directly plunder, we nevertheless have spread our troops across
130 nations of the world. Our intense effort to spread our power
in the oil-rich Middle East is not a coincidence. But unlike the
old days, we don't declare direct ownership of the natural resources
- we just insist that we can buy what we want and pay for it with
our paper money. Any country that challenges our authority does
so at great risk.
Once again Congress has bought into the
war propaganda against Iran, just as it did against Iraq. Arguments
are now made for attacking Iran economically, and militarily if
necessary. These arguments are all based on the same false reasons
given for the ill-fated and costly occupation of Iraq."
Eight out of Ten Americans, according
to UPI, believe that Iran is a nuclear threat to the United States.
Apparently the only thing standing in the way of the war with
Iran is the fact that it would be at least as destructive to the
American and world economy as about anything else we could do.
Which brings up the question, as the War Party drives this country
into the ground, are they trying to save the dollar or destroy
Either way, it's clear, Empire is a bad
deal for America.