Iran in the Crosshairs
Iran's danger to America is not its nuclear
program but its plan to introduce a euro-based energy exchange.
08/24/05 "RTH" -- -- Starting
in 2006, Iran will start up an "oil bourse", or a stock
exchange for trading energy, that will be based on the euro, not
the US dollar. While this may seem innocuous, it will be a grave
risk to continued American global hegemony.
Today, most oil trading takes place on the New
York Mercantile Exchange (NYMEX) and the London-based
International Petroleum Exchange (IPE). Since the 1970s, the OPEC
countries have all agreed to sell oil for US dollars only. This
means every country that wants to buy oil must first acquire
enough US dollars to buy what it needs.
Year after year, America imports much more than
it exports. It must pay out that difference (its current accounts
deficit) in dollars. Last year, the US ran a current accounts
deficit of over $600 billion USD; this year, it's expected to
increase to $700 billion.
If there were no good reason for other countries
to buy all those American dollars, then the dollar would decline
in value until the US economy could no longer afford to import
goods from abroad. This is what happens when other countries run
large current accounts deficits over long periods.
However, the deal with OPEC means other
countries have no choice but to buy all those excess American
dollars, which props up the value of the dollar and allows the
American "import economy" to go on year after year.
Effectively, America's main export is US dollars, and it is
absolutely imperative to preserve a captive market for those
dollars among oil-consuming countries.
The continued viability of the US economy
depends on it. Americans can still afford to consume because their
economy is suffused with cheap imports; a falling dollar will
raise the prices of imported goods. At the same time, Americans
enjoy some of the lowest oil prices in the world, largely due to
the petrodollar arrangement. This has skewed the American vehicle
market toward gas-guzzling but profitable SUVs and light trucks.
Selling Oil for Euros
One of the major unstated reasons the United
States invaded Iraq was to stop Saddam Hussein from trading oil
for euros, which he had begun in 2000. Hussein actually made more
money selling oil for euros, as the euro appreciated 17 percent
against the dollar between 2000 and 2003. Other countries in the
region, particulary Iran and Syria, began public musing about
switching from dollars to euros around the same time.
All three countries were subject to a barrage of
threats from the United States government, but only Iraq went
through with the switch, and it was summarily invaded. One of the
US government's first acts in Iraq was to switch oil sales back to
Now, Iran plans not just to sell oil for euros,
but to create an exchange market for parties to trade oil
for euros. The oil bourse will provide a euro-based price
standard, the way West Texas Intermediate crude (WTI) and North
Sea Brent crude do today. To the extent that the balance of
reserve holdings starts to shift from dollars to euros, that's
very bad news for America's system of dollar hegemony.
Iran is taking a calculated risk that enough
countries have an interest in a petro-euro market to contain
American aggression. Many central banks are already quietly
shedding their dollar reserves, nervous that America's economic
fundamentals ($500 billion federal deficit, $700 billion current
accounts deficit, $4.5 billion federal debt, record business and
personal debts, zero savings) cannot be sustained for long, and
hoping to insulate themselves from what they see as an inevitable
recession. The US dollar has declined by a third against the euro
since 2000, despite the petrodollar arrangement.
At the same time, Europe is eager to enjoy more
of the "virtuous circle" that comes from supplying a
major reserve currency: a ready market for its currency and
guaranteed reinvestment as euro-holders plant their money in
European markets. Vladimir Putin, Russia's president, has also
expressed interest in switching from dollars to euros. Russia
would benefit from getting paid in a stronger currency, and it
would represent a political victory over America after fifteen
years of watching its clients and assets in the oil-rich Caspian
region co-opted by American expansion.
Iran may, indeed, be attempting to acquire
nuclear weapons. However, it also has a "legitimate"
interest in developing nuclear power, since its own oil reserves
are already post-peak and it aims to continue in its role as an
energy exporter. Iran is a signatory in good standing to the
Nuclear Non-Proliferation Treaty (NPT) and has openly informed the
International Atomic Energy Agency of its intentions as requried
by the Treaty.
However, Iran's presumed attempt to acquire
nuclear weapons is only the politically acceptable excuse for
America's threats. The real danger is that Iran will lay down the
foundation for a post-hegemonic international energy industry in
which America is merely one of many players. If Iran is, in fact,
developing nuclear weapons, it is doing so to acquire a deterrent
against exactly this kind of American encroachment.
Indeed, recent world events have only enforced
the notion that a nation's successful efforts to acquire nuclear
weapons confer respect and status, not the opprobrium it deserves.
India, a growing economic power that possesses a nuclear arsenal
and refuses to sign either the NPT or the Comprehensive Test Ban
Treaty (CTBT), has just been rewarded for its efforts by US
President Bush, who has agreed to "work to achieve full civil
nuclear energy cooperation with India." This is a
straightforward violation of the NPT, which forbids signatories
from exchanging nuclear materials or support with non-signatories.
If Iran really is trying to acquire nuclear
weapons, is it any wonder why? Look at the advantages that having
nuclear arsenals have given to US allies India, Pakistan, and
Israel, all of which have benefitted immensely from a playing
field tilted in their favour by their ability to project
devastating power. As official hysteria about Iran's intentions
escalates in volume and intensity, remember the real force
undermining the moral authority of the NPT: the big nuclear 'have'
countries that still refuse either to apply the ban consistently
or to take any meaningful steps of their own toward "general
and complete disarmament" - ostensibly the NPT's ultimate
Ironically, America originally invaded Iraq - a
poor, defenseless country - partly to send a message to other oil
producing countries not to rock the petrodollar system, but the
real message for small countries is that they need to present a
credible deterrent threat or risk being ignored and/or invaded.
Petrodollars to Petroeuros: Are the Dollar's Days as an
International Reserve Currency Drawing to an End?
Strategic Insights, Volume II, Issue 11 (November 2003)
the Dollar and the Euro, Hazel Henderson, The Globalise,
June 02, 2003
Real Reasons for the Upcoming War With Iraq: A Macroeconomic
and Geostrategic Analysis of the Unspoken Truth William
Clark, January 2003 (Revised March 2003, with Post-war
Commentary January 2004)
Dollar Hegemony Has to Go Henry Liu, Asian Times, April
Raise The Hammer © 2004
(In accordance with Title 17
U.S.C. Section 107, this material is distributed without profit to
those who have expressed a prior interest in receiving the
included information for research and educational purposes.
Information Clearing House has no affiliation whatsoever with the
originator of this article nor is Information Clearing House
endorsed or sponsored by the originator.)