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Euro as the Cause for the Iraq War

Clark points out the government’s efforts to stop the switch to the euro as the currency of exchange for OPEC countries was the principle cause for the war.  Article published in Jan of 03, revised in March & Jan of 04.


Published at http://www.ratical.org/ratville

Clarks article at www.ratical.org/ratville/CAH/RRiraqWar.html 


Revisited - The Real Reasons for the Upcoming War With Iraq:
A Macroeconomic and Geostrategic Analysis of the Unspoken Truth
by William Clark


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.


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



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 geostrategic

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


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,


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 26 billion euros. According to a former government

analyst, the following scenario would occur if OPEC made an unlikely, but sudden

(collective) switch to euros, as opposed to a gradual transition.

"Otherwise, the effect of an OPEC switch to the euro would be that oilconsuming

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)."



For the entire article go to




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


"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


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:

1. US global over-reach in the `war on terrorism' already leading to

deficits as far as the eye can see -- combined with historically-high US

trade deficits -- lead to a further run on the dollar. This and the stock

market doldrums make the US less attractive to the world's capital.

2. More developing countries follow the lead of Venezuela and China in

diversifying their currency reserves away from dollars and balanced

with euros. Such a shift in dollar-euro holdings in Latin America and

Asia could keep the dollar and euro close to parity.

3. OPEC could act on some of its internal discussions and decide (after

concerted buying of euros in the open market) to announce at a future

meeting in Vienna that OPEC's oil will be re-denominated in euros, or


even a new oil-backed currency of their own. A US attack on Iraq

sends oil to 40 (euros) per barrel.

4. The Bush Administration's efforts to control the domestic political

agenda backfires. Damage over the intelligence failures prior to 9/11

and warnings of imminent new terrorist attacks precipitate a further

stock market slide.

5. All efforts by Democrats and the 57% of the US public to shift energy

policy toward renewables, efficiency, standards, higher gas taxes, etc.

are blocked by the Bush Administration and its fossils fuel industry

supporters. Thus, the USA remains vulnerable to energy supply and

price shocks.

6. The EU recognizes its own economic and political power as the euro

rises further and becomes the world's other reserve currency. The G-8

pegs the euro and dollar into a trading band -- removing these two

powerful currencies from speculators trading screens (a "win-win" for

everyone!). Tony Blair persuades Brits of this larger reason for the UK

to join the euro.

7. Developing countries lacking dollars or "hard" currencies follow

Venezuela's lead and begin bartering their undervalued commodities

directly with each other in computerized swaps and counter trade

deals. President Chavez has inked 13 such country barter deals on its

oil, e.g., with Cuba in exchange for Cuban health paramedics who are

setting up clinics in rural Venezuelan villages.

The result of this scenario? The USA could no longer run its huge current

account trade deficits or continue to wage open-ended global war on terrorism

or evil. The USA ceases pursuing unilateralist policies. A new US

administration begins to return to its multilateralist tradition, ceases its

obstruction and rejoins the UN and pursues more realistic international

cooperation." [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 grāce." [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 recordhigh

$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 dollardenominated

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 capitalaccounts

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:

1. Nations continue to demand and purchase oil for their energy/survival needs

2. the world's monopoly currency for global oil transactions remains the US dollar

3. the three internationally traded crude oil markers remain denominated in US


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 Eurozone

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 neargiven

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


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.


"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 `profitmaker'

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 breakup

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


"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


"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.


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 oilproducing

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 naļve 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



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, imperialistoriented

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 oilproducing

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


"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.

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


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]



1. Rangwala, Glen, `Claims and evaluations of Iraq's proscribed weapons,' February 25,


2. FAIR Fairness & Accuracy, `Media Advisory: Star Witness On Iraq Said Weapons

Were Destroyed,' February 27, 2003 (Official UNSCOM/IAEA Document); See also

Barry, John, "Exclusive: The Defector's Secrets, Newsweek, March 3, 2003

3. London, Heidi Kingstone, "Middle East: Trouble in the House of Saud," The Jerusalem

Report, January 13, 2003

4. Recknagel, Charles, "Iraq: Baghdad Moves to Euro," Radio Free Europe, November

1, 2000

5. Islam, Faisal, "Iraq nets handsome profit by dumping dollar for euro," The Observer,

February 16, 2003

6. "Economics Drive Iran Euro Oil Plan, Politics Also Key," IranExpert, August 23, 2002

7. "Forex Fund Shifting to Euro," Iran Financial News, August 25, 2002

8. Gutman, Roy & Barry, John, "Beyond Baghdad: Expanding Target List: Washington

looks at overhauling the Islamic and Arab world," Newsweek, August 11, 2002

9. Costello, Tom, "Japan's Economy at Risk of Collapse," MSNBC News, December 11,


10. Gluck, Caroline, "North Korea embraces the euro," BBC News, December 1, 2002

11. "What the World Thinks in 2002 -- How Global Publics View: Their Lives, Their

Countries, The World, America," The Pew Research Center For The People & The

Press, December 4, 2002

12. "Euro continues to extend its global influence," europartnership.com, January 7, 2002

13. Garnaut, John, "US Dollar Losing Its Position As Asia's Reserve Currency," July 17,


14. "Canada sells gold, keeps shift into euro reserves," Forbes, January 6, 2003

15. Henderson, Hazel, "Beyond Bush's Unilateralism: Another Bi-Polar World or A New

Era of Win-Win?" InterPress Service, June 2002

16. Birms, Larry & Volberding, Alex, "U.S. is the Primary Loser in Failed Venezuelan

Coup," Newsday, April 21, 2002

17. "USA intelligence agencies revealed in plot to oust Venezuela's President,"

vheadline.com, December 12, 2002


18. Spiro, David E., The Hidden Hand of American Hegemony: Petrodollar Recycling and

International Markets, Cornell University Press (1999)

19. Liu, Henry C K, "US dollar hegemony has got to go," Asia Times, April 11, 2002

20. "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

21. Walsh, Edward, "U.S. Sketches Plan for Postwar `Iraqi Interim Authority'," Washington

Post, March 15, 2003

22. Dreyfus, Robert, "The Thirty Year Itch,' Mother Jones Magazine, March/April 2003

23. Nayyer, Dr. Ali, "Iraq and Oil," PakistanLink, December 13, 2002

24. Isbell, Paul, "The Shifting Geopolitics of the Euro," Real Instituto El Cano, September

23, 2002

25. Scott, Dr. Peter Dale, "Bush Deep Reason's for the War on Iraq: Oil, Petrodollars, and

the OPEC Euro Question," February 15, 2003

26. Project for a New American Century (PNAC); See Rebuilding America's Defenses:

Strategy, Forces and Resources For a New Century, September 2000

27. "US plan for military action against Iran complete," Sidney Morning Herald, May 30,


28. Clark, Wesley, Waging Modern War: Iraq, Terrorism, and the American Empire, Public

Affairs (2003)

29. Heinberg, Richard, The Party's Over: Oil, War and the Fate of Industrial Societies,

New Society Publishers (2003)

30. Deffeyes, Kenneth S, Hubbert's Peak: The Impending World Oil Shortage, Princeton

University Press (2001)

31. Campbell, Colin, Founder, The Association for the Study of Peak Oil & Gas (ASPO)

32. Dreffeyes, Hubbert's Peak, op. cit.; See sample chapter

33. 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

34. National Energy Policy: Report of the National Energy Policy Development Group,

whitehouse.gov, May 2001

35. Heinberg, Richard, "The Petroleum Plateau," Muse Letter No. #135, May 2003

36. Revealing Statements from a Bush Insider about Peak Oil and Natural Gas Depletion,

From The Wilderness, Matthew Simmons Transcript, June 12, 2003


37. 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)

m Interview: Donahue With Jean-Charles Brisard

m The French Connection - Paris Reporters Say Bush Threatened War Last Summer, Village

Voice, January 2-8, 2002

m Three Reviews of the book

38. 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

39. 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

40. Paul, James A, "Iraq: the Struggle for Oil," Global Policy Forum, December 2002

41. Golf, Stan, "The Infinite War and its Roots," From The Wilderness, August 27, 2002

42. 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

43. 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


"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 dollardenominated

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,

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