April 7, 2003	Monday	Safar 4, 1424

This article by Geoffrey Heard, a Melbourne-based writer on the environment, sustainability and human rights, has been circulated on the web. The writer has permitted Dawn to condense it for publication.

Why was George Bush so hell bent on war with Iraq? Why did his administration reject every positive Iraqi move for disarmament. It all makes sense when you consider the economic implications for the US of not going to war with Iraq.

The war on Iraq is actually the US and Europe going head-to-head over economic leadership of the world. Unable to gain majority support in the UN Security Council for invading Iraq, the US invaded without authorization. Why this desperation?

There are many forces driving President Bush and his administration to invade Iraq, unseat Saddam Hussein and take over the country. One of the biggest is hidden and very, very simple. It is about the currency used to trade oil and consequently, who will dominate the world economically, in the foreseeable future — the US or the European Union.

Alongside that is physical control of oil, but once America has a massive military force based in the Middle East in territory over which it has control, where will it end? Iran is already on the agenda, named by Bush as part of the “axis of evil”, and Saudi Arabia, with the world’s largest oil reserves and the home of Al Qaeda, would be the obvious step after that. The oil rich southern republics of the former Soviet Union are a further target.

Iraq is a European Union beachhead in the economic confrontation. America had a monopoly on the oil trade, with the US dollar as the fiat currency, until Iraq broke ranks in 2000, started to trade oil in the EU’s fledgling euro, and profited mightily as the dollar sank by 20 per cent against the euro. By taking over Iraq, America will hurl the EU and its euro back into the economic sea.

Besides ensuring the dollar remains the premier world trading currency, physical control of oil reserves is vital to the US to ensure supply at affordable prices. The USA’s own oil reserves are very limited — it has capped wells to retain a viable on-shore reserve, but it would not last long — and because real world oil reserves are being rapidly depleted.

The conquest of Iraq will make America’s position as the dominant economic power in the world all but impregnable. America’s allies in the invasion, Britain and Australia, bet that the invasion will be successful and that they will get some trickle-down benefits for jumping on to the US bandwagon. France and Germany are the spearhead of the European force — Russia would like to go European but possibly can still be bought off because of its current economic problems. China would like to see the Europeans build a share of international trade currency ownership at this point to blunt the US’s power a little while it continues to grow its international trading presence.

Debate building on the Internet: Oddly, little or nothing is appearing in the general media about the oil trading currency issue. Are key people becoming aware of it? Despite the silence in the general media, a major world discussion is developing around this issue, particularly on the internet.

Oil dollars: The key to the oil dollar motivation is the fiat currency for trading oil. Under an OPEC agreement, all oil has been traded in US dollars since 1971 which makes the US dollar the de facto major international trading currency. Nations actually need a common currency for trade. With the trade so badly balanced, the majority of the money flow is one way. If other nations have to hold US dollars to buy oil, then they find it is convenient and necessary for them to do other trading in those dollars. This fact gives the United States a huge trading advantage and helps make it the dominant economy in the world.

As an economic bloc, the European Union is the only challenger to the USA’s economic position, and it created the euro to challenge the dollar in international markets. However, the EU is not yet united behind the euro — there is a lot of jingoistic national politics involved, not least in Britain — and in any case, so long as nations throughout the world must hoard dollars to buy oil, the euro can make only limited inroads into the dollar’s dominance.

Iraq’s switch to the euro has got Iran thinking about switching too; Venezuela, the fourth largest oil producer, began looking at it and was cutting out the dollar by bartering oil with several nations including America’s bete noir, Cuba. Russia is seeking to ramp up oil production with Europe (trading in euros) an obvious market.

The greenback’s grip on oil trading and consequently on world trade in general, was under serious threat. If America did not stamp on this immediately, this economic brushfire could rapidly be fanned into a wildfire capable of consuming the US’s economy and its dominance of world trade. The US has enjoyed a special advantage for 30 years — it has been getting a free world trade ride because of the oil trade being conducted in dollars and oil is the major commodity to be traded. The US has been receiving a huge subsidy from everyone else in the world. As its debt has been growing, it has printed more money to keep trading. No wonder it is an economic powerhouse!

If the oil exporters decide to accept another currency and the idea spreads, the world trade’s dependence on dollars will cease. The USA is so eager to take over Iraq right now because of the speed with which the euro fire could spread and the huge impact higher oil prices would have on its fragile economy.

If Iran, Venezuela and Russia joined Iraq and sold large quantities of oil for euros, the euro would have the leverage it needs to become a much more powerful force in general international trade very quickly. Other nations would have to start swapping some of their dollars for euros.

The dollars the US has printed would start to fly home, stripping away the illusion of value behind them.

The USA’s real economic condition is about as bad as it could be; it is the most debt-ridden nation on earth, owing about US$12,000 for every single one of it’s 280 million men, women and children.

It is worse than the position of Indonesia when it imploded economically a few years ago, or more recently, that of Argentina.

Even if OPEC did not switch to euros wholesale (and that would make a very nice non-oil profit for the OPEC countries, including minimizing the various contrived debts America has forced on some of them), the US’s difficulties would build. If only a small part of the oil trade went euro, that would do three things immediately:

* Increase the attractiveness to EU members of joining the ‘eurozone’, which in turn would make the euro stronger and make it more attractive to oil nations as a trading currency and to other nations as a general trading currency.

* Start the US dollars flying home demanding value when there isn’t enough in the bank to cover them.

* Cause the usual panic attack in the world financial markets and in no time, the US dollar’s value would be spiralling down.

The American solution

America’s response to the euro and oil shortage threat was predictable. As always, it came out fighting. It aims to achieve three primary and four subsidiary objectives by going to war with Iraq:

* Safeguard the United States economy by returning Iraq to trading oil in US dollars and sending a clear message to other oil producers who may be wavering towards euros, thus ensuring the greenback is once again the exclusive oil currency and is reaffirmed as the reserve currency for world trade.

* Safeguard the USA’s supply of oil by placing the second largest reserves of oil in the world under direct US control.

* Establish a secular subject state where it can maintain a huge military force, unrestricted by the host’s national considerations, to dominate the Middle East with its vital oil, and neighbouring regions in all directions, including the south-east of Europe and the southern Caspian oil fields.

* Severely setback the expansion of the influence of the European Union and its euro, the only trading bloc and currency strong enough to attack the current American dominance of world trade through the dollar, and weaken the EU by splintering it.

* Provide cover for the US to run a covert operation to overturn the democratically elected government of Venezuela and replace it with a US-friendly military supported junta which would put Venezuela’s oil into US hands and ensure oil trading in US dollars.

* Secure Israel’s position.

* Satisfy the United States’ need to wage war with someone at regular intervals so that it tests and expends its munitions and military hardware, thus providing work and vast profits for the US military industrial complex to produce replacement hardware and upgrades.

The occupation of Iraq will enhance America’s current position and make it all but impregnable as the dominant world power — economically and militarily. The euro and the development of the ‘eurozone’ has suffered a serious setback and might take decades to recover. Europe has been splintered.

Physical control of oil secures the supplies which underpin the high energy consumption US economy and will place the United States in a position to profit directly from higher world oil prices resulting from the growing shortage of oil.

The USA, with a stable military base in Iraq would also be more independent of Europe and able to give the faint whiff of military threat to Europe itself.

The United States of America is making the boldest grab for absolute power the world has seen in modern times.

It is hardly likely to allow the possible slaughter of some tens of thousand Iraqis stand between it and world domination.