Similar to the Iraq war, military operations against Iran relate to the macroeconomics of ?petrodollar recycling? and the unpublicized but real challenge to U.S. dollar supremacy from the euro as an alternative oil transaction currency.
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Concerning Iran, recent articles have revealed active Pentagon planning for operations against its suspected nuclear facilities. While the publicly stated reasons for any such overt action will be premised as a consequence of Iran's nuclear ambitions, there are again unspoken macroeconomic drivers underlying the second stage of petrodollar warfare ? Iran's upcoming oil bourse.
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The proposed Iranian oil bourse signifies that without some sort of US intervention, the euro is going to establish a firm foothold in the international oil trade. Given U.S. debt levels and the stated neoconservative project of U.S. global domination, Tehran?s objective constitutes an obvious encroachment on dollar supremacy in the crucial international oil market.
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Published on 3 Aug 2005 by Media Monitors Network. Archived on 9 Aug 2005.
Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil Bourse
by William Clark
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?This notion that the United States is getting ready to attack Iran is simply ridiculous...Having said that, all options are on the table.?
? President George W. Bush, February 2005
Contemporary warfare has traditionally involved underlying conflicts regarding economics and resources. Today these intertwined conflicts also involve international currencies, and thus increased complexity. Current geopolitical tensions between the United States and Iran extend beyond the publicly stated concerns regarding Iran?s nuclear intentions, and likely include a proposed Iranian ?petroeuro? system for oil trade.
Similar to the Iraq war, military operations against Iran relate to the macroeconomics of ?petrodollar recycling? and the unpublicized but real challenge to U.S. dollar supremacy from the euro as an alternative oil transaction currency.
It is now obvious the invasion of Iraq had less to do with any threat from Saddam?s long-gone WMD program and certainly less to do to do with fighting International terrorism than it has to do with gaining strategic control over Iraq?s hydrocarbon reserves and in doing so maintain the U.S. dollar as the monopoly currency for the critical international oil market. Throughout 2004 information provided by former administration insiders revealed the Bush/Cheney administration entered into office with the intention of toppling Saddam Hussein.[1][2]
Candidly stated, ?Operation Iraqi Freedom? was a war designed to install a pro-U.S. government in Iraq, establish multiple U.S military bases before the onset of global Peak Oil, and to reconvert Iraq back to petrodollars while hoping to thwart further OPEC momentum towards the euro as an alternative oil transaction currency (i.e. ?petroeuro?).[3] However, subsequent geopolitical events have exposed neoconservative strategy as fundamentally flawed, with Iran moving towards a petroeuro system for international oil trades, while Russia evaluates this option with the European Union.
In 2003 the global community witnessed a combination of petrodollar warfare and oil depletion warfare. The majority of the world?s governments ? especially the E.U., Russia and China ? were not amused ? and neither are the U.S. soldiers who are currently stationed inside a hostile Iraq. In 2002 I wrote an award-winning online essay that asserted Saddam Hussein sealed his fate when he announced in September 2000 that Iraq was no longer going to accept dollars for oil being sold under the UN?s Oil-for-Food program, and decided to switch to the euro as Iraq?s oil export currency.[4]
Indeed, my original pre-war hypothesis was validated in a Financial Times article dated June 5, 2003, which confirmed Iraqi oil sales returning to the international markets were once again denominated in U.S. dollars ? not euros.
The tender, for which bids are due by June 10, switches the transaction back to dollars -- the international currency of oil sales - despite the greenback's recent fall in value. Saddam Hussein in 2000 insisted Iraq's oil be sold for euros, a political move, but one that improved Iraq's recent earnings thanks to the rise in the value of the euro against the dollar [5]
The Bush administration implemented this currency transition despite the adverse impact on profits from Iraqi?s export oil sales.[6] (In mid-2003 the euro was valued approx. 13% higher than the dollar, and thus significantly impacted the ability of future oil proceeds to rebuild Iraq?s infrastructure). Not surprisingly, this detail has never been mentioned in the five U.S. major media conglomerates who control 90% of information flow in the U.S., but confirmation of this vital fact provides insight into one of the crucial ? yet overlooked ? rationales for 2003 the Iraq war.
Concerning Iran, recent articles have revealed active Pentagon planning for operations against its suspected nuclear facilities. While the publicly stated reasons for any such overt action will be premised as a consequence of Iran's nuclear ambitions, there are again unspoken macroeconomic drivers underlying the second stage of petrodollar warfare ? Iran's upcoming oil bourse. (The word bourse refers to a stock exchange for securities trading, and is derived from the French stock exchange in Paris, the Federation Internationale des Bourses de Valeurs.)
In essence, Iran is about to commit a far greater ?offense? than Saddam Hussein's conversion to the euro for Iraq?s oil exports in the fall of 2000. Beginning in March 2006, the Tehran government has plans to begin competing with New York's NYMEX and London's IPE with respect to international oil trades ? using a euro-based international oil-trading mechanism.[7]
The proposed Iranian oil bourse signifies that without some sort of US intervention, the euro is going to establish a firm foothold in the international oil trade. Given U.S. debt levels and the stated neoconservative project of U.S. global domination, Tehran?s objective constitutes an obvious encroachment on dollar supremacy in the crucial international oil market.
From the autumn of 2004 through August 2005, numerous leaks by concerned Pentagon employees have revealed that the neoconservatives in Washington are quietly ? but actively ? planning for a possible attack against Iran. In September 2004 Newsweek reported:
Deep in the Pentagon, admirals and generals are updating plans for possible U.S. military action in Syria and Iran. The Defense Department unit responsible for military planning for the two troublesome countries is ?busier than ever,? an administration official says. Some Bush advisers characterize the work as merely an effort to revise routine plans the Pentagon maintains for all contingencies in light of the Iraq war. More skittish bureaucrats say the updates are accompanied by a revived campaign by administration conservatives and neocons for more hard-line U.S. policies toward the countries??
?administration hawks are pinning their hopes on regime change in Tehran ? by covert means, preferably, but by force of arms if necessary. Papers on the idea have circulated inside the administration, mostly labeled "draft" or "working draft" to evade congressional subpoena powers and the Freedom of Information Act. Informed sources say the memos echo the administration's abortive Iraq strategy: oust the existing regime, swiftly install a pro-U.S. government in its place (extracting the new regime's promise to renounce any nuclear ambitions) and get out. This daredevil scheme horrifies U.S. military leaders, and there's no evidence that it has won any backers at the cabinet level.[8]
Indeed, there are good reasons for U.S. military commanders to be ?horrified? at the prospects of attacking Iran. In the December 2004 issue of the Atlantic Monthly, James Fallows reported that numerous high-level war-gaming sessions had recently been completed by Sam Gardiner, a retired Air Force colonel who has run war games at the National War College for the past two decades.[9] Col. Gardiner summarized the outcome of these war games with this statement, ?After all this effort, I am left with two simple sentences for policymakers: You have no military solution for the issues of Iran. And you have to make diplomacy work.? Despite Col. Gardiner?s warnings, yet another story appeared in early 2005 that reiterated this administration?s intentions towards Iran. Investigative reporter Seymour Hersh?s article in The New Yorker included interviews with various high-level U.S. intelligence sources. Hersh wrote:
In my interviews [with former high-level intelligence officials], I was repeatedly told that the next strategic target was Iran. Everyone is saying, ?You can?t be serious about targeting Iran. Look at Iraq,? the former [CIA] intelligence official told me. But the [Bush administration officials] say, ?We?ve got some lessons learned ? not militarily, but how we did it politically. We?re not going to rely on agency pissants.? No loose ends, and that?s why the C.I.A. is out of there.[10]
The most recent, and by far the most troubling, was an article in The American Conservative by intelligence analyst Philip Giraldi. His article, ?In Case of Emergency, Nuke Iran,? suggested the resurrection of active U.S. military planning against Iran ? but with the shocking disclosure that in the event of another 9/11-type terrorist attack on U.S. soil, Vice President Dick Cheney?s office wants the Pentagon to be prepared to launch a potential tactical nuclear attack on Iran ? even if the Iranian government was not involved with any such terrorist attack against the U.S.
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Why would the Vice President instruct the U.S. military to prepare plans for what could likely be an unprovoked nuclear attack against Iran? Setting aside the grave moral implications for a moment, it is remarkable to note that during the same week this ?nuke Iran? article appeared, the Washington Post reported that the most recent National Intelligence Estimate (NIE) of Iran?s nuclear program revealed that, ?Iran is about a decade away from manufacturing the key ingredient for a nuclear weapon, roughly doubling the previous estimate of five years.?[12]
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The upcoming bourse will introduce petrodollar versus petroeuro currency hedging, and fundamentally new dynamics to the biggest market in the world - global oil and gas trades. In essence, the U.S. will no longer be able to effortlessly expand its debt-financing via issuance of U.S. Treasury bills, and the dollar?s international demand/liquidity value will fall.
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The implementation of the proposed Iranian oil Bourse ? if successful in utilizing the euro as its oil transaction currency standard ? essentially negates the previous two criteria as described by Mr. Yarjani regarding the solidification of a petroeuro system for international oil trades. It should also be noted that throughout 2003-2004 both Russia and China significantly increased their central bank holdings of the euro, which appears to be a coordinated move to facilitate the anticipated ascendance of the euro as a second World Reserve Currency. [17] [18]
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Furthermore, the geopolitical stakes for the Bush administration were raised dramatically on October 28, 2004, when Iran and China signed a huge oil and gas trade agreement (valued between $70 - $100 billion dollars.) [20] It should also be noted that China currently receives 13% of its oil imports from Iran. In the aftermath of the Iraq invasion, the U.S.-administered Coalition Provisional Authority (CPA) nullified previous oil lease contracts from 1997-2002 that France, Russia, China and other nations had established under the Saddam regime. The nullification of these contracts worth a reported $1.1 trillion created political tensions between the U.S and the European Union, Russia and China.
The Chinese government may fear the same fate awaits their oil investments in Iran if the U.S. were able to attack and topple the Tehran government. Despite U.S. desires to enforce petrodollar hegemony, the geopolitical risks of an attack on Iran?s nuclear facilities would surely create a serious crisis between Washington and Beijing.
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Synopsis:
It is not yet clear if a U.S. military expedition will occur in a desperate attempt to maintain petrodollar supremacy. Regardless of the recent National Intelligence Estimate that down-graded Iran?s potential nuclear weapons program, it appears increasingly likely the Bush administration may use the specter of nuclear weapon proliferation as a pretext for an intervention, similar to the fears invoked in the previous WMD campaign regarding Iraq.
If recent stories are correct regarding Cheney?s plan to possibly use another 9/11 terrorist attack as the pretext or casus belli for a U.S. aerial attack against Iran, this would confirm the Bush administration is prepared to undertake a desperate military strategy to thwart Iran?s nuclear ambitions, while simultaneously attempting to prevent the Iranian oil Bourse from initiating a euro-based system for oil trades.
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