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(en) Iraq, oil and U.S. world hegemony (II)

From secretariado@iwa-ait.org
Date Thu, 20 Mar 2003 16:42:03 +0100 (CET)

A - I N F O S N E W S S E R V I C E

The U.S. world hegemony is based on military and economical power. By
attacking Iraq, the U.S. can fulfil their goal of controlling the
entire Middle East, but the outcomes are dependent on what will
happen with the war. The U.S. goal is clearly to obtain a ?quick
victory? scenario lasting only one or two months, and this explains
why the U.S. is threatening Turkey. They need to attack Iraq on at
least two fronts, from Kuwait in the South and the Kurdish areas in
the North.

On the other hand, the U.S. fears a ?prolonged conflict? lasting
three to six months with combinations of burning Iraqi oil-fields,
urban fighting, heavy casualties, pictures of a humanitarian disaster
on the news, massive foreign denouncements of the U.S. policy. These
fears are not humanitarian, but economical. Given the fact that the
trend of the slow U.S. economical growth in the fall of 2002
continues or even increases, a war against Iraq can be triggering a
serious economical recession or crisis.

The dictator Saddam Hussein stated as a propaganda effort during the
Gulf War I that he would be longer in power than President Bush Sr.
He was right as burning oil -fields in Iraq and Kuwait, a rise and
drop of oil prices and a sharp U.S. and world economic decline
followed the war, and President Bush wasn?t re-elected. Today Saddam
Hussein says he will win the war. This seems unlikely, as the U.S.
killing machine is ready for attack in order to implement a regime
change. But does Saddam Hussein have a ?secret weapon??

This question makes it necessary to look upon a mechanism in which
the U.S. economical hegemony is established, and in this mechanism
oil is central. The oil industry was born in the United States, and
both the prices and payments of oil are dominated in dollars. Nations
buy and hold dollars like they buy and hold gold because they can`t
purchase oil without dollars. It is estimated that as much as
two-thirds of central banks official foreign exchange reserves are
denominated in dollars.

Similarly the oil- exporters keep their huge profits in the currency
in which they receive the payments. Investing these dollars (called
petrodollars) back in the U.S. economy is possible at zero currency
risk. Norway, the third largest oil exporter, has invested tens of
thousands of millions of dollars in stocks and U.S. government bonds.
Russia, the second largest exporter does the same. Saudi Arabia, the
largest oil exporter and producer might have as much as 700 000 000
000 dollars invested in the United States.

This system of the dollar acting as world (reserve) currency in oil
trade and most of the world trade, keeps the demand for the dollar
?artificial? high. As no other nation it enables the United States to
carry out printing dollars at the price of nothing, to fund tax cuts,
increased military spending and consumer spending on imports. This is
shown by the figures of the United States net debt accumulated over
years to the rest of the world: In 2002 it was as enormous as 2800
000 000 000 dollars, a level more than double that recorded in 1999.
Any other nation would have seen its currency and stock market crash
hard. (Compare Argentine in 2001!)

The U.S. foreign dept increases as the expansion goes on. As long as
the U.S. has no serious challengers and the other nations have
confidence in the dollar and U.S. policy, the system functions. But,
as we know, capitalism can`t exist without competition and
imperialist struggle about control of territory, resources and other
nations` economies.

We see this clearly in the Middle East today. Iraq and the Middle
East is an imperialist battleground about access to present and
future oil supplies, of implementing free trade zones and of
controlling and undermining competitors. And additionally it brings
us to a very important and untold root of the war: It`s a currency
war between the dollar and the euro that in fact can undermine the
economical foundation of the U.S. hegemony!

This brings us back to the so-called ?secret weapon? of Iraq. In the
end of the 2000, Iraq switched its oil denomination from ?the enemy
currency? dollar to euro. When Iraq switched to euro, the value was
low compared to the dollar, and it was considered as a political move
with no economical sense. But the alarm bells were ringing in
Washington, and the crucial question was: Who will follow next?

After the September 11th 2001, we know more of what has happened. The
Afghanistan war became ?a war against terrorism?. President Bush
declared Iraq, Iran and North Korea as «Axis of Evil States». We have
seen a further U.S. militarization of Colombia, and the important
U.S. oil supplier Venezuela suffered a coup attempt in April 2002
etc. We must also remember that a report to the U.S. Congress January
the 8th 2002 outlined that the Pentagon should be prepared to use
nuclear weapons against China, Russia, Iraq, North Korea, Iran, Libya
and Syria. No wonder, that the alarm bells were ringing in these

Today we know that the dollar dropped 15% last year towards the euro,
and 5% so far in 2003. The Iraqi switch to euro, the expected move by
Iran and the strengthening of the euro, have put a pressure on OPEC
and other main oil-exporters to drop the dollar as transaction
currency. And as the future prospects show a looming oil marked,
consuming nations must switch currencies when oil producing states do
so. The Iraqi trade partner Jordan did this in 2000.

If we take the largest oil exporters, the third largest Norway is
traditionally tied to the United States as a strategically important
country with borders to Russia. Norway is not a political member of
the EU, but now the public opinions polls show that a majority is in
favour of the European Union. If Sweden and Denmark decide to
accept euro as their currency, Norway might join the EU and it is
unlikely to think that oil transactions can be kept in dollars. If
Norway switches to euro, Great Britain has to follow as both produces
the oil from the North Sea. Contrary, if Britain implements the euro
currency, Norway will have to follow. Both countries are today in
fact squeezed between the United States and the EU.

Russia, the second largest oil exporter, has according to an article
of ?The Observer? on the February 23rd, recently discussed to adopt
the euro for oil sales. Russia acts in an alliance with France and
Germany and (partly) China against the U.S. It is important for the
U.S. to try to split Russia from Old Europe (Germany and France)
since Russia has oil.

And when it comes to Saudi Arabia, beyond doubt he largest producer
and exporter, we will mention an event that shows how vulnerable the
U.S. is. In the aftermath of September 11th more and more tracks went
towards Saudi Arabia. 15 of the 19 terrorist hijackers were from
Saudi Arabia and an extensive research was (and is) made by the U.S.
and Israel to reveal Saudi terrorist connections.

On August the 6th 2002 the Washington Post described a report
prepared by the Consultation Council of the U.S. Defence Department
(the Pentagon). The report, which was extended by a researcher at the
Rand Corporation, reflected views of the growing trend inside the
U.S. Administration, which classifies Saudi Arabia as an enemy. It
also called for targeting the Saudi oil - fields and investments in
the United States, unless the Saudis stopped their support to

The Financial Times reported the August 20th that the Saudis had
withdrawn tens of thousands of millions of dollars from the United
States in protest against the accusations, and the article indicated
that the Saudi money shifts may have contributed to the downward
pressure on the dollar. Later, it became silent about this
?intermezzo?. The U.S. denied that the report reflected official
views and the Saudis denied the withdrawing of investments from the

We wrote in part I that it seems to be a matter of U.S. National
Security of not talking about oil in the Iraq conflict. This is
partly because a regime change would benefit U.S. and U.K. oil
companies, and not the Russian, Chinese, French etc. companies that
have made contracts with the Iraqi dictatorship. The reason is
further highly that the U.S. is dependent on Saudi Arabia until the
job is done in Iraq. They need military bases in Saudi Arabia, their
oil and continued Saudi petrodollar investments in the U.S.

A ?quick victory? scenario against Iraq can fulfil the U.S. goal of
controlling the entire Middle East. After the war, one of the first
priorities of the planned U.S. military junta will be to switch Iraqi
oil transactions back to dollars showing the neighbouring countries
Saudi Arabia, Syria and Iran the price of challenging the Empire.
They will also implement a free trade zone for the Middle East and an
increase the Iraqi oil production in order to decrease oil prices,
and by this undermine oil exporters as Saudi Arabia. (See part I)

A ?prolonged conflict? scenario, and even an intermediate one, can
create major economical problems for the U.S. and the world economy.
The U.S. will be dependent on Saudi Arabia spare oil production
capacity and they can?t, as the time goes on, rely on releasing their
own Strategic Petroleum Reserves to adjust prices. The oil prices are
in this scenario expected to rise from today?s already high price of
35$ to 40$ per barrel. This price rise can, as shown in the past, be
followed by an economical recession.

It must be noticed that Japan is very vulnerable as they get as much
as 70% of their oil imports from the Middle East. If a crises starts
in Asia, it can be triggering a major economical world recession and
crisis. Investments can be withdrawn from the U.S. and switched to
euro as the dollar value drops.

These are desperate scenarios, but we are living in desperate times
of the global capitalism.

(To be continued)

Oslo the 16th of March 2003



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