Petrodollar Warfare: Oil, Iraq and the Future of the Dollar

The battle is to maintain the dollar as the World Reserve currency. Invasion of Iraq was necessary to preserve US global dominance of oil, the dollar as the oil currency, and unlimited constraint for debt creation. The dollar as a world reserve currency is necessary as a mechanism for effortless US credit expansion. The US has $3 trillion of foreign purchased debt and $2 trillion of consumer debt, but the consumer have limits on the total amount of debt they can finance before default. Neoconservative hawks Donald Rumsfeld, Paul Wolfowitz, and Richard Perle secretly have engineered military imperialism structure too control key energy reserves with antagonism towards uncooperative governments and treating many allies as energy rivals; large transactional energy companies, such as, Halliburton, Exxon Mobile, Chevron Texico position and exploit known energy reserves, in conjunction with new foreign policy; defense contractors benefit from military imperlism: Boeing, Lockheed Martin, Rayethon, Northrop Grumman, and TRW. Monetary maneuvers away from the dollar by the international community indicates a manifest intolerance of a unilaterist US employing military imperialism that seek gain over the world's energy supplies and denies the self determination regarding their chosen oil export currencies. The fact governments around the world are adding Euros to their central bank reserves is indicative that they have lost faith in the dollar and the fiscal policies surrounding debt. Petrodollars are backed by black gold. WWII war debt of 2,600 tons of God caused the collapse of Brent Wood Agreement. The dollar moved off the gold standard and its value traded on the open market. Large international banks: Citibank, Chase Manhatten, Barclay's assumed the role of the central bank with the market forces determining the value of the dollar. Money was a commodity too be bought and sold on the open market. The result of the dollar valuation was inflation and deflation business cycles. In the 1970s, the growing trade massive trade deficit from the Vietnam War contributed to the devaluation of the dollar; OPEC began discussing the viability of pricing oil trade in several currencies; the Nixon administration began talks with Saudi Arabia to unilaterally price international oil sales in dollars only; in 1974, an agreement was reached with New York and Lond Banks and the arrangement began to be known as "Petrodollar recycling". The oil price shocks of 1973-74, 79 created enormous demand fro the floating dollar. Germany, Argentina, Japan were faced with how to acquire export-based dollars to pay for the expensive new oil import bills. Meanwhile, OPEC was flooded with surplus petrodollars; the power banking interest (US Fed Reserve and the Bank of England) sought too manage the monetary flows from a 400% increase in the price of oil in the Middle East. The banks used the petrodollar surplus by relending the money as Eurobonds to governments of

William Clark has presented a brilliant summary of the painful truth of our economy: that it is propped up, and consistently abused, by the use of the dollar as the world's only pathway to buying oil on the international market. Without Petrodollars our economy would collapse in a pile of debt, and it is the threat of a rival currency that led to the invasion of Iraq, not the nonsensical mythology spun by the Neocons. There are sane ideas that could put us on a more sustainable economic track, but, as Clark shows, the current administration is doing exactly the opposite. This is a "must read."

I'd been somewhat skeptical of claims that Bush's Invasion of Iraq had much to do with the dollar versus the euro. After reading "Petrodollar Warfare" I came to understand that the strength of the dollar, and its status as the world reserve currency, came from the fact that it has, in effect, been backed by oil since Nixon went off the gold standard. That is, you can always trade in your dollars at a reasonable exchange rate for the world's most valuable resource, oil. In fact, most countries must buy or trade for dollars to buy oil, propping up the value of the dollar. The International Monetary Fund has been a key enforcer of this dollar monopoly, especially among the poorer countries of the world. The "warfare" comes from the fact that Saddam Hussein switched his oil sales from dollars to euros in 2000, also that Iran is planning to open an energy market (Bourse) in euros in the spring of 2006. Clark makes a compelling case that "maintaining the dollar as the World Reserve Currency was a major component of the Bush administration's push for the Iraq War". Because of this the US enjoys almost unlimited credit compared to other countries, way beyond its actual economic productivity. Loss of this credit would entail dramatic belt-tightening in the US combined with major inflation, rivaling the Great Depression. So far Bush's strategy has worked. But there is widespread fear, even by some financial authorities, that this is about to end as US debt spirals into the stratosphere to finance militarization and consumption, not productive investments. Clark points out that China, which recently signed a $70 billion oil and gas deal with Iran, could decide to dump its dollars if the US attacks Iran to head off the new Bourse. However this would shatter both China's industrial expansion and economic globalization as we've come to know it. Opportunity for a more democratic world order would lie in such a crisis, but also extreme risks of global economic depression and/or warfare. Clark lays out very well the sordid history of US geostrategy related to oil and the Middle East and the developing Peak Oil crisis. But unlike many other books on this subject, he delves deeply into the likely financial crisis, though he does not explain the current strength of the US dollar. He describes sensible measures to prevent this crisis, including adding the euro as a second International Reserve Currency. However, he is not sanguine that much will happen "unless a significant global financial crisis occurs". Unmentioned by Clark is the push toward a new global currency, and associated banking system, backed only by the actual or anticipated value of energy and other natural and human resources. This would not only enforce Colin Campbell's proposed oil "Depletion Protocol" but would also transform the global economy to work toward sustainable development without ecological or economic collapse.

This book challenges us to comprehend the macroeconomic motivations of our U.S policy makers over the last 60 years to do two things. 1. Make the U.S. dollar the standard world currency for oil. 2. Ensure that the U.S. can control oil resources in order to sustain this dominance through superpower military superiority. William R. Clark makes a compeling case against our current positions in foreign and economic policies based on the fact that the world's oil supplies have reached peak production and are now in decline. His scenarios are not all bleak and depressing. His solutions for the next generations of energy supply give us some hope that the human species may be sustainable through alternative energy sources and a change in the way we American's squander carbon based fuels.

The people of the United States must regain its democratic control over the large rogue politic which underpins the Bush/Cheney/Wolfowitz administration, which allows for economic warfare disguised as, take your pick: 'war on terror', 'liberation of the Iraqi people', 'the preservation of democracy', etc. ad nauseum. Those in the broader community who understand Peak Oil as the natural limit by which the US economy can grow, also understand what Richard Heinberg aptly describes as the option of "last one standing - The path of competition for remaining resources." There are other options and William Clarks's book adds considerably to the necessary public debate by which we, the American people, must first understand what is happening, and secondly, assert our values which choose life and freedom. The path is clear and it entails a shift to renewable fuels on a massive scale, huge conservation efforts, and vastly improved energy efficiencies. Its the option to "powerdown." Unfortunately, the time is quickly running out for choosing that path. War with Iran, by Israel, with considerable US backing, may now be inevitable, because of Iran's necessary choice for economic self preservation in the face of US hegemony to preserve the petrodollar. And when the bombs start dropping, we'll be irrevocably locked into World War III. Its time for all of us to become strident, with ourselves in our inanity, each other, and most importantly, with our representatives in Congress. A few notable quotes from the book: "Only in the United States and Britain did the majority of people indicate that the campaign against terror was a sincere effort to reduce international terrorism." "Despite its omnipotent military power and current position as the largest economy in the world, the US has become an increasingly fearful and isolated nation, ... instilled with a belief that America is so vulnerable to a small rogue group of terrorists that it must engage in a worldwide 'war on terror'." "Before 1985 the United States had been a net creditor, gaining more from its foreign investments than it paid to them in interest on Treasury bonds or other US assets. However,since the end of the cold war, the US has become the world's largest debtor nation." "The oil price shocks of 1973-1974 and again in 1979 resulted in the formulation of aggressive geostrategic planning that included a US military invasion to gain control over the oil reserves in the Persian Gulf. The origins of the policies become public in 1975, when Henry Kissinger stated the US was prepared to wage war over oil." "The Middle East is reported to contain approximately 65 percent of the world's 'proven' oil reserves... it is typically accepted as factual that Iraq alone has a reported 11 percent of the world's proven reserves, an estimated 112 billion barrels." "All objective oil geologists agree that global Peak Oil will occur - the real debate centers around exactly when it will happen." "Americans m