The Invasion of Iraq: Dollar vs. Euro
Saturday, May 06,, 2006
The Invasion of Iraq: Dollar vs. Euro
Re-denominating Iraqi oil in U. S. dollars, instead of the Euro
by Sohan Sharma, Sue Tracy, and Surinder Kumar, February, 2004
What prompted the U.S. attack on Iraq, a country under sanctions for 12 years (1991-2003), struggling to obtain clean water and basic medicines? A little discussed factor responsible for the invasion was the desire to preserve "dollar imperialism" as this hegemony began to be challenged by the euro.
After World War II, most of Europe and Japan lay economically prostrate, their industries in shambles and production, in general, at a minimum level. The U.S. was the only major power to escape the destruction of war, its industries thriving with a high level of productivity. In addition, prior to and during WWII, due to extreme political and economic upheaval, a considerable amount of gold from European countries was transferred to the U.S. Thus, after WWII the U.S. had accumulated 80 percent of the world's gold and 40 percent of the world's production. At the founding of the World Bank (WB) and the International Monetary Fund (IMF) in 1944-45, U.S. predominance was absolute. A fixed exchange currency was established based on gold, the gold-dollar standard, wherein the value of the dollar was pegged to the price of gold-U.S. $35 per ounce of gold. Because gold was combined with U.S. bank notes, the dollar note and gold became equivalent, which then became the international reserve currency.
Initially, the U.S. had $30 billion in gold reserves. But the United States spent more than $500 billion on the Vietnam War alone, from 1967-1972. During these years, the U.S. had over 110 military bases across the globe, each costing hundreds of millions of dollars a year. These expenses were paid in paper dollars and the total number given out far exceeded the gold reserve of the U.S treasury. By then (1971-72), the U.S. Treasury was running out of gold and had only $10 billion in gold left. On August 17, 1971, Nixon suspended the U.S. dollar conversion into gold. Thus, the dollar was "floated" in the international monetary market.
Also in the early 1970s, U.S. oil production peaked and its energy resources began to deplete. Its own oil production could not keep pace with growing home consumption. Since then, U.S. demand for oil continually increased, and by 2002-2003 the U.S. imported approximately 60 percent of its oil-OPEC (primarily Saudi Arabia) being the main exporter. The U.S. sought to protect its dollar strength and hegemony by ensuring that Saudi Arabia price its oil only in dollars. To achieve this, the U.S. made a deal, some say a secret one, that it would protect the Saudi regime in exchange for their selling oil only in dollars.
Throughout the late 1950s and 1960s the Arab world was in ferment over an emerging Nasser brand of Arab nationalism and the Saudi monarchy began to fear for its own stability. In Iraq, the revolutionary officers corps had taken power with a socialist program. In Libya, military officers with an Islamic socialist ideology took power in 1969 and closed the U.S. Wheelus Air base; in 1971, Libya nationalized the holdings of British Petroleum. There were proposals for uniting several Arab states-Syria, Egypt, and Libya. During 1963-1967, a civil war developed in Yemen between Republicans (anti-monarchy) and Royalist forces along almost the entire southern border of Saudi Arabia. Egyptian forces entered Yemen in support of republican forces, while the Saudis supported the royalist forces to shield its own monarchy. Eventually, the Saudi government-a medieval, Islamic fundamentalist, dynastic monarchy with absolute power-survived the nationalistic upheavals.
Saudi Arabia, the largest oil producer with the largest known oil reserves, is the leader of OPEC. It is the only member of the OPEC cartel that does not have an allotted production quota. It is the "swing producer," i.e., it can increase or decrease oil production to bring oil draught or glut in the world market. This enables it more or less to determine prices.
Oil can be bought from OPEC only if you have dollars. Non-oil producing countries, such as most underdeveloped countries and Japan, first have to sell their goods to earn dollars with which they can purchase oil. If they cannot earn enough dollars, then they have to borrow dollars from the WB/IMF, which have to be paid back, with interest, in dollars. This creates a great demand for dollars outside the U.S. In contrast, the U.S. only has to print dollar bills in exchange for goods. Even for its own oil imports, the U.S. can print dollar bills without exporting or selling its goods. For instance, in 2003 the current U.S. account deficit and external debt has been running at more than $500 billion. Put in simple terms, the U.S. will receive $500 billion more in goods and services from other countries than it will provide them. The imported goods are paid by printing dollar bills, i.e., "fiat" dollars.
Fiat money or currency (usually paper money) is a type of currency whose only value is that a government made a "fiat" (decree) that the money is a legal method of exchange. Unlike commodity money, or representative money, it is not based in any other commodity such as gold or silver and is not covered by a special reserve. Fiat money is a promise to pay by the usurer and does not necessarily have any intrinsic value. Its value lies in the issuer's financial means and creditworthiness.
Such fiat dollars are invested or deposited in U.S. banks or the U.S. Treasury by most non-oil producing, underdeveloped countries to protect their currencies and generate oil credit. Today foreigners hold 48 percent of the U.S. Treasury bond market and own 24 percent of the U.S. corporate bond market and 20 percent of all U.S. corporations. In total, foreigners hold $8 trillion of U.S. assets. Nevertheless, the foreign deposited dollars strengthen the U.S. dollar and give the United States enormous power to manipulate the world economy, set rules, and prevail in the international market.
Thus, the U. S. effectively controls the world oil-market as the dollar has become the "fiat" international trading currency. Today U.S. currency accounts for approximately two-thirds of all official exchange reserves. More than four-fifths of all foreign exchange transactions and half of all the world exports are denominated in dollars and U.S. currency accounts for about two-thirds of all official exchange reserves. The fact that billions of dollars worth of oil is priced in dollars ensures the world domination of the dollar. It allows the U.S. to act as the world's central bank, printing currency acceptable everywhere. The dollar has become an oil-backed, not gold-backed, currency.
If OPEC oil could be sold in other currencies, e.g. the euro, then U.S. economic dominance-dollar imperialism or hegemony-would be seriously challenged. More and more oil importing countries would acquire the euro as their "reserve," its value would increase, and a larger amount of trade would be transacted and denominated in euros. In such circumstances, the value of the dollar would most likely go down, some speculate between 20-40 percent.
In November 2000, Iraq began selling its oil in euros. Iraq's oil for food account at the UN was also in euros and Iraq later converted its $10 billion reserve fund at the UN to euros. Several other oil producing countries have also agreed to sell oil in euros-Iran, Libya, Venezuela, Russia, Indonesia, and Malaysia (soon to join this group). In July 2003, China announced that it would switch part of its dollar reserves into the world's emerging "reserve currency" (the euro).
On January 1, 1999, when 11 European countries formed a monetary union around this currency, Britain and Norway, the major oil producers, were absent. As the U.S. economy began to slow down during mid-2000, Western stock markets began to yield lower dividends. Investors from Gulf Cooperation Council nations lost over $800 million in the stock plunge. As investors sold U.S. assets and reinvested in Europe, which seemed to be better shielded from a recession, the euro began to gain ground against the dollar .
After September 11, 2001, Islamic financiers began to repatriate their dollar investments-amounting to billions of dollars-to Arab banks, as they were worried about the possible seizure of their assets under the USA PATRIOT Act. Also, they feared their accounts might be frozen on the suspicion that such accounts fund Islamic terrorists. Iranian sources stated that their banking colleagues felt particularly hassled as Washington heated up its war of words and threats of military intervention. This encouraged Tehran to abandon the dollar payment for oil sales and switch to the euro. Iran also moved the majority of its reserve fund to the euro. (Iran is the latest target of the U.S., which has interfered by stirring up opposition forces, and making covert threats.)
OPEC member countries and the euro-zone have strong trade links, with more than 45 percent of total merchandize imports of OPEC member countries coming from the countries of the euro-zone, while OPEC members are the main suppliers of oil and crude oil products to Europe. The EU has a bigger share of global trade than the U.S. and, while the U.S. has a huge current account deficit, the EU has a more balanced external accounts position. The EU plans to enlarge in May 2004 with ten new members. It will have a population of 450 million; it will have an oil consuming-purchasing population 33 percent larger than the U.S., and over half of OPEC crude oil will be sold to the EU as of mid-2004. In order to reduce currency risks, Europeans will pressure OPEC to trade oil in euros. Countries such as Algeria, Iran, Iraq, and Russia-which export oil and natural gas to European countries and in turn import goods and services from them-will have an interest in reducing their currency risk and hence, pricing oil and gas in euros. Thus momentum is building toward at least the dual use of euro and dollar pricing.
The unprovoked "shock and awe" attack on Iraq was to serve several economic purposes: (1) Safeguard the U.S. economy by re-denominating Iraqi oil in U.S. dollars, instead of the euro, to try to lock the world back into dollar oil trading so the U.S. would remain the dominant world power-militarily and economically. (2) Send a clear message to other oil producers as to what will happen to them if they abandon the dollar matrix. (3) Place the second largest oil reserve under direct U.S. control. (4) Create a subject state where the U.S. can maintain a huge force to dominate the Middle East and its oil. (5) Create a severe setback to the European Union and its euro, the only trading block and currency strong enough to attack U.S. dominance of the world through trade. (6) Free its forces (ultimately) so that it can begin operations against those countries that are trying to disengage themselves from U.S. dollar imperialism-such as Venezuela, where the U.S. has supported the attempted overthrow of a democratic government by a junta more friendly to U. S. business/oil interests.
The U.S. also wants to create a new oil cartel in the Middle East and Africa to replace OPEC. To this end the U.S. has been pressuring Nigeria to withdraw from OPEC and its strict production quotas by dangling the prospects of generous U.S. aid. Instead the U.S. seeks to promote a "U.S.-Nigeria Alignment," which would place Nigeria as the primary oil exporter to the U.S. Another move by the U.S. is to promote oil production in other African countries-Algeria, Libya, Egypt, and Angola, from where the U.S. imports a significant amount of oil-so that the oil control of OPEC is loosened, if not broken. Furthermore, the U.S. is pressuring non-OPEC producers to flood the oil market and retain denomination in dollars in an effort to weaken OPEC's market control and challenge the leadership of any country switching oil denomination from the dollar to the euro.
To break up OPEC and control the world's oil supply, it is also helpful to control Middle East and central Asiatic oil producing countries through which oil pipelines traverse. The first attack and occupation was of Afghanistan, October 2001, in itself a gas producing country, but primarily a country through which Central Asia and the Caspian Sea oil and gas will be shipped (piped) to energy-starved Pakistan and India. Afghanistan also provided an alternative to previously existing Russian pipelines. Simultaneously, the U.S. acquired military bases-19 of them-in the Central Asian countries of Uzbekistan, Tajikistan, Kyrgyzstan, and Turkmenistan in the Caspian Basin, all of which are potential oil producers. After the invasion and occupation of Afghanistan and Iraq, the U.S. controlled the natural resources of these two countries and, once again, Iraq's oil began to be traded in U.S. dollars. The UN's oil for food production program was scrapped and the U.S. Iaunched its Iraqi Assistance Fund in U.S. dollars. In December 2003, the U.S. (Pentagon) announced that it had barred French, German, and Russian oil and other companies from bidding on Iraq's reconstruction.
How would a shift to the euro affect underdeveloped countries, most of which are either non-oil producing or do not produce enough for their home consumption and development? These countries have to import oil. One of the advantages that may accrue to them is that they are likely to earn more euros than dollars since much of their trade is with the European countries. On the other hand, a shift to euro will pose a similar dilemma for them as dollars. They will have to pay for oil in euros, have enough euros deposited-invested in EU treasuries, and borrow euros if they do not have enough for their oil purchases. If, as is projected, the dollar and euro are in a price band (that is, prices will stay within an agreed upon range), they may not have much of a bargaining position.
Oil for euros would be far more helpful if oil-importing underdeveloped countries could develop some form of barter arrangement for their goods to obtain oil from OPEC. Venezuela (Chavez) has presented a successful working model of this. Following Venezuela's lead, several underdeveloped countries began bartering their undervalued commodities directly with each other in computerized swaps and counter trade deals, and commodities are now traded among these countries in exchange for Venezuela's oil. President Chavez has linked 13 such barter deals on its oil; e.g., with Cuba in exchange for Cuban doctors and paramedics who are setting up clinics in shanty towns and rural areas. Such arrangements help underdeveloped countries save their hard currencies, lessening indebtedness to international bankers, the World Bank, and IMF, so that money thus saved can be used for internal development.
http://tinyurl.com/mbmx3
Looting Iraqi Oil for Israel
How we (essentially) stole Iraq's oil
By Joshua Holland
Posted on May 9, 2006, Printed on May 10, 2006
Scott Adams, the father of Dilbert, has a question:
I don't understand the theory that we attacked Iraq for oil. Can one of you geniuses explain that to the rest of us?
I like a good conspiracy theory as much as the next person. And I certainly think governments are capable of doing bad things. But I don't understand the concept of attacking Iraq "because of oil." What does that even mean? [...]
Seriously. Can anyone explain what the plan was?
Sure, Dilbert's dad.
And let me just say that if I had a nickel for every time someone airily dismissed the anti-war crowd's chants of "no blood for oil" by pointing out that we could always buy the oil on the open market, or that Iraq's government still controls it I'd … well, I'd have quite a few nickels.
The first thing one needs to understand is the difference between the old-school paleo-colonialism so popular among Brits wearing pith helmets in the 19th century and the shiny new brand of neo-colonialism that we perfected in the 20th. The essence of the latter is this: of course we'll respect your sovereignty and abide by your domestic laws, as long as we can help write them.
That's the heart of it. In her book, The Bush Agenda, Antonia Juhasz detailed how, six months before the invasion, the administration brought in a group of oil executives to advise them on Iraqi oil policy (this, as Bush was swearing up and down that he had no intention of going to war). The State Department also set up a consulting group under the "Future of Iraq Project" called the "Oil and Energy Working Group." After some back and forth among the various consultants, a consensus was reached that Iraq's oil "should be opened to international oil companies as quickly as possible after the war." What a shocker!
But they couldn't just say that, or Dilbert's father wouldn't be able to scratch his head at those unruly anti-war types. The administration did a great job of deflecting the criticism; Bush called Iraq's oil wealth its "patrimony" and promised it would stay in the hands of the Iraqi people.
And when Paul Bremer was serving as the "dictator of Iraq" (in the words of UN envoy Lakhdar Brahimi) and instituted his infamous "100 rules" -- rules that privatized Iraq's state companies, threw open its economy to foreign investment, established a flat tax and instituted a dozen other measures on the Chamber of Commerce's wish-list -- oil was excluded.
And the war-hawks said: See?
But what Iraq ended up with was a law, written by our oil execs, that gave their companies a far greater cut of Iraq's oil wealth than they can get anywhere else in the Middle East.
I'll let Antonia Juhasz explain the deal:
Essentially the United States crafted a new oil law for Iraq that provides for production sharing agreements [PSAs], which are contractual terms between a government and a foreign corporation to explore for, produce and market oil. Production sharing agreements are not used by any country in the Middle East, or in fact by any country that's truly wealthy in oil. They're used to entice investors into an area where the oil is expensive to produce or there isn't a lot of oil.
But Iraq has potentially the largest oil reserves in the world and they're very easy and cheap to get to -- in Iraq, you essentially just stick a pipe in the ground and you get oil. There's absolutely no reason for Iraq to enter into PSAs, but there's every reason for Western oil companies to want them -- they provide the best terms short of full privatization of the oil.
Iraq has eighty known oil fields. Seventeen of them have been discovered. Under the new oil law -- written into the constitution -- those seventeen will be under the control of the Iraqi national oil company.
That's what Bush meant when he talked about preserving Iraq's "oil patrimony." But …
All undiscovered oil fields are now open to the PSAs. That means, depending on how much oil there is in Iraq, foreign companies will have control over at least 64 percent of Iraq's oil and as much as 84 percent.
PSAs are the worst possible deals for countries; last week economist Mark Weisbrot referred to one in Latin America that gave the government a healthy cut of one percent of its natural gas revenues.
That isn't just a law that can be dismissed down the road by Iraq's legislature with a simple vote; it was built into the country's Constitution, a document that Iraqis approved without having a firm grip on its details (read my interview with Juhasz for some insight into how that happened).
And it's not just about oil; combine the Oil Law with the rest of Bremer's orders. They not only slashed corporate taxes and allowed foreign investors to take 100 percent of their profits out of the country, they gave them -- by law -- the same status as Iraqi firms. That means that all the things countries like Iraq do to turn foreign investment into a little bit of development are off the table: foreign multinationals can't be asked to invest in the local economy or hire a certain number of Iraqi workers or build schools and health clinics or any of the other strategies that are common in poor but resource-rich countries. All of those rules worked their way into the Constitution as well.
None of this is a conspiracy theory; all of it is well-documented in the public record. There were endless position papers put out by industry groups urging the ouster of Saddam in order to open Iraq's economy, and they lobbied quite openly. Juhasz details all of it in her book. People like Dick Cheney, George Schultz and Henry Kissinger warned that American firms were being left out of the fun; while 36 prcent of Iraq's oil ended up in the U.S. during the sanctions years, it mostly came through foreign middle-men -- Saddam gave very few contracts to American firms. That wasn't acceptable and we took him out. It's not a conspiracy when the "conspirators" spent years writing Op-Eds in the Washington Post.
The best evidence that Iraq was an economic invasion, though, is the whole history of our relationship with his government. Saddam was supposed to be our boy in the Middle East after the Shah fell in Iran. He didn't become the Next Hitler™ when he gassed the Kurds. Although always a brutal tyrant, Saddam became a real monster, according to the U.S. government, six months before the first invasion, when, after a very prolonged negotiation with Bechtel, he put the kibosh on the Aqaba pipeline project, a project that both Reagan and Bush 41 wanted badly. That's when we decided we couldn't work with him and the rest, as they say, is … you know.
I hope that helps, Scott.
Joshua Holland is a staff writer at Alternet and a regular contributor to The Gadflyer.
http://tinyurl.com/r9uwo
The Invasion of Iraq: Dollar vs. Euro
Re-denominating Iraqi oil in U. S. dollars, instead of the Euro
by Sohan Sharma, Sue Tracy, and Surinder Kumar, February, 2004
What prompted the U.S. attack on Iraq, a country under sanctions for 12 years (1991-2003), struggling to obtain clean water and basic medicines? A little discussed factor responsible for the invasion was the desire to preserve "dollar imperialism" as this hegemony began to be challenged by the euro.
After World War II, most of Europe and Japan lay economically prostrate, their industries in shambles and production, in general, at a minimum level. The U.S. was the only major power to escape the destruction of war, its industries thriving with a high level of productivity. In addition, prior to and during WWII, due to extreme political and economic upheaval, a considerable amount of gold from European countries was transferred to the U.S. Thus, after WWII the U.S. had accumulated 80 percent of the world's gold and 40 percent of the world's production. At the founding of the World Bank (WB) and the International Monetary Fund (IMF) in 1944-45, U.S. predominance was absolute. A fixed exchange currency was established based on gold, the gold-dollar standard, wherein the value of the dollar was pegged to the price of gold-U.S. $35 per ounce of gold. Because gold was combined with U.S. bank notes, the dollar note and gold became equivalent, which then became the international reserve currency.
Initially, the U.S. had $30 billion in gold reserves. But the United States spent more than $500 billion on the Vietnam War alone, from 1967-1972. During these years, the U.S. had over 110 military bases across the globe, each costing hundreds of millions of dollars a year. These expenses were paid in paper dollars and the total number given out far exceeded the gold reserve of the U.S treasury. By then (1971-72), the U.S. Treasury was running out of gold and had only $10 billion in gold left. On August 17, 1971, Nixon suspended the U.S. dollar conversion into gold. Thus, the dollar was "floated" in the international monetary market.
Also in the early 1970s, U.S. oil production peaked and its energy resources began to deplete. Its own oil production could not keep pace with growing home consumption. Since then, U.S. demand for oil continually increased, and by 2002-2003 the U.S. imported approximately 60 percent of its oil-OPEC (primarily Saudi Arabia) being the main exporter. The U.S. sought to protect its dollar strength and hegemony by ensuring that Saudi Arabia price its oil only in dollars. To achieve this, the U.S. made a deal, some say a secret one, that it would protect the Saudi regime in exchange for their selling oil only in dollars.
Throughout the late 1950s and 1960s the Arab world was in ferment over an emerging Nasser brand of Arab nationalism and the Saudi monarchy began to fear for its own stability. In Iraq, the revolutionary officers corps had taken power with a socialist program. In Libya, military officers with an Islamic socialist ideology took power in 1969 and closed the U.S. Wheelus Air base; in 1971, Libya nationalized the holdings of British Petroleum. There were proposals for uniting several Arab states-Syria, Egypt, and Libya. During 1963-1967, a civil war developed in Yemen between Republicans (anti-monarchy) and Royalist forces along almost the entire southern border of Saudi Arabia. Egyptian forces entered Yemen in support of republican forces, while the Saudis supported the royalist forces to shield its own monarchy. Eventually, the Saudi government-a medieval, Islamic fundamentalist, dynastic monarchy with absolute power-survived the nationalistic upheavals.
Saudi Arabia, the largest oil producer with the largest known oil reserves, is the leader of OPEC. It is the only member of the OPEC cartel that does not have an allotted production quota. It is the "swing producer," i.e., it can increase or decrease oil production to bring oil draught or glut in the world market. This enables it more or less to determine prices.
Oil can be bought from OPEC only if you have dollars. Non-oil producing countries, such as most underdeveloped countries and Japan, first have to sell their goods to earn dollars with which they can purchase oil. If they cannot earn enough dollars, then they have to borrow dollars from the WB/IMF, which have to be paid back, with interest, in dollars. This creates a great demand for dollars outside the U.S. In contrast, the U.S. only has to print dollar bills in exchange for goods. Even for its own oil imports, the U.S. can print dollar bills without exporting or selling its goods. For instance, in 2003 the current U.S. account deficit and external debt has been running at more than $500 billion. Put in simple terms, the U.S. will receive $500 billion more in goods and services from other countries than it will provide them. The imported goods are paid by printing dollar bills, i.e., "fiat" dollars.
Fiat money or currency (usually paper money) is a type of currency whose only value is that a government made a "fiat" (decree) that the money is a legal method of exchange. Unlike commodity money, or representative money, it is not based in any other commodity such as gold or silver and is not covered by a special reserve. Fiat money is a promise to pay by the usurer and does not necessarily have any intrinsic value. Its value lies in the issuer's financial means and creditworthiness.
Such fiat dollars are invested or deposited in U.S. banks or the U.S. Treasury by most non-oil producing, underdeveloped countries to protect their currencies and generate oil credit. Today foreigners hold 48 percent of the U.S. Treasury bond market and own 24 percent of the U.S. corporate bond market and 20 percent of all U.S. corporations. In total, foreigners hold $8 trillion of U.S. assets. Nevertheless, the foreign deposited dollars strengthen the U.S. dollar and give the United States enormous power to manipulate the world economy, set rules, and prevail in the international market.
Thus, the U. S. effectively controls the world oil-market as the dollar has become the "fiat" international trading currency. Today U.S. currency accounts for approximately two-thirds of all official exchange reserves. More than four-fifths of all foreign exchange transactions and half of all the world exports are denominated in dollars and U.S. currency accounts for about two-thirds of all official exchange reserves. The fact that billions of dollars worth of oil is priced in dollars ensures the world domination of the dollar. It allows the U.S. to act as the world's central bank, printing currency acceptable everywhere. The dollar has become an oil-backed, not gold-backed, currency.
If OPEC oil could be sold in other currencies, e.g. the euro, then U.S. economic dominance-dollar imperialism or hegemony-would be seriously challenged. More and more oil importing countries would acquire the euro as their "reserve," its value would increase, and a larger amount of trade would be transacted and denominated in euros. In such circumstances, the value of the dollar would most likely go down, some speculate between 20-40 percent.
In November 2000, Iraq began selling its oil in euros. Iraq's oil for food account at the UN was also in euros and Iraq later converted its $10 billion reserve fund at the UN to euros. Several other oil producing countries have also agreed to sell oil in euros-Iran, Libya, Venezuela, Russia, Indonesia, and Malaysia (soon to join this group). In July 2003, China announced that it would switch part of its dollar reserves into the world's emerging "reserve currency" (the euro).
On January 1, 1999, when 11 European countries formed a monetary union around this currency, Britain and Norway, the major oil producers, were absent. As the U.S. economy began to slow down during mid-2000, Western stock markets began to yield lower dividends. Investors from Gulf Cooperation Council nations lost over $800 million in the stock plunge. As investors sold U.S. assets and reinvested in Europe, which seemed to be better shielded from a recession, the euro began to gain ground against the dollar .
After September 11, 2001, Islamic financiers began to repatriate their dollar investments-amounting to billions of dollars-to Arab banks, as they were worried about the possible seizure of their assets under the USA PATRIOT Act. Also, they feared their accounts might be frozen on the suspicion that such accounts fund Islamic terrorists. Iranian sources stated that their banking colleagues felt particularly hassled as Washington heated up its war of words and threats of military intervention. This encouraged Tehran to abandon the dollar payment for oil sales and switch to the euro. Iran also moved the majority of its reserve fund to the euro. (Iran is the latest target of the U.S., which has interfered by stirring up opposition forces, and making covert threats.)
OPEC member countries and the euro-zone have strong trade links, with more than 45 percent of total merchandize imports of OPEC member countries coming from the countries of the euro-zone, while OPEC members are the main suppliers of oil and crude oil products to Europe. The EU has a bigger share of global trade than the U.S. and, while the U.S. has a huge current account deficit, the EU has a more balanced external accounts position. The EU plans to enlarge in May 2004 with ten new members. It will have a population of 450 million; it will have an oil consuming-purchasing population 33 percent larger than the U.S., and over half of OPEC crude oil will be sold to the EU as of mid-2004. In order to reduce currency risks, Europeans will pressure OPEC to trade oil in euros. Countries such as Algeria, Iran, Iraq, and Russia-which export oil and natural gas to European countries and in turn import goods and services from them-will have an interest in reducing their currency risk and hence, pricing oil and gas in euros. Thus momentum is building toward at least the dual use of euro and dollar pricing.
The unprovoked "shock and awe" attack on Iraq was to serve several economic purposes: (1) Safeguard the U.S. economy by re-denominating Iraqi oil in U.S. dollars, instead of the euro, to try to lock the world back into dollar oil trading so the U.S. would remain the dominant world power-militarily and economically. (2) Send a clear message to other oil producers as to what will happen to them if they abandon the dollar matrix. (3) Place the second largest oil reserve under direct U.S. control. (4) Create a subject state where the U.S. can maintain a huge force to dominate the Middle East and its oil. (5) Create a severe setback to the European Union and its euro, the only trading block and currency strong enough to attack U.S. dominance of the world through trade. (6) Free its forces (ultimately) so that it can begin operations against those countries that are trying to disengage themselves from U.S. dollar imperialism-such as Venezuela, where the U.S. has supported the attempted overthrow of a democratic government by a junta more friendly to U. S. business/oil interests.
The U.S. also wants to create a new oil cartel in the Middle East and Africa to replace OPEC. To this end the U.S. has been pressuring Nigeria to withdraw from OPEC and its strict production quotas by dangling the prospects of generous U.S. aid. Instead the U.S. seeks to promote a "U.S.-Nigeria Alignment," which would place Nigeria as the primary oil exporter to the U.S. Another move by the U.S. is to promote oil production in other African countries-Algeria, Libya, Egypt, and Angola, from where the U.S. imports a significant amount of oil-so that the oil control of OPEC is loosened, if not broken. Furthermore, the U.S. is pressuring non-OPEC producers to flood the oil market and retain denomination in dollars in an effort to weaken OPEC's market control and challenge the leadership of any country switching oil denomination from the dollar to the euro.
To break up OPEC and control the world's oil supply, it is also helpful to control Middle East and central Asiatic oil producing countries through which oil pipelines traverse. The first attack and occupation was of Afghanistan, October 2001, in itself a gas producing country, but primarily a country through which Central Asia and the Caspian Sea oil and gas will be shipped (piped) to energy-starved Pakistan and India. Afghanistan also provided an alternative to previously existing Russian pipelines. Simultaneously, the U.S. acquired military bases-19 of them-in the Central Asian countries of Uzbekistan, Tajikistan, Kyrgyzstan, and Turkmenistan in the Caspian Basin, all of which are potential oil producers. After the invasion and occupation of Afghanistan and Iraq, the U.S. controlled the natural resources of these two countries and, once again, Iraq's oil began to be traded in U.S. dollars. The UN's oil for food production program was scrapped and the U.S. Iaunched its Iraqi Assistance Fund in U.S. dollars. In December 2003, the U.S. (Pentagon) announced that it had barred French, German, and Russian oil and other companies from bidding on Iraq's reconstruction.
How would a shift to the euro affect underdeveloped countries, most of which are either non-oil producing or do not produce enough for their home consumption and development? These countries have to import oil. One of the advantages that may accrue to them is that they are likely to earn more euros than dollars since much of their trade is with the European countries. On the other hand, a shift to euro will pose a similar dilemma for them as dollars. They will have to pay for oil in euros, have enough euros deposited-invested in EU treasuries, and borrow euros if they do not have enough for their oil purchases. If, as is projected, the dollar and euro are in a price band (that is, prices will stay within an agreed upon range), they may not have much of a bargaining position.
Oil for euros would be far more helpful if oil-importing underdeveloped countries could develop some form of barter arrangement for their goods to obtain oil from OPEC. Venezuela (Chavez) has presented a successful working model of this. Following Venezuela's lead, several underdeveloped countries began bartering their undervalued commodities directly with each other in computerized swaps and counter trade deals, and commodities are now traded among these countries in exchange for Venezuela's oil. President Chavez has linked 13 such barter deals on its oil; e.g., with Cuba in exchange for Cuban doctors and paramedics who are setting up clinics in shanty towns and rural areas. Such arrangements help underdeveloped countries save their hard currencies, lessening indebtedness to international bankers, the World Bank, and IMF, so that money thus saved can be used for internal development.
http://tinyurl.com/mbmx3
Looting Iraqi Oil for Israel
How we (essentially) stole Iraq's oil
By Joshua Holland
Posted on May 9, 2006, Printed on May 10, 2006
Scott Adams, the father of Dilbert, has a question:
I don't understand the theory that we attacked Iraq for oil. Can one of you geniuses explain that to the rest of us?
I like a good conspiracy theory as much as the next person. And I certainly think governments are capable of doing bad things. But I don't understand the concept of attacking Iraq "because of oil." What does that even mean? [...]
Seriously. Can anyone explain what the plan was?
Sure, Dilbert's dad.
And let me just say that if I had a nickel for every time someone airily dismissed the anti-war crowd's chants of "no blood for oil" by pointing out that we could always buy the oil on the open market, or that Iraq's government still controls it I'd … well, I'd have quite a few nickels.
The first thing one needs to understand is the difference between the old-school paleo-colonialism so popular among Brits wearing pith helmets in the 19th century and the shiny new brand of neo-colonialism that we perfected in the 20th. The essence of the latter is this: of course we'll respect your sovereignty and abide by your domestic laws, as long as we can help write them.
That's the heart of it. In her book, The Bush Agenda, Antonia Juhasz detailed how, six months before the invasion, the administration brought in a group of oil executives to advise them on Iraqi oil policy (this, as Bush was swearing up and down that he had no intention of going to war). The State Department also set up a consulting group under the "Future of Iraq Project" called the "Oil and Energy Working Group." After some back and forth among the various consultants, a consensus was reached that Iraq's oil "should be opened to international oil companies as quickly as possible after the war." What a shocker!
But they couldn't just say that, or Dilbert's father wouldn't be able to scratch his head at those unruly anti-war types. The administration did a great job of deflecting the criticism; Bush called Iraq's oil wealth its "patrimony" and promised it would stay in the hands of the Iraqi people.
And when Paul Bremer was serving as the "dictator of Iraq" (in the words of UN envoy Lakhdar Brahimi) and instituted his infamous "100 rules" -- rules that privatized Iraq's state companies, threw open its economy to foreign investment, established a flat tax and instituted a dozen other measures on the Chamber of Commerce's wish-list -- oil was excluded.
And the war-hawks said: See?
But what Iraq ended up with was a law, written by our oil execs, that gave their companies a far greater cut of Iraq's oil wealth than they can get anywhere else in the Middle East.
I'll let Antonia Juhasz explain the deal:
Essentially the United States crafted a new oil law for Iraq that provides for production sharing agreements [PSAs], which are contractual terms between a government and a foreign corporation to explore for, produce and market oil. Production sharing agreements are not used by any country in the Middle East, or in fact by any country that's truly wealthy in oil. They're used to entice investors into an area where the oil is expensive to produce or there isn't a lot of oil.
But Iraq has potentially the largest oil reserves in the world and they're very easy and cheap to get to -- in Iraq, you essentially just stick a pipe in the ground and you get oil. There's absolutely no reason for Iraq to enter into PSAs, but there's every reason for Western oil companies to want them -- they provide the best terms short of full privatization of the oil.
Iraq has eighty known oil fields. Seventeen of them have been discovered. Under the new oil law -- written into the constitution -- those seventeen will be under the control of the Iraqi national oil company.
That's what Bush meant when he talked about preserving Iraq's "oil patrimony." But …
All undiscovered oil fields are now open to the PSAs. That means, depending on how much oil there is in Iraq, foreign companies will have control over at least 64 percent of Iraq's oil and as much as 84 percent.
PSAs are the worst possible deals for countries; last week economist Mark Weisbrot referred to one in Latin America that gave the government a healthy cut of one percent of its natural gas revenues.
That isn't just a law that can be dismissed down the road by Iraq's legislature with a simple vote; it was built into the country's Constitution, a document that Iraqis approved without having a firm grip on its details (read my interview with Juhasz for some insight into how that happened).
And it's not just about oil; combine the Oil Law with the rest of Bremer's orders. They not only slashed corporate taxes and allowed foreign investors to take 100 percent of their profits out of the country, they gave them -- by law -- the same status as Iraqi firms. That means that all the things countries like Iraq do to turn foreign investment into a little bit of development are off the table: foreign multinationals can't be asked to invest in the local economy or hire a certain number of Iraqi workers or build schools and health clinics or any of the other strategies that are common in poor but resource-rich countries. All of those rules worked their way into the Constitution as well.
None of this is a conspiracy theory; all of it is well-documented in the public record. There were endless position papers put out by industry groups urging the ouster of Saddam in order to open Iraq's economy, and they lobbied quite openly. Juhasz details all of it in her book. People like Dick Cheney, George Schultz and Henry Kissinger warned that American firms were being left out of the fun; while 36 prcent of Iraq's oil ended up in the U.S. during the sanctions years, it mostly came through foreign middle-men -- Saddam gave very few contracts to American firms. That wasn't acceptable and we took him out. It's not a conspiracy when the "conspirators" spent years writing Op-Eds in the Washington Post.
The best evidence that Iraq was an economic invasion, though, is the whole history of our relationship with his government. Saddam was supposed to be our boy in the Middle East after the Shah fell in Iran. He didn't become the Next Hitler™ when he gassed the Kurds. Although always a brutal tyrant, Saddam became a real monster, according to the U.S. government, six months before the first invasion, when, after a very prolonged negotiation with Bechtel, he put the kibosh on the Aqaba pipeline project, a project that both Reagan and Bush 41 wanted badly. That's when we decided we couldn't work with him and the rest, as they say, is … you know.
I hope that helps, Scott.
Joshua Holland is a staff writer at Alternet and a regular contributor to The Gadflyer.
http://tinyurl.com/r9uwo
bin66 - 11. Mai, 00:49
