Reidblog [The Reid Report blog]

Oh, the parallels of history:

"Iran is led by a Prime Minister who has a history of ordering and carrying out the executions of his enemies, both at home and abroad. He has been tied to the deaths of dozens, if not hundreds, of Iranian dissidents around the world. He has repeatedly proclaimed his belief in the Islamic version of Armageddon, has repeatedly called for Israel to be wiped off the map, and insists on unfettered research into nuclear physics -- saying it is strictly for peaceful purposes, but meanwhile asserting his nation's right to possess nuclear weapons. ..." [JT]

Meanwhile...

The United States is led by a president who has a history of ordering the indefinite detention and sanctioning the torture of individuals, including minors, many of whom were later found to be bystanders rather than al-Qaida terrorists, and others of whom were tortured into giving their interrogators false information later used to justify the misuse of American armed forces in Iraq. He has disappeared American citizens without trial, festooned the globe with secret prisons that are tied to the deaths of an uncounted number of people, and ordered the secret wiretapping and surveillance of political opponents and God only knows who else (journalists, maybe?). His administration outed a covert agent working on non-proliferation issues, threatening her safety and the safety of everyone she ever dealt with, simply because her husband criticized the political policy of invading Iraq. He has repeatedly proclaimed that the United States is spreading freedom around the world, and that democracies are peaceful, yet his "democratically elected" administration ordered the invasion of a country that had not attacked and did not threaten us. He and his administration manipulated intelligence to justify a war that has killed upwards of 100,000 Iraqis and more than 2,000 U.S. troops, and which has injured nearly 20,000 others.

Two-thirds of our troops now apparently believe the mission should be brought to an end (NYT poll today). And he has propped up a dictator in Pakistan, an oligarchy in Saudi Arabia, whom, along with the UAE, he and his family have repeatedly taken money from, and to whom he is now prepared to hand over operational control of 21 U.S. ports (after having thrown open the U.S. southern border to an unlimited hoarde of barely paid corporate slaves. He decries the search for nuclear weapons by countries seeking a deterrent against Israel, which is armed to the teeth with them, while continuing research on next-generation nuclear weapons for our use.

What a world.

Syria is weak and deterred by Israel. North Korea, having gone nuclear, is untouchable. That leaves Iran. What to do? There are only two things that will stop the Iranian nuclear program: revolution from below or an attack on its nuclear facilities.

The country should be ripe for revolution. The regime is detested. But the mullahs are very good at police-state tactics. The long-awaited revolution is not happening.

Which makes the question of pre-emptive attack all the more urgent. Iran will go nuclear during the next presidential term. Some Americans wishfully think that the Israelis will do the dirty work for us, as in 1981 when they destroyed Saddam's nuclear reactor. But for Israel, attacking Iran is a far more difficult proposition. It is farther away. Moreover, detection and antiaircraft technology are far more advanced than 20 years ago.

There may be no deus ex machina. If nothing is done, a fanatical terrorist regime openly dedicated to the destruction of the ``Great Satan'' will have both nuclear weapons and the terrorists and missiles to deliver them. All that stands between us and that is either revolution or pre-emptive strike.

"America's unilateral move to sever ties with the Islamic Republic was aimed at destroying the Islamic revolution...

"America was free to sever its ties with Iran, but it remains Iran's decision to re-establish relations with America."

Washington, August 8th, 2005 -- The announcement that Iran is to begin pricing its petroleum products in euros and create an "Iranian Oil Bourse" for trading oil, in direct competition with New York and London has sent the Oil Barons into a tail spin.

Convinced that their grab of Iraqi oilfields after Saddam dared to announce that he was moving to the Euro should have taught the Iranians a lesson, the NeoCons under Cheney and Rumsfeld seek to up the stakes in their "Old Mans Poker Game". Any moron who still believes that Iraq was either invaded for the threatening Weapons of Mass Destruction and to create a democratic state in the Middle East should stop reading now, and take their medication. But now the stakes are much higher, and the odds are not in our favor. NeoCon military planners even go so far as to contemplate using first strike nuclear weapons.

Others, outside of the carefully controlled mainstream media are warning against such folly. William Clark wrote:

"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…'"

A PetroEuro would shatter the illusion, swallowed by the gullible voters, that all is just fine in the US Economy. At present the printing presses can churn out as many dollar bills as the President needs for his latest folly. It doesn't matter if all the US factories and workshops are closed down, and everyone is in paper debt up to their ears, just print more money and give them a tax break to keep them quiet. Then collect all the paper debt together and get another loan from China.

What is the Iranian Bourse and what has a Russian natural gas curtailment got to do with it?

Well, to answer the second question; in future, some gas delivered to Ukraine and perhaps on to Western Europe via pipeline will be Iranian.

And, according to Iranian officials, the Iranian Bourse will be a state-owned international oil, gas and refined products exchange, operating principally over the Internet, with transactions denominated principally in Euros.

The Iranian Bourse will be competing directly with London’s International Petroleum Exchange and New York’s Mercantile Exchange, both of which are owned by US corporations, and whose transactions are denominated in Dollars.

At present, the Dollar is the global monetary standard for petroleum exchange. Hence, all petroleum consuming countries – including China and Japan – must buy and keep a large cache of dollars in their central banks.

What would be the effect of an Iranian Bourse operating on petroeuros rather than petrodollars?

Well, back in 2000, Saddam Hussein converted Iraqi bank reserves from the Dollar to the Euro, and began demanding payments in Euro for Iraqi oil. Central banks of many countries – most notably Russia and China – began keeping Euros and Dollars as monetary "reserves" and as an exchange fund for oil.

And, perhaps at least partially because of Saddam’s conversion to it, by 2003 the Euro was stronger than the Dollar.

So, there are some observers who fervently believe that the real reason Bush-Cheney launched a war of aggression against Iraq was to restore the primacy of petrodollars and to demonstrate to any country – such as Iran, who had begun serious planning for the Iranian Bourse in 2000 – what would happen to them if they followed Saddam’s lead.

Of course, once occupied by the US-UK-Halliburton coalition, Iraqi oil sales were once again denominated in petrodollars.

The Proposed Iranian Oil Bourse
by Krassimir Petrov

I. Economics of Empires

A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military. One part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes. ...

...Early in the 20th century, the U.S. economy began to dominate the world economy. The U.S. dollar was tied to gold, so that the value of the dollar neither increased, nor decreased, but remained the same amount of gold. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, had substantially increased the amount of currency in circulation, and thus rendered the backing of U.S. dollars by gold impossible. This led Roosevelt to decouple the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not an empire. The fixed value of the dollar did not allow the Americans to extract economic benefits from other countries by supplying them with dollars convertible to gold.

Economically, the American Empire was born with Bretton Woods in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world’s gold. An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold. However, the guns-and-butter policy of the 1960’s was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ’s Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was tantamount to a tax—the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that U.S. imposed on rest of the world.

When in 1970-1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of “severing the link between the dollar and gold”, in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond— the world was taxed and it could not do anything about it.

From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and that reason was oil.

In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world’s demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil.

The economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world. If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist. Thus, Imperial survival dictated that oil be sold only for dollars. It also dictated that oil reserves were spread around various sovereign states that weren’t strong enough, politically or militarily, to demand payment for oil in something else. If someone demanded a different payment, he had to be convinced, either by political pressure or military means, to change his mind.

The man that actually did demand Euro for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably Euro and Yen, the danger to the dollar was clear and present, and a punitive action was in order. Bush’s Shock-and-Awe in Iraq was not about Saddam’s nuclear capabilities, about defending human rights, about spreading democracy, or even about seizing oil fields; it was about defending the dollar, ergo the American Empire. It was about setting an example that anyone who demanded payment in currencies other than U.S. Dollars would be likewise punished.

Many have criticized Bush for staging the war in Iraq in order to seize Iraqi oil fields. However, those critics can’t explain why Bush would want to seize those fields—he could simply print dollars for nothing and use them to get all the oil in the world that he needs. He must have had some other reason to invade Iraq.

History teaches that an empire should go to war for one of two reasons: (1) to defend itself or (2) benefit from war; if not, as Paul Kennedy illustrates in his magisterial The Rise and Fall of the Great Powers, a military overstretch will drain its economic resources and precipitate its collapse. Economically speaking, in order for an empire to initiate and conduct a war, its benefits must outweigh its military and social costs. Benefits from Iraqi oil fields are hardly worth the long-term, multi-year military cost. Instead, Bush must have went into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with Euro. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet and declared the mission accomplished—he had successfully defended the U.S. dollar, and thus the American Empire.