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April, 2003

Why We Fight: Petrodollars Vs. Petroeuros
By Jim Scanlon

Dick Cheney said, "This has nothing to do with oil". President Bush and his spokesman Ari Fleisher, deny repeatedly that oil has anything to do with it. Tony Blair said, "...there is no way ever if oil were the issue..." Colin Powell did not mention it in his speech to the UN. The mantra of the administration is "The oil belongs to the Iraqi people".

But is oil the issue? And is the euro and the dollar and national economies and militarism involved? Many scholar and thoughtful commentators think so.

The US military is, without doubt, the strongest in the world and, without doubt, its economy is declining. For decades the US has been a creditor nation, lending money to others, but during the 1980s the US became a debtor nation, buying more goods outside the country, and building up a foreign debt of some $2,500,000,000,000, which is expected to rise up to $3,500,000,000,000 over the next 3 years! This debt is sustained by the inflow of foreign investment. which has fallen dramatically since September 11, 2001, imperiling the value of the dollar and the way we live. Argentina's economy collapsed with a foreign debt of only 132,000,000,000, but then oil and international goods are not denominated in the peso.

Basically, and greatly simplified, the US trades pieces of paper (the dollar) for things that other countries make.

At present, oil sales of the OPEC cartel are denominated in US dollars, which requires that countries buying oil pay in dollars. They therefore maintain dollar reserves and in maintaining dollar reserves, they must invest them Since the inception of the euro currency, sales of Iraqi oil have been denominated in euros. Libya and Iran (Axis of Evil Countries) have toyed with pricing oil sales in euros, as has Hugo Chevez of Venezuela (Axis we'd like to get rid of him) who recently survived two coup d'etat attempts.

The three largest "proven" oil reserves in the world are in Saudi Arabia (a feudal state), Iraq and the United Arab Emirates (a collection of small feudal states). Taking over the country, installing a protectorate and pricing Iraqi oil in dollars takes enormous pressure off the US currency and its economy. It also helps explain part of the resistance of France and Germany, both euro countries, to the US and UK attack on Iraq. One might predict that, if the Anglo American invasion is successful, the UK will not switch to the euro.

It is important to remember that the importance of Persian Gulf oil is not only in it's vast volume, but in its accessibility and ease of transport.

The basic reason we are fighting is to preserve our exchange rate and preserve the rule of the dollar almighty.

Notes:

It is strange and unusual to hear George Bush, Richard Cheney and others constantly referring to the oil in Mesopotamia as "belonging to the Iraqi people." One does not hear of the oil in Texas or Alaska or Nigeria referred to as "belonging to the American people" or "the Nigerian people."

Iraq is, as is Kuwait, an artificial country whose borders were drawn by British and French imperial officials at the end of World War I when the Turkish Empire was carved up. It is a "Balkanized" state, a conglomeration of vastly different peoples and cultures. There are some similarities to the now defunct Yugoslavia also a remnant of the Turkish Empire, which was allowed to disintegrate, in reality, if not legally. It appears that Iraq will not be allowed to disintegrate.

 

 

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