Date: Sun, 16 Mar 2003 01:18:35 -0800
From: Judy <jaw-AT-earthlink.net>
Subject: Iraq, dollars and euros?




The Euro Effect: The Real Reason for the War in Iraq
By W. Clark


"If a nation expects to be ignorant and free, it expects what never
was and never will be... The People cannot be safe without
information. When the press is free, and every man is able to read,
all is safe."


Those words by Thomas Jefferson embody the unfortunate state of
affairs that have beset our nation. As our government prepares to go
to war with Iraq, our country seems unable to answer even the most
basic questions about this war.


First, why is there virtually no international support to topple
Saddam? If Iraq's weapons of mass destruction (WMD) program truly
possessed the threat level that President Bush has repeatedly
purported, why is there no international coalition to militarily
disarm Saddam?


Secondly, despite over 300 unfettered U.N inspections to date, there
has been no evidence reported of a reconstituted Iraqi WMD program.


Third, and despite Bush's rhetoric, the CIA has not found any links
between Saddam Hussein and Al Qaeda. To the contrary, some analysts
believe it is far more likely Al Qaeda might acquire an unsecured
former Soviet Union Weapon(s) of Mass Destruction, or potentially from
sympathizers within a destabilized Pakistan.


Moreover, immediately following Congress's vote on the Iraq
Resolution, we suddenly became aware of North Korea's nuclear program
violations. Kim Jong Il is processing uranium in order to produce
nuclear weapons this year. President Bush has not provided a rationale
answer as to why Saddam's seemingly dormant WMD program possesses a
more imminent threat that North Korea's active program. Strangely,
Donald Rumsfeld suggested that if Saddam were 'exiled' we could avoid
an Iraq war.


Confused yet? Well, I'm going to give their game away -- the core
driver for toppling Saddam is actually the euro currency.


Although completely suppressed in the U.S. media, the answer to the
Iraq enigma is simple yet shocking. The upcoming war in Iraq war is
mostly about how the ruling class at Langley and the Bush oligarchy
view hydrocarbons at the geo-strategic level, and the overarching
macroeconomic threats to the U.S. dollar from the euro.


The Real Reason for this upcoming war is this administration's goal of
preventing further OPEC momentum towards the euro as an oil
transaction currency standard. However, in order to pre-empt OPEC,
they need to gain geo-strategic control of Iraq along with its 2nd
largest proven oil reserves.


This lengthy essay will discuss the macroeconomics of the
'petro-dollar' and the unpublicized but real threat to U.S. economic
hegemony from the euro as an alternative oil transaction currency. The
following is how an astute and anonymous friend alluded to the
unspoken truth about this upcoming war with Iraq:


"The Federal Reserve's greatest nightmare is that OPEC will switch its
international transactions from a dollar standard to a euro standard.
Iraq actually made this switch in Nov. 2000 (when the euro was worth
around 80 cents), and has actually made off like a bandit considering
the dollar's steady depreciation against the euro. (Note: the dollar
declined 17% against the euro in 2002.)


"The real reason the Bush administration wants a puppet government in
Iraq -- or more importantly, the reason why the
corporate-military-industrial network conglomerate wants a puppet
government in Iraq -- is so that it will revert back to a dollar
standard and stay that way." (While also hoping to veto any wider OPEC
momentum towards the euro, especially from Iran -- the 2nd largest
OPEC producer who is actively discussing a switch to euros for its oil
exports)."


Furthermore, despite Saudi Arabia being our 'client state,' the Saudi
regime appears increasingly weak, threatened from massive civil
unrest. Some analysts believe a 'Saudi Revolution' might be plausible
in the aftermath of an unpopular U.S. invasion of Iraq (ie. Iran circa
1979) [1].


Undoubtedly, the Bush administration is acutely aware of these risks.
Hence, the neo-conservative framework entails a large and permanent
military presence in the Persian Gulf region in a post Saddam era,
just in case we need to surround and grab Saudi's oil fields in the
event of a coup by an anti-western group. But first back to Iraq.


"Saddam sealed his fate when he decided to switch to the euro in late
2000 (and later converted his $10 billion reserve fund at the U.N. to
euros) -- at that point, another manufactured Gulf War become
inevitable under Bush II. Only the most extreme circumstances could
possibly stop that now and I strongly doubt anything can -- short of
Saddam getting replaced with a pliant regime.


"Big Picture Perspective: Everything else aside from the reserve
currency and the Saudi/Iran oil issues (i.e. domestic political issues
and international criticism) is peripheral and of marginal consequence
to this administration. Further, the dollar-euro threat is powerful
enough that they will rather risk much of the economic backlash in the
short-term to stave off the long-term dollar crash of an OPEC
transaction standard change from dollars to euros. All of this fits
into the broader Great Game that encompasses Russia, India, China."


This information about Iraq's oil currency is censored by the U.S.
media and the Bush administration as the truth could potentially
curtail both investor and consumer confidence, reduce consumer
borrowing/spending, create political pressure to form a new energy
policy that slowly weans us off middle-eastern oil, and of course stop
our march towards war in Iraq. This quasi 'state secret' can be found
on a Radio Free Europe article discussing Saddam's switch for his oil
sales from dollars to the euros on Nov. 6, 2000:


"Baghdad's switch from the dollar to the euro for oil trading is
intended to rebuke Washington's hard-line on sanctions and encourage
Europeans to challenge it. But the political message will cost Iraq
millions in lost revenue. RFE/RL correspondent Charles Recknagel looks
at what Baghdad will gain and lose, and the impact of the decision to
go with the European currency." [2]


At the time of the switch many analysts were surprised that Saddam was
willing to give up millions in oil revenue for what appeared to be a
political statement. However, contrary to one of the main points of
this November 2000 article, the steady depreciation of the dollar
versus the euro since late 2001 means that Iraq has profited
handsomely from the switch in their reserve and transaction
currencies. The euro has gained roughly 17% against the dollar in that
time, which also applies to the $10 billion in Iraq's U.N. 'oil for
food' reserve fund that was previously held in dollars has also gained
that same percent value since the switch. What would happen if OPEC
made a sudden switch to euros, as opposed to a gradual transition?


"Otherwise, the effect of an OPEC switch to the euro would be that
oil-consuming nations would have to flush dollars out of their
(central bank) reserve funds and replace these with euros. The dollar
would crash anywhere from 20-40% in value and the consequences would
be those one could expect from any currency collapse and massive
inflation (think Argentina currency crisis, for example). You'd have
foreign funds stream out of the U.S. stock markets and dollar
denominated assets, there'd surely be a run on the banks much like the
1930s, the current account deficit would become unserviceable, the
budget deficit would go into default, and so on. Your basic 3rd world
economic crisis scenario.


"The United States economy is intimately tied to the dollar's role as
reserve currency. This doesn't mean that the U.S. couldn't function
otherwise, but that the transition would have to be gradual to avoid
such dislocations (and the ultimate result of this would probably be
the U.S. and the E.U. switching roles in the global economy)." In the
aftermath of toppling Saddam it is clear the U.S. will keep a large
and permanent military force in the Persian Gulf. Indeed, there is no
'exit strategy' in Iraq, as the military will be needed to protect the
newly installed Iraqi regime, and perhaps send a message to other OPEC
producers that they might receive 'regime change' if they convert
their oil exports to the euro.


Another underreported story from this summer related to another OPEC
'Axis of Evil' country, Iran, who is vacillating on the euro issue.


"Iran's proposal to receive payments for crude oil sales to Europe in
euros instead of U.S. dollars is based primarily on economics, Iranian
and industry sources said.


"But politics are still likely to be a factor in any decision, they
said, as Iran uses the opportunity to hit back at the U.S. government,
which recently labeled it part of an 'axis of evil.'


"The proposal, which is now being reviewed by the Central Bank of
Iran, is likely to be approved if presented to the country's
parliament, a parliamentary representative said.


"'There is a very good chance MPs will agree to this idea... now that
the euro is stronger, it is more logical,' the parliamentary
representative said." [3]


Moreover, and perhaps most telling, during 2002 the majority of
reserve funds in Iran's central bank have been shifted to euros. It
appears imminent that Iran intends to switch to euros for their oil
currency.


"More than half of the country's assets in the Forex Reserve Fund have
been converted to euro, a member of the Parliament Development
Commission, Mohammad Abasspour announced. He noted that higher parity
rate of euro against the US dollar will give the Asian countries,
particularly oil exporters, a chance to usher in a new chapter in ties
with European Union's member countries.


"He said that the United States dominates other countries through its
currency, noting that given the superiority of the dollar against
other hard currencies, the US monopolizes global trade. The lawmaker
expressed hope that the competition between euro and dollar would
eliminate the monopoly in global trade." [4]


After toppling Saddam, this administration may decide that Iran's
disloyalty to the dollar qualifies them as the next target in the 'war
on terror.' Iran's interest in switching to the euro as their currency
for oil exports is well documented. Perhaps this MSNBC article alludes
to the objectives of neo-conservatives.


"While still wrangling over how to overthrow Iraq's Saddam Hussein,
the Bush administration is already looking for other targets.
President Bush has called for the ouster of Palestinian leader Yasir
Arafat. Now some in the administration -- and allies at D.C. think
tanks -- are eyeing Iran and even Saudi Arabia. As one senior British
official put it: 'Everyone wants to go to Baghdad. Real men want to go
to Tehran.'" [5]


Aside from these political risks regarding Saudi Arabia and Iran,
another risk factor is actually Japan. Perhaps the biggest gamble in a
protracted Iraq war may be Japan's weak economy. [6]


If the war creates prolonged oil high prices ($45 per barrel over
several months), or a short but massive oil price spike ($80 to $100
per barrel), some analysts believe Japan's fragile economy would
collapse. Japan is quite hypersensitive to oil prices, and if its
banks default, the collapse of the second largest economy would set in
motion a sequence of events that would prove devastating to the U.S.
economy. Indeed, Japan's fall in an Iraq war could create the economic
dislocations that begin in the Pacific Rim but quickly spread to
Europe and Russia. The Russian government lacks the controls to thwart
a disorderly run on the dollar, and such an event could ultimately
force an OPEC switch to euros.


Additionally, other risks might arise if the Iraq war goes poorly or
becomes prolonged. It is possible that civil unrest may unfold in
Kuwait or other OPEC members including Venezuela, as the latter may
switch to euros just as Saddam did in November 2000. This would foster
the very situation this administration is trying to prevent: another
OPEC member switching to euros as their oil transaction currency.


Incidentally, the final 'Axis of Evil' country, North Korea, recently
decided to officially drop the dollar and begin using euros for trade,
effective Dec. 7, 2002. [7] Unlike the OPEC-producers, North Korea's
switch will have negligible economic impact, but it illustrates the
geopolitical fallout of Bush's harsh rhetoric.


Much more troubling are North Korea's recent actions following the oil
embargo of their country. They are in dire need of oil and food; and
in an act of desperation they have re-activated their pre-1994 nuclear
program. Processing uranium appears to be taking place at a rapid
pace, and it appears their strategy is to prompt negotiations with the
U.S. regarding food and oil. The CIA estimates that North Korea could
produce 4-6 nuclear weapons by the second half of 2003. Ironically,
this crisis over North Korea's nuclear program further confirms the
fraudulent premise for which this war with Saddam was entirely
contrived.


Unfortunately, neo-conservatives such as George Bush, Dick Cheney,
Donald Rumsfeld, Paul Wolfowitz and Richard Pearle fail to grasp that
Newton's Law applies equally to both physics and the geo-political
sphere as well: "For every action there is an equal but opposite
reaction."


During the 1990s the world viewed the U.S. as a rather self-absorbed
but essentially benevolent superpower. Military actions in Iraq
(1990-91 and 1998), Serbia and Kosovo (1999) were undertaken with both
U.N. and NATO cooperation and thus afforded international legitimacy.
President Clinton also worked to reduce tensions in Northern Ireland
and attempted to negotiate aresolution to the Israeli-Palestinian
conflict.


However, in both the pre and post 9/11 intervals, the 'America first'
policies of the Bush administration, with its unwillingness to honor
International Treaties, along with their aggressive militarisation of
foreign policy, has significantly damaged our reputation abroad.
Following 9/11, it appears that President Bush's 'warmongering
rhetoric' has created global tensions -- as we are now viewed as a
belligerent superpower willing to apply unilateral military force
without U.N. approval.


Lamentably, the tremendous amount of international sympathy that we
witnessed in the immediate aftermath of the September 11th tragedy has
been replaced with fear and anger at our government. This
administration's bellicosity has changed the worldview, and
'anti-Americanism' is proliferating even among our closest allies. [8]


Even more alarming, and completely unreported in the U.S media, are
some monetary shifts in the reserve funds of foreign governments away
from the dollar with movements towards the euro. [9]


It appears that the world community may lack faith in the Bush
administration's economic policies, and along with OPEC, seems poised
to respond with economic retribution if the U.S. government is
regarded as an uncontrollable and dangerous superpower. The
plausibility of abandoning the dollar standard for the euro is
growing. An interesting U.K. article by Hazel Henderson outlines the
dynamics and the potential outcomes:


The most likely end to US hegemony may come about through a
combination of high oil prices (brought about by US foreign policies
toward the Middle East) and deeper devaluation of the US dollar
(expected by many economists). Some elements of this scenario:


1. US global over-reach in the 'war on terrorism' already leading to
deficits as far as the eye can see -- combined with historically-high
US trade deficits -- lead to a further run on the dollar. This and the
stock market doldrums make the US less attractive to the world's
capital.


2. More developing countries follow the lead of Venezuela and China in
diversifying their currency reserves away from dollars and balanced
with euros. Such a shift in dollar-euro holdings in Latin America and
Asia could keep the dollar and euro close to parity.


3. OPEC could act on some of its internal discussions and decide
(after concerted buying of euros in the open market) to announce at a
future meeting in Vienna that OPEC's oil will be re-denominated in
euros, or even a new oil-backed currency of their own. A US attack on
Iraq sends oil to [euro dollar symbol] 40 (euros) per barrel.


4. The Bush Administration's efforts to control the domestic political
agenda backfires. Damage over the intelligence failures prior to 9/11
and warnings of imminent new terrorist attacks precipitate a further
stock market slide.


5. All efforts by Democrats and the 57% of the US public to shift
energy policy toward renewables, efficiency, standards, higher gas
taxes, etc. are blocked by the Bush Administration and its fossil fuel
industry supporters. Thus, the USA remains vulnerable to energy supply
and price shocks.


6. The EU recognizes its own economic and political power as the euro
rises further and becomes the world's other reserve currency. The G-8
pegs the euro and dollar into a trading band -- removing these two
powerful currencies from speculators trading screens (a "win-win" for
everyone!). Tony Blair persuades Brits of this larger reason for the
UK to join the euro.


7. Developing countries lacking dollars or "hard" currencies follow
Venezuela's lead and begin bartering their undervalued commodities
directly with each other in computerized swaps and counter trade
deals. President Chavez has inked 13 such country barter deals on its
oil, e.g., with Cuba in exchange for Cuban health paramedics who are
setting up clinics in rural Venezuelan villages.


The result of this scenario? The USA could no longer run its huge
current account trade deficits or continue to wage open-ended global
war on terrorism or evil. The USA ceases pursuing unilateralist
policies. A new US administration begins to return to its
multilateralist tradition, ceases its obstruction and rejoins the UN
and pursues more realistic international cooperation. [10]
-- 

"Reality is nothing more that a stubbornly persistent illusion" - 
Albert Einstein.