Date: Wed, 19 Mar 2003 23:33:31 +0000
From: "steve.devos" <steve.devos-AT-krokodile.co.uk>
Subject: Re: Iraq, dollars and euros?


Judy/all

Thanks for this - an interesting take on the situation.

I went to see Mike Davis at the ICA tonight talking about the LA and the 
far west... selling his new book 'Dead Cities' ... excellent.



regards
steve

Judy wrote:

>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]
>  
>