Petro Euros Versus Petro Dollars

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    petro-Euros versus petroDollars:economic battle between Europe and US for global control

    Iran's proposed Euro-based oil trading system is a factor behind the threat ofwaron Iran

    Saddam Hussein's shift to petro-euros was a reason the US attacked Iraq

    related page:

    Peak Money

    The Organization of Petroleum Exporting Countries (OPEC) is shifting away from totalreliance on the dollar as an international currency - and adopting the euro as an alternativeThis is probably the US government's worst nightmare, economically speaking. SaddamHussein's biggest crime in recent years - in the minds of the US elites - is his demand to bepaid in euros instead of dollars for the oil that Iraq exports (it was a wise business decision

    given that the dollar has dropped and the euro is now worth $1.10, as of March 10, 2003 -$1.20 reached in December, 2003) These articles provide background and detail about thwar between the dollar and the euro, which will be waged by proxy in Iraq (and Iran).

    Update: as of September 2007, the euro is at $1.40 -- a substantial decline in the value ofthe dollar. This website does not keep track of the constant fluctuations, but thelong term trend is obvious.

    March 2008 - $1.50, $1.58, falling falling falling ...

    What the United States gained in terms of European good will after World War IIhas been lost forever. And as the Euro continues to remain stronger than the

    dollar, there is little incentive anywhere for people here to remember.-- Michael Ruppert

    12/29/2009 petro-Euros versus petro-Dollars

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    http://uk.news.yahoo.com/rtrs/20071208/tpl-uk-iran-oil-dollar-02bfc7e_1.html

    Iran stops selling oil in U.S. dollars -reportReuters - Saturday, December 8, 2007 - 10:10 am

    TEHRAN (Reuters) - Iran has completely stopped selling any of its oil for U.S.dollars, an Iranian news agency reported on Saturday, citing the oil minister ofthe world's fourth-largest crude producer.

    The ISNA news agency did not give a direct quote from Oil MinisterGholamhossein Nozari. A senior oi l official last month said "nearly all" of Iran'scrude oil sales were now being paid for in non-U.S. currencies.

    For nearly two years, OPEC's second biggest producer has been reducing itsexposure to the dollar, saying the weak U.S. currency is eroding its purchasing

    power.

    BEHIND THE DRUMS OF WAR WITH IRAN:NUCLEAR WEAPONS OR COMPOUND INTEREST?

    Ellen Brown, November 13th, 2007www.webofdebt.com/articles/war-with-iran.php

    On October 25, 2007, the United States announced harsh new penalties on theIranian military and its state-owned banking systems. Sanctions, bellicoserhetoric and the implicit threat of military action are goads for another war, onethat critics fear is more likely to ignite a nuclear holocaust than prevent one. The

    question is, why is Iran considered such a serious threat? The officialexplanation is that it is planning to develop nuclear weapons. But the head of theUN watchdog agency IAEA says he has "no concrete evidence" of an Iranianweapons program. And even if there were one, a number of countries havetested or possess nuclear weapons outside the Nuclear Non-ProliferationTreaty, including Pakistan, North Korea, India, and probably Israel; yet we don'tconsider that grounds for military action. Iran would just be joining a long list ofnuclear powers.

    Another theory says the push for war is all about oil; but Iran supplies only 15percent of total Persian Gulf oil exports, and its oil is already for sale. We don'tneed to go to war for it. We can just buy it.

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    A third theory says the saber-rattling is about defending the dollar. Iran isthreatening to open its own oil bourse, and it is already selling about 85 percentof its oil in non-dollar currencies. Iran has broken the petrodollar strangleholdimposed in the 1970s, when OPEC entered into a covert agreement with theUnited States to sell oil only in U.S. dollars.

    www.iht.com/articles/2007/09/13/news/econ.php

    Dollar's Retreat Raises Fear of CollapseBy Carter DoughertyThe International Herald Tribune

    Thursday 13 September 2007

    Frankfurt - Finance ministers and central bankers have long fretted that at somepoint, the rest of the world would lose its willingness to finance the United States'proclivity to consume far more than it produces - and that a potentially disastrousfree-fall in the dollar's value would result.

    But for longer than most economists would have been willing to predict adecade ago, the world has been a willing partner in American excess - until a

    new and home-grown financial crisis this summer rattled confidence in thecountry, the world's largest economy.

    On Thursday, the dollar briefly fell to another low against the euro of $1.3927, asa slow decline that has been under way for months picked up steam this pastweek.

    http://biz.yahoo.com/ap/070917/germany_greenspan_euro.html?.v=1

    Greenspan: Euro Gains As Reserve ChoiceMonday September 17, 8:07 am ETReport: Former Fed Boss Says Euro Could Replace U.S. Dollar As Favored Reserve

    Currency

    FRANKFURT, Germany (AP) -- Former U.S. Federal Reserve chairman AlanGreenspan said it is possible that the euro could replace the U.S. dollar as thereserve currency of choice.

    Recycling Petro Dollars and the Emergence of Petro Euros

    www.museletter.com/archive/132.html

    The US and Eurasia: End Game for the Industrial Era? by Richard Heinberg

    In November 2000, Iraq announced that it would cease to accept dollars

    for its oil, and would accept instead only euros. At the time, financial

    analysts suggested that Iraq would lose tens of millions of dollars in

    value because of this currency switch; in fact, over the following two

    years, Iraq made millions. Other oil-exporting nations, including Iran and

    Venezuela, have stated that they are contemplating a similar move. If OPEC asa whole were to switch from dollars to euros, the consequences to the

    US economy would be catastrophic. Investment money would flee the

    country, real estate values would plummet, and Americans would shortly findthemselves living in Third-World conditions.

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    Currently, if any country wishes to obtain dollars with which to buy oil, it can doso only by selling its goods or resources to the US, taking out a loan from a USbank (or the World Bank - functionally the same thing), or trading its currency onthe open market and thus devaluing it. The US is in effect importing goods andservices virtually for free, its massive trade deficit representing a huge interest-free loan from the rest of the world. If the dollar were to cease being the world'sreserve currency, all of that would change overnight ....

    For US geostrategists, the prevention of an OPEC switch from dollars to eurosmust therefore seem paramount. An invasion and occupation of Iraq would

    effectively give the US a voting seat in OPEC while placing new Americanbases within hours' striking distance of Saudi Arabia, Iran, and several other keyOPEC countries.

    The second factor likely weighing on Bush's decision to invade Iraq is thedepletion of US energy resources and the consequently increasing Americandependency on oil imports. The oil production of all non-OPEC countries, takentogether, probably peaked in 2002. From now on, OPEC will have ever moreeconomic power in the world. Moreover, global oi l production will probably peakwithin a few years. As I have discussed elsewhere, alternatives to fossil fuelshave not been developed sufficiently to permit a coordinated process ofsubstitution once oil and natural gas grow scarce. The implications - especially

    for major consumer nations such as the US - will eventually be ruinous.

    Both problems are of overwhelming urgency. Bush's Iraq strategy is apparentlyan offensive one designed to enlarge the US empire, but in reality it is primarilydefensive in character since its deeper purpose is to forestall an economiccataclysm.

    It is the two factors of dollar hegemony and oil depletion - even more than thehubris of the neo-conservative strategists in Washington - that are prompting anoverall de-emphasis of long-standing alliances with Europe, Japan, and SouthKorea; and the increasing deployment of US troops in the Middle East andCentral Asia.

    While no one is talking about it openly, top echelons in the governments ofRussia, China, Britain, Germany, France, Saudi Arabia and other countries arekeenly aware of these factors - hence the shifting alliances, the veto threats, andthe back-room negotiations leading up to the US invasion of Iraq.

    But the war, though by now inevitable, remains a highly risky gamble. Even if i tends in days or weeks with a decisive American victory, we will not know forsome time whether that gamble has paid off. ....

    Even in the best case, petroleum resources are limited and, as they graduallyrun out over the next few decades, will be unable to support the furtherindustrialization of China or the maintenance of industrial infrastructure inEurope, Russia, Japan, Korea, or the US.

    Who will rule Eurasia? In the end, no single power will be capable of doing so,because the energy-resource base will be insufficient to support a continent-wide system of transportation, communication, and control. Thus Russiangeopolitical fantasies are as vain as those of the US. For the next half-century there will be just enough energy resources left to enable either a

    horrific and futile contest for the remaining spoils, or a heroic

    cooperative effort toward radical conservation and transition to a post-

    fossil-fuel energy regime.

    The next century will see the end of global geopolitics, one way or another. If ourdescendants are fortunate, the ultimate outcome will be a world of

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    modest, bioregionally organized communities living on received solar

    energy.

    Russia`s Switch into the Euro signals Decline of US Dollar as a Global Currency

    The Global Redlining of America:

    Bush Plunges U.S. into Rapid Declinewww.blackcommentator.com 16 October 2003

    The previously unthinkable is now on the table. Russia, the world's secondlargest oil exporter, is giving serious consideration to trading its black gold ineuros, a switch that would surely set dominos in motion among other oilproducing nations and, ultimately, knock the dollar off i ts global throne.

    The Dollar Has Had Its Day

    Is There a Eurologist in the House?

    www.counterpunch.org/tripp03082003.htmlhumorous article summarizing the situation

    The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and

    Geostrategic Analysis of the Unspoken Truth

    by W. Clark January 2003 (last revised 6 March) Independent Media Centerwww.ratical.org/ratville/CAH/RRiraqWar.html

    Although completely suppressed in the U.S. media, the answer to the

    Iraq enigma is simple yet shocking - it an an oil CURRENCY war. 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.

    Bush's Deep Reasons For War on Iraq: Oil, Petrodollars, and the OPEC Euro

    Question, by Peter Dale Scott, updated 2/15/2003

    http://ist-socrates.berkeley.edu/~pdscott/iraq.html

    By Paul Harris - YellowTimes.org Columnist (Canada) YellowTimes.org

    There are many reasons for George Bush's single-minded drive towardBaghdad. In other articles I have written for YellowTimes.org, I hinted that a notso obvious reason for the drive against Iraq is Bush's war against Europe. Infact, I have now come to believe that is the primary reason for his Iraqophenia.Whenever a nation decides to go to war, there are plans made for who is goingto win and who is going to lose; no one goes to war expecting to lose, but it isn'talways the obvious target of the aggression that is the real thrust behind the war.Sometimes, it isn't a case of what you expect to win from a war, but rather acase of what you hope someone else loses; and it doesn't have to be yourstated enemy who you hope will sustain the losses.In this case, Bush's hoped-for victim is the European economy. It is robust, andis likely to become much stronger in the easily foreseeable future. Britain's entryinto the European Monetary Union is inevitable; Scandinavia will join soonerrather than later. Already, even without those countries, there will be 10 newmember nations in May 2004, which will swell the GDP of the E.U. to about $9.6

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    trillion with 450 million people as against $10.5 trillion and 280 million people inthe United States. This represents a formidable competing block for the UnitedStates but the situation is significantly more complex than what is revealed justby those numbers. And much of it hinges on the future of Iraq.I have written before, as have many others, that this upcoming war is about oil.To be sure there are other reasons, but oil is the single most impelling force. Notin the way you might expect, however. It isn't so much that there are believed tobe huge untapped oi l reserves in Iraq, untapped only due to outdatedtechnology; it isn't so much an American desire to get its grubby hands on thatoil; i t is much more a question of whose grubby hands the Americans want tokeep it out of.What precipitated all of this was not September 11, nor a sudden realization thatSaddam was still a nasty guy, nor just the change in leadership in the UnitedStates. What precipitated it was Iraq's November 6, 2000 switch to the euro asthe currency for its oil transactions. At the time of the switch, it might haveseemed daft that Iraq was giving up such a lot of oi l revenue to make a politicalstatement. But that political statement has been made and the steadydepreciation of the dollar against the euro since then means that Iraq hasderived good profits from switching its reserve and transaction currencies. Theeuro has gained about 17 percent against the dollar since that time, which alsoapplies to the $10 billion held in Iraq's United Nations "oi l for food" reserve fund.So the question arises, as it did for George Bush, what happens if OPEC

    makes a sudden switch to euros? In a nutshell, all hell breaks loose.At the end of World War II, an agreement was reached at the Bretton WoodsConference which pegged the value of gold at $35 per ounce and that becamethe international standard against which currency was measured. But in 1971,Richard Nixon took the dollar off the gold standard and ever since, the dollar hasbeen the most important global monetary instrument, and only the United Statescan produce them. The dollar, now a fiat currency, is at a 16-year trade-weighted high despite record U.S. current-account deficits and the status of theU.S. as the leading debtor nation. The U.S. national debt as of April 4, 2002 was$6.021 trillion against GDP of $9 trillion.Trade between nations has become a cycle in which the U.S. produces dollarsand the rest of the world produces things that dollars can buy. Nations no longer

    trade to capture comparative advantage but rather to capture needed dollars toservice dollar-denominated foreign debts and to accumulate dollar reserves inorder to sustain the exchange value of their domestic currencies. In an effort toprevent speculative and potentially harmful attacks on their currencies, thosenations' central banks must acquire and hold dollar reserves in amountscorresponding to their own currencies in circulation. This creates a built-insupport for a strong dollar that in turn forces the world's central banks to acquireand hold even more dollar reserves, making the dollar stronger still.This phenomenon is known as "dollar hegemony," which is created by thegeopolitically constructed peculiarity that critical commodities, most notably oil,are denominated in dollars. Everyone accepts dollars because dollars can buyoil.The reality is that the strength of the dollar since 1945 rests on being theinternational reserve currency for global oil transactions (i.e., "petro-dollar"). TheU.S. prints hundreds of billions of these fiat petro-dollars, which are then used bynation states to purchase oil and energy from OPEC producers (exceptpresently Iraq and, to some degree, Venezuela). These petro-dollars are thenre-cycled from OPEC back into the U.S. via Treasury Bills or other dollar-denominated assets such as U.S. stocks, real estate, etc. The recycling ofpetro-dollars is the price the U.S. has extracted since 1973 from oil-producingcountries for U.S. tolerance of the oil-exporting cartel.Dollar reserves must be invested in U.S. assets which produces a capi tal-accounts surplus for the U.S. economy. Despite poor market performanceduring the past year, U.S. stock valuation is still at a 25-year high and trading ata 56 percent premium compared with emerging markets. The U.S. capital-

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    account surplus finances the U.S. trade deficit.Since it is the U.S. that prints the petro-dollars, they control the flow of oi l.Period. When oil is denominated in dollars through U.S. state action and thedollar is the only fiat currency for trading in oil, an argument can be made that theU.S. essentially owns the world's oil for free.So what happens if OPEC as a group decides to follow Iraq's lead and suddenlybegins trading oil on the euro standard? Economic meltdown. Oil-consumingnations would have to flush dollars out of their central bank reserves and replacethem with euros. The dollar would crash in value and the consequences wouldbe those one could expect from any currency collapse and massive inflation(think of Argentina for an easy example). Foreign funds would stream out of U.S.stock markets and dollar denominated assets; there would be a run on thebanks much like the 1930s; the current account deficit would becomeunserviceable; the budget deficit would go into default; and so on.And that's just in the United States. Japan would be particularly hard hit becauseof total dependence on foreign oil and incredible sensitivity to the U.S. dollar. IfJapan's economy tumbles, so does that of many other countries, especially theUnited States in a crescendo of dominos.Now, this is the potential effect of a "sudden" switch to euros. A more gradualshift might be manageable but even that would change the financial and politicalbalance of the world. Given the size of the European market, its population, itsneed for oil (it actually imports more oil than the U.S.), it may be rapidly

    approaching that the euro will become the de facto monetary standard for theworld.There are some good reasons for OPEC as a group to follow Iraq and begin tovalue oil in euros. There seems little doubt that they would relish the opportunityto make a political statement after years of having to kowtow to the U.S., butthere are solid economic reasons as well.The mighty dollar has reigned supreme since 1945, and in the last few yearshas gained even more ground with the economic dominance of the UnitedStates. By the late 1990s, more than four-fifths of all foreign exchangetransactions, and half of all world exports, were denominated in dollars. Inaddition, U.S. currency accounts for about two thirds of all official exchangereserves. The world's dependency on U.S. dollars to pay for trade has seen

    countries bound to dollar reserves, which are disproportionately higher thanAmerica's share of global output.It is important to note that the euro is not at any disadvantage versus the dollarwhen one compares the relative sizes of the economies involved, especiallygiven the E.U. enlargement plans. Moreover, the E.U. has a bigger share ofglobal trade than the U.S. and while the U.S. has a huge current account deficit,the E.U. has a more balanced external accounts position. One of the morecompelling arguments for keeping oil pricing and payments in dollars has beenthat the U.S. remains a large importer of oil, despite being a substantialproducer itself. But the EU is an even larger importer of oil and petroleumproducts than the U.S., and represents for OPEC a more attractive market,closer and less domineering.The point of Bush's war against Iraq, therefore, is to secure control of those oilfields and revert their valuation to dollars, then to increase productionexponentially, forcing prices to drop. Finally, the point of Bush's war is tothreaten significant action against any of the oi l producers who would switch tothe euro.In the long run, then, it is not really Saddam who is the target; it is the euro and,therefore, Europe. There is no way the United States will sit by idly and let thoseupstart Europeans take charge of their own fate, let alone of the world'sfinances.Of course, all of this depends on Bush's insane plan not becoming the trigger fora Third World War, as it so readily might.Excerpts from "The Real Reasons for the Upcoming War with Iraq: AMacroeconomic and Geostrategic Analysis of the Unspoken Truth" used with

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    permission of the author, William R. Clark. This author owes a debt of gratitudeto Mr. Clark and encourages you to read Mr. Clark's complete essay at:http://www.ratical.org/ratville/CAH/RRiraqWar.html.[Paul Harris is self-employed as a consultant providing Canadian businesseswith the tools and expertise to successfully reintegrate their sick or injuredemployees into the workplace. He has traveled extensively in what we arrogantNorth Americans refer to as "the Third World," and he believes that life is verymuch like a sewer: what you get out of it depends on what you put into it. Paullives in Canada.]Paul Harris encourages your comments: pharris@ YellowTimes.orgYellowTimes.org is an international news and opinion publication.YellowTimes.org encourages its material to be reproduced, reprinted, orbroadcast provided that any such reproduction identifies the original source,http://www.YellowTimes.org. Internet web links to http://www.YellowTimes.org areappreciated.

    Syria switches to Euro for foreign reserves

    Syria switches to euro amid confrontation with USMon Feb 13, 2006 5:11 PM ET

    DAMASCUS, Feb 13 (Reuters) - Syria has switched all of the state's foreigncurrency transactions to euros from dollars amid a political confrontation with theUnited States, the head of state-owned Commercial Bank of Syria said onMonday."This is a precaution. We are talking about billions of dollars. Switching to theeuro will help us avoid settlement problems in the United Sates," DuraidDurgham told Reuters."The move is also needed to avoid complications with our correspondent banks,which have expressed a preference to deal in euro under these circumstances,"he said.Most of the government's foreign currency flows goes through the Commercial

    Bank, whose U.S. assets were frozen by Washington in 2004 as relations withSyria deteriorated.The bank, which dominates the Syrian market, also stopped dealing with dollarsfor international private flows, such as imports, exports and letters of credit,Durgham said.He said the switch would mean euro pricing for crude oil sales, a major foreigncurrency earner for Syria.The latest official figure show Syria imported $6.7 billion goods in 2004 andexported $5.4 bi llion. Oil output is around 400,000 barrels per day.In 2004, Washington imposed sanctions that prohibited certain U.S. exports toSyria, severed financial ties with the Commercial Bank of Syria, and froze theassets of Syrians believed linked to terrorism.After the assassination of former Lebanese Prime Minister Rafik al-Hariri a yearago, the United States led foreign pressure on Syria for its alleged role in thekilling.Damascus denies involvement in the killing but faces the possibility of moresanctions if it is found uncooperative with a U.N. investigation into the killing ofHariri.Regional financiers said the Syria managed to minimise the damage of U.S.sanctions and deal with economic uncertainty that followed the Haririassassination, including pressure on the Syrian pound.The government, controlled by the Baath Party for the last for 40 years, hasproceeded with steps to open up the economy after decades of centralplanning, naming on Monday a board to head up a stock exchange underformation.

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    "To its credit, the government managed to keep the economic cycle going;imports, exports and tourism did not suffer a major blow. The have reactedeffectively to pressure," said Joe Sarrouh, a senior executive at Fransabank inBeirut.One economist said euro move by the Commercial Bank of Syria "looked like akind of pre-emptive action aimed at making their foreign assets safer andpreventing them from getting frozen in case of any conflict." Reuters 2006. All Rights Reserved.

    A story title that will be repeated many times in the years to come ...

    December 27, 2004

    Dollar Falls to New Low Vs Euro

    NEW YORK (Reuters) - The dollar fell to new lows against the euro on Monday,part of broad losses the U.S. currency suffered as traders gunned downtechnical targets amid thin market conditions.Many traders and investors were on extended vacations after the Christmasholiday keeping volume relatively low and causing small orders to haveexaggerated effects on prices."Today traders primarily went after stop-loss orders, taking advantage of thin

    market conditions between the Christmas holiday and the New Year andsucceeding in driving the dollar lower," said Alex Beuzelin, foreign exchangeanalyst with Ruesch International."It was largely a technical move that was very consistent with the underlyingfundamental concerns on the greenback," he added. Stop-losses are orders tobuy or sell a currency when it hits a predetermined level. In a session rife withtechnically driven moves, small purchases of euros triggered stop-loss buyorders which lifted the euro zone currency to a new all-time high of$1.3640,

    according to Reuters data.

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    Bush is destroying the economy, the Bill of Rights, and the Earth"The dollar fell to record lows around $1.2647 pereuro ... bringing its losses this year tomore than 17 percent."Dollar Plumbs New Lows Vs Euro, Reuters, Dec 31, 2003Jan 5, 2004 (Reuters) - "Gold futures traded above $425 an ounce for the first time in morethan 15 years in New York Monday, extending its watershed rally on the first trading day of2004 as investors continued to diversify out of the beleagured dollar. Other precious metalsurged as well, but gold is considered a form of currency and is seen as a hard alternativeto the greenback. It built on last year's 20 percent gain as the dollar hit a new low against thsoaring euro and fell to its cheapest level against the yen in three years."

    "America's challenge is not just to reduce its current-account deficit to a levelwhich foreigners are happy to finance by buying more dollar assets, but also to

    persuade existing foreign creditors to hang on to their vast stock of dollarassets, estimated at almost $11 trillion. A fall in the dollar sufficient to close thecurrent-account deficit might destroy its safe-haven status. If the dollar falls byanother 30%, as some predict, it would amount to the biggest default in history:not a conventional default on debt service, but default by stealth, wiping trillionsoff the value of foreigners' dollar assets."The dollar's loss of reserve-currency status would lead America's creditors tostart cashing those chequesand what an awful lot of cheques there are tocash. As that process gathered pace, the dollar could tumble further and further."

    The disappearing dollarDec 2nd 2004From The Economist print edition

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    www.economist.com/opinion/displayStory.cfm?story_id=3446249

    Bush's "re-election" causes plummit in dollar

    http://news.ft.com/cms/s/a67665a0-2e8d-11d9-97e3-00000e2511c8.htmlDollar falls to nine-year lowsBy Steve Johnson and Kevin Morrison in London and Jennifer Hughes in New YorkPublished: November 4 2004 18:19 | Last updated: November 4 2004 18:19

    The dollar fell to fresh nine-year lows in trade-weighted terms on Thursday andgold prices reached a 16-year peak amid concerns over tensions in the MiddleEast and a renewed belief in the dollar's longer-term decline.Traders said reports of Yassir Arafat's continuing ill-health were weighing on thedollar. This spells trouble for the dollar since it could mean protracted USinvolvement in the region, not just Iraq, said Kamal Sharma, currenciesstrategist at Dresdner Kleinwort Wasserstein.Middle Eastern investors, including central banks, have been active in themarket selling dollars over the past two days, according to traders. There hasbeen speculation for some time that investors in the region would seek todiversify their largely dollar-based wealth as the greenback weakened.People are not just looking at simply the next few months for the dollar, they're

    looking more broadly at a decline over the next few years, said Tony Norfield,global head of currency strategy at ABN Amro.The greenback's weakness was also attributed to the re-election of PresidentGeorge W. Bush. Since the start of Mr Bush's first term the dollar has fallen 20.8per cent in trade-weighted terms and observers do not expect a change in dollarpolicy in his second term.Dollar sentiment is dire at the moment, said Derek Halpenny, senior currencyeconomist at Bank of Tokyo-Mitsubishi. Bush has been given an extremelystrong mandate and that raises doubts about his commitment to reduce thebudget deficit by half over a five-year period.Thursday's selling saw the dollar fall to $1.2886, within 0.4 cents of its Februaryall-time low against the euro. It declined to an eight-year low of SFr1.1854against the Swiss franc, a 12-year low of C$1.2034 against the Canadian dollarand to within a whisker of a six-month low against the yen.Gold hit a 16-year high of $432.95 a troy ounce, before settling at$429.65/$430.40 in late London trade.The dollar's decline against the euro was hastened by Jean-Claude Trichet, thepresident of the European Central Bank, who emphasised the risk of inflation ata press conference but declined to say that the euro's strength of the euro washurting the eurozone.

    The U.S. also faces a unique problem in that commodities such as oil and basemetals are priced in U.S. dollars.

    Steven DeSanctis, small-cap strategist with Prudential Equity Group said hisbiggest concern is that oil prices can stay high in dollar terms, as people outsidethe U.S. are effectively paying less.Economies using the euro will see lower energy costs and a lift in theireconomies, but in the U.S. -- the world's largest consumer of oil -- companieswill see profits erode.http://uk.news.yahoo.com/031221/325/ehl5i.htmlSunday December 21, 05:53 PMDollar's drop becomes more ominousBy Nick Olivari

    www.hindustantimes.com/news/181_490084,00020008.htm

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    OPEC may trade oil in euros to compensate for dollar declineAssociated PressCaracas (Venezuela), December 10

    OPEC Secretary General Alvaro Silva said the organisation is consideringtrading oil in euros to compensate for the US dollar's decline in value.Another alternative is to trade in a basket of currencies other than thegreenback, Silva told Venezuela's state news agency, Venpres."There is a talk of trading crude in euros. It is one of the alternatives," the formerVenezuelan oil minister said from Vienna late on Monday."It is possible that the organisation will discuss that, and make a decision atsome point in time," he said.Silva did not provide more details.At its meeting in Vienna last week, the Organisation of Petroleum ExportingCountries expressed concern that the US dollar's decline against the euro andyen was eroding its members' purchasing power.Many OPEC members are Middle Eastern countries reliant on imports fromwestern Europe and Japan.OPEC decided last week to keep its target output ceiling stable at 24.5 millionbarrels a day. Saudi Oil Minister Ali Naimi said the decision was due in part tothe weakening dollar.The US dollar hit a new low against the euro on Monday, with the European

    common currency reaching USD 1.2276. The greenback is at a three-year lowagainst the yen at 107.19 yen.

    Will the war crush the U.S. dollar?OPINIONBy Robert ShapiroSLATE.COM www.msnbc.com/news/891133.asp?0si=&cp1=1

    March 26 For months, the prospect, and now the reality, of war with Iraq haveunnerved but not yet disrupted global currency markets. The odds are still smallthat the war will trigger a currency crisis. If it does, youll see it in a fast-fallingdollar; and given our current sour relations with much of the G-7, we might not beable to do much about it.IN THE INTERNATIONAL ECONOMY, more money is made or lost fromcurrency movementsor at least, more money is made or lost fasterthan anyother way. Speculators such as hedge funds can sometimes make or lose afortune overnight in currency bets, but the value of the dollar, the yen, and theeuro are fundamentally driven by the normal transactions of the global economy.When a London bank buys U.S. Treasuries or shares in a U.S. company, or aSpanish firm buys computers from a U.S. maker, it has to use pounds or eurosto buy dollars, so it can pay the American seller. The more demand for dollars tocarry out the daily business of trade and investment, the more euros or pounds ittakes to buy them.The war has not been good for the dollar. Since last November, the greenback

    has fallen nearly 7 percent against a basket of other major currencies. First,Middle Eastern investors converted a lot of their dollar holdings and took themhome: By the New Year, all the imponderables about the coming war leftEuropean and Asian investors reluctant to expand their U.S. holdings. The resulthas been less foreign investment in the United States, translating into lessdemand for dollars in world markets..... The war gave the dollar a shove, but its been sliding for more than a yeardown almost 15 percent since early 2002..... The dollars decline in the last four months has reduced the dollar value ofthese holdings by $445 billion; its fall over the last year cost more than $950billion.A falling dollar is bad news for a lot of people because greenbacks are also the

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    global economys principal medium of exchange. Foreign producers of oil andmany other commodities, along with a goodly share of global manufacturingcompanies, prefer payment in dollars to Saudi riyals or South Korean wan.Foreign governments, or at least their finance ministries, also usually like asteady dollar, since dollars make up two-thirds of the reserves they hold to backup their own currencies. The 15 percent fall in the dollar has made a lot ofpeople in a lot of places a little poorer.Add local news and weather to the MSNBC home page. A weaker dollar,however, is good news for U.S. exporters because it makes their productscheaper in foreign markets. It also helps U.S. companies that compete withforeign imports, because a stronger euro or yenthe other side of the weakerdollarmakes imports more expensive in the United States.The worst is probably yet to come, because the dollars decline reflects not onlyall the uncertainties about the wars impact on U.S. growth, but also increasingconcerns about a structural imbalance in the American and global economies.The core of the problem is that we dont save enough. To keep spending andinvesting at the rates we have, we have to tap the savings of foreigners. Thebookkeeping expression of this undersaving, or the amount we have to borrow,is the current account deficit$503 billion last year.

    Indonesia considers switch from dollar to euro Asia Times April 1, 2003

    JAKARTA - Echoing a wider move away from the US dollar, the Indonesiangovernment and the central bank, Bank Indonesia, may begin to use the euro inexport-import transactions and foreign-exchange reserves.The statement was made by Finance Minister Boediono, Bank Indonesiagovernor Syahril Sabirin and senior deputy governor Anwar Nasution here onthe weekend in connection with state oil company Pertamina's plan to use theeuro in its trade transactions."The US dollar is now still dominating trade. It is possible to use [the] euro whenit replaces the dollar's position," the minister said.Boediono said that if the US dollar continues to weaken compared with otherforeign currencies including the euro, users of the greenback may seek morestable currencies.(Asia Pulse/Antara)www.atimes.com/atimes/Southeast_Asia/ED01Ae04.html

    The Euro And The War On IraqBy Amir [email protected]

    As Mark Twain once noted, prophecy is always difficult, particularly with regardsto the future. However, it is a safe bet that as soon as Saddam is toppled one of

    the first tasks of the America-backed regime will be to restore the US dollar asthe nation's oil currency.

    In November 2000, Iraq began selling its oil for euros, moving away from thepost-World War II standard of the US dollar as the currency of internationaltrade. Whilst seen by many at the time as a bizarre act of political defiance, ithas proved beneficial for Iraq, with the euro gaining almost 25% against thedollar during 2001. It now costs around USD$1.05 to buy one Euro.

    Iraq's move towards the euro is indicative of a growing trend. Iran has alreadyconverted the majority of its central bank reserve funds to the euro, and hashinted at adopting the euro for all oil sales. On December 7th, 2002, the thirdmember of the axis of evil, North Korea, officially dropped the dollar and began

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    using euros for trade. Venezuela, not a member of the axis of evil yet, but a largeoil producer nonetheless, is also considering a switch to the euro. Moreimportantly, at its April 14th, 2002 meeting in Spain, OPEC expressed aninterest in leaving the dollar in favour of the euro.

    If OPEC were to switch to the euro as the standard for oil transactions, it wouldhave serious ramifications for the US economy. Oil-consuming economieswould have to flush the dollars out of their central bank holdings and convertthem to euros. Some economists estimate that with the market flooded, the US

    dollar could drop up to 40% in value. As the currency falls, there would be amonetary evacuation by foreign investors abandoning the US stock markets anddollar-denominated assets. Imported products would cost Americans a lot more,and the trade deficit would be magnified.

    It is foreign demand for the US dollar that funds the US federal budget deficits.Foreign investors flush with dollars typically look to US treasury securities as ameans of secure investment. With a large reduction in such investment, thecountry could potentially go into default. Things could turn very bad, very quickly.

    In May 2004 an additional 10 member nations will join the European Union. Atthat point, the EU will represent an oil consumer 33% larger than the UnitedStates. In order to mitigate currency risks, the Europeans will increasingly

    pressure OPEC to trade in euros, and with the EU at that stage buying over halfof OPEC oil production, such a change seems likely.

    This is a scenario that America cannot afford to see eventuate. The US will go toany length to fend off an attempt by OPEC to dump greenbacks as its reservecurrency. Attacking Iraq and installing a client regime in Baghdad may have apreventative effect. It will certainly ensure that Iraq returns to using dollars andprovide a violent example to any other nation in the region contemplating amigration to the euro.

    An American-backed junta in Iraq would also enable the US to smash OPEC'shold over oil prices. The US or its client regime could increase Iraqi oil

    production to levels well beyond OPEC quotas, driving prices down worldwideand weakening the economies of the oil producing nations, thus lessening theirlikelihood of abandoning the dollar. It would have the short term effect ofreducing the profits of domestic oi l companies, but the long term effect ofsecuring America's economic hegemony.

    The frequently offered canard of the Left that this war is being fought to secureoil revenues for American oil companies may have some truth to it. However, amore plausible explanation may be that the Bush administration is waging warto protect the dollar and smash the OPEC hold over international oil prices. It's awar whose purpose is bigger than Halliburton or Exxon: it's a war being fought tomaintain America's position in the world.

    Attending the 1992 Earth Summit in Rio, George Bush Senior told the worldthat, "the American way of life is not negotiable". As cruise missiles rain on Iraq,we are learning just how 'non-negotiable' that way of life really is.

    Amir Butler is executive director of the Australian Muslim Public AffairsCommittee (AMPAC), and writes for ATrueWord.com. He can be contacted [email protected].

    www.guardian.co.uk/Iraq/Story/0,2763,922217,00.html

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    Bush fiddles with economy while Baghdad burns, by Mark TranWednesday March 26, 2003

    Independent Strategy sees the weakening dollar as the fourth strand in thedecline of empire."The dollar will go on down because the good empire has the same faultlines asmany other empires: unsustainable living standards at the core depend on flowsof wealth from the periphery," says Independent Strategy in terms that would notbe out of a place in a Marxist textbook. "The US no longer earns the returnneeded to sustain these flows. The costs of war and unilateralism will increase

    the thirst for capital, but reduce the return earned by it."In plain English, America relies on the rest of the world to finance its deficits. Therest of the world was happy to do so when the US economy was strong andreturns were high, but investors will put their cash elsewhere if America looksweak economically. America borrows hundreds of millions of dollars from therest of the world each day to cover its savings gap and, under George Bush, USdependence on foreign capital is set to increase.The decline of empire thesis is not exactly new. Paul Kennedy, the Britishhistorian, wrote the best-selling The Rise and Fall of the Great Powers back in1988, where he coined the phrase "imperial overstretch". It was a great read,but then the US embarked on a record-breaking expansion that lasted 10 yearsand saw Wall Street shoot up to over 11,000 points.

    But that great economic expansion turned out not to be so great after all,culminating in a wave of financial misreporting and outright fraud at Enron andWorldCom. The twilight of empires can last a long time, but judging from hisreckless unilateralism and his economic vandalism, George Bush seems to bedetermined to do his level best to hasten that decline.

    When will we buy oil in euros?Sunday February 23, 2003The Observerwww.observer.co.uk/business/story/0,6903,900867,00.html

    Whether the price of oil is surging to new highs, as it is today, or slumping, as is

    predicted after a war in Iraq, there is one enduring constant.Oil trading, whether from Norway to the Netherlands, Britain to Bermuda, orBahrain to Bangladesh, operates through the US greenback.The oil-dollar nexus is one of the foundations of the world economy thatinevitably filters through to geopolitics. Recycling so-called petrodollars, theproceeds of these high oil prices, has helped the United States run its colossaltrade deficits. But the past year has seen the quiet emergence of the 'petroeuro'.Effectively, the normal standards of economics have not applied to the US,because of the international role of the dollar. Some $3 trillion (1,880 billion)are in circulation around the world helping the US to run virtually permanent tradedeficits. Two-thirds of world trade is dollar-denominated. Two-thirds of centralbanks' official foreign exchange reserves are also dollar-denominated.

    Dollarisation of the oil markets is one of the key drivers for this, alongside, inrecent years, the performance of the US economy. The majority of countries thatrequire oi l imports require dollars to pay for their fuel. Oil exporters similarlyhold, as their currency reserve, billions in the currency in which they are paid.Investing these petrodollars straight back into the US economy is possible atzero currency risk.So the US can carry on printing money - effectively IOUs - to fund tax cuts,increased military spending, and consumer spending on imports without fear ofinflation or that these loans will be called in. As keeper of the global currencythere is always the last-ditch resort to devaluation, which forces other countries'exporters to pay for US economic distress. It's probably the nearest thing to a'free lunch' in global economics.

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    And for a long time, everything has worked smoothly. The oil industry was bornin Texas, and so developed in dollars. The complex web of supply chains,distribution, and futures markets, all run off the central rock that is the US dollar.But now there is the euro. At the time of its launch, various overblown claimswere made to its role as 'co-hegemon', sharing the spoils of reserve currencystatus. The rapid fall in the euro after its launch put paid to such suggestions. Butthe single currency has since rescued itself, reigniting talk of euro-ised oil. Infact, it's happening already.Iraqi oil, two-thirds of which is being snapped up by US companies, can only bepaid for in euros.'It was a political move on the part of the Iraqi government to show that the eurocould be a substitute for the dollar in denominating the oil price,' says FadhilChalabi of the Centre for Global Energy Studies.That move was made in the same week that the euro reached its historic low of$0.82 in October 2000. The subsequent 30 per cent rise in the euro has greatlyhelped the United Nations' oil-for-food programme in Iraq.Soon afterwards, Jordan launched its own bilateral trade scheme with Iraq,carried out entirely in euros.Last year, in a little noticed Opec speech to a Spanish Finance Ministryconference, Javad Yarjani, a senior Iranian oil diplomat, said: 'It is quite possiblethat as bilateral trade increases between the Middle East and the EuropeanUnion, it could be feasible to price oi l in euros. This would foster further ties

    between these trading blocs by increasing commercial exchange, and byhelping attract much-needed European investment in the Middle East.'Yarjani said the 'critical question is the overall value and stability of the euro, andwhether other countries within the union adopt the single currency'.The first point is beginning to be answered. The second refers to Britain andNorway. If either joins the single currency, the key Brent benchmark could beredenominated in euros, offering an impetus to movers within Opec.The rising value of the euro makes redenomination in the immediate financialinterest of European oil majors such as TotalFinaElf and Shell. Over the pastyear both companies have seen profits gobbled up by the dollar slump, as theirprofits are calculated in euros. Opec member countries too would have a stronginterest in moving to euros. The eurozone is the biggest importer of oil in the

    world and 45 per cent of Middle East imports are from Europe. Even US oilmajors would benefit from selling their oil in a currency that is increasing invalue, say US energy consultants.The Iranian and Russian parliaments have recently discussed adopting the eurofor oil sales.Last year Russia entered into negotiations with Germany over the establishmentof an exchange to sell oil futures denominated in euros. Russia, which on somemeasures is the world's Number 1 oil producer at the moment, is awash withpetrodollars, but trades mainly with Europe. Russia's foreign exchange holdingsrecently reached an all-time high of $50bn.At the moment, European consumers are benefiting from the link between oiland the dollar. The euro's surge has, in effect, paid for much of the increase inthe price of oil. This, however, is just the flipside of the very high prices in Franceand Germany in Autumn 2000, which were a combination of a very weak euroand high oil price. US consumers have no such additional worries, as there is nocurrency risk.So there is a huge list of potential winners from a move to price oil in euros, butmovement remains slow.'At various points in time since the early 1970s, oil producers have discussedthis, especially in periods when the dollar has been weak. Opinions have tendedto be wide-ranging, depending on the strategic and trade alliances certainmembers have with particular trade blocs,' said Yarjani.That was an elliptical reference to the overwhelming influence of Saudi Arabia,whose government is the staunchest ally of the US within Opec.'The Saudis are holding the line on oil prices in Opec and should they, for

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    example, go along with the rest of the Opec people in demanding that oil bepriced in euros, that would deal a very heavy blow to the American economy,'Youssef Ibrahim, of the influential US Council on Foreign Relations, told CNN.Last year the former US Ambassador to Saudi Arabia told a committee of theUS Congress: 'One of the major things the Saudis have historically done, in partout of friendship with the United States, is to insist that oil continues to be pricedin dollars. Therefore, the US Treasury can print money and buy oil, which is anadvantage no other country has. With the emergence of other currencies andwith strains in the relationship, I wonder whether there will not again be, as therehave been in the past, people in Saudi Arabia who raise the question of whythey should be so kind to the United States.'Historically, empires have been exporters of capital, rather than importers likethe US. The dollar has been vital to this revolution. At the euro's launch MartinFeldstein, a Harvard economist, pointed to the possibility that the singlecurrency could weaken the status of the dollar to the extent that it 'couldcomplicate international military relationships'. Feldstein is an outside contenderto replace Alan Greenspan at the Federal Reserve.Oil pricing is just the background to a wider issue. The Bank of China and theRussian Central Bank are both rumoured to be waiting for the best moment toincrease the holdings of euros. Only 5 per cent of Chinese reserves are held ineuros, but more than 20 per cent of its trade is with Europe. Middle Easternstates hold $700bn of US assets, but comparatively little in Europe.

    So is the euro the missing link between the 'axis of evil' and the 'axis of weasel'?It is greatly appreciated in the former and was invented in the latter. Research byState Street shows that the euro has gained 'safe haven' status since lastAugust as the dollar has lost i t. It's likely this shift is a temporary phenomenon.Petroeuros may just change that.

    www.GuluFuture.com/news/eurozone_war030323.htmAILING DOLLAR STRIKES AT EURO IN IRAQ WAR23rd March, 2003 17:00 GMTAn Economic Perspective On The War

    It's Not About Oil Or Iraq.It's About The US And Europe GoingHead-To-Head On World Economic Dominance.By Geoffrey Heard, Australia

    Summary: Why is George Bush so hell bent on war with Iraq? Why does hisadministration reject every positive Iraqi move? It all makes sense when youconsider the economic implications for the USA of not going to war with Iraq.The war in Iraq is actually the US and Europe going head to head on economicleadership of the world.America's Bush administration has been caught in outright lies, grossexaggerations and incredible inaccuracies as it trotted out its litany of paper thinexcuses for making war on Iraq. Along with its two supporters, Britain and

    Australia, it has shifted its ground and reversed its position with a barefacedcontempt for its audience. It has manipulated information, deceived bycommission and omission and frantically "bought" UN votes with billion dollarbribes.Faced with the failure of gaining UN Security Council support for invading Iraq,the USA has threatened to invade without authorisation. It would act in breach ofthe UN's very constitution to allegedly enforced UN resolutions.It is plain bizarre. Where does this desperation for war come from?There are many things driving President Bush and his administration to invadeIraq, unseat Saddam Hussein and take over the country. But the biggest one ishidden and very, very simple. It is about the currency used to trade oil andconsequently, who will dominate the world economically, in the foreseeable

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    future -- the USA or the European Union.Iraq is a European Union beachhead in that confrontation. America had amonopoly on the oil trade, with the US dollar being the fiat currency, but Iraqbroke ranks in 1999, started to trade oil in the EU's euros, and profited. IfAmerica invades Iraq and takes over, it will hurl the EU and its euro back into thesea and make America's position as the dominant economic power in the worldall but impregnable.It is the biggest grab for world power in modern times.America's allies in the invasion, Britain and Australia, are betting America willwin and that they will get some trickle-down benefits for jumping on to the USbandwagon.France and Germany are the spearhead of the European force -- Russia wouldlike to go European but possibly can still be bought off.Presumably, China would like to see the Europeans build a share ofinternational trade currency ownership at this point while it continues to grow itsinternational trading presence to the point where i t, too, can share theleadership rewards.DEBATE BUILDING ON THE INTERNETOddly, little or nothing is appearing in the general media about this issue,although key people are becoming aware of it -- note the recent slide in thevalue of the US dollar. Are traders afraid of war? They are more likely to beafraid there will not be war.

    But despite the silence in the general media, a major world discussion isdeveloping around this issue, particularly on the internet. Among the manyarticles: Henry Liu, in the 'Asia Times' last June, it has been a hot topic on theFeasta forum, an Irish-based group exploring sustainable economics, and W.Clark's "The Real Reasons for the Upcoming War with Iraq: A Macroeconomicand Geostrategic Analysis of the Unspoken Truth" has been published by the'Sierra Times', 'Indymedia.org', and 'ratical.org'.This debate is not about whether America would suffer from losing the US dollarmonopoly on oil trading -- that is a given -- rather it is about exactly how hard theUSA would be hit. The smart money seems to be saying the impact would be inthe range from severe to catastrophic. The USA could collapse economically.OIL DOLLARS

    The key to it all is the fiat currency for trading oil.Under an OPEC agreement, all oil has been traded in US dollars since 1971(after the dropping of the gold standard) which makes the US dollar the de factomajor international trading currency. If other nations have to hoard dollars to buyoil, then they want to use that hoard for other trading too. This fact gives Americaa huge trading advantage and helps make it the dominant economy in the world.As an economic bloc, the European Union is the only challenger to the USA'seconomic position, and it created the euro to challenge the dollar in internationalmarkets. However, the EU is not yet united behind the euro -- there is a lot of

    jingoistic national politics involved, not least in Britain -- and in any case, so longas nations throughout the world must hoard dollars to buy oil, the euro can makeonly very limited inroads into the dollar's dominance.In 1999, Iraq, with the world's second largest oil reserves, switched to trading itsoil in euros. American analysts fell about laughing; Iraq had just made a mistakethat was going to beggar the nation. But two years on, alarm bells weresounding; the euro was rising against the dollar, Iraq had given itself a hugeeconomic free kick by switching.Iran started thinking about switching too; Venezuela, the 4th largest oil producer,began looking at it and has been cutting out the dollar by bartering oil withseveral nations including America's bete noir, Cuba. Russia is seeking to rampup oil production with Europe (trading in euros) an obvious market.The greenback's grip on oil trading and consequently on world trade in general,was under serious threat. If America did not stamp on this immediately, thiseconomic brushfire could rapidly be fanned into a wildfire capable of consumingthe US's economy and its dominance of world trade.

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    HOW DOES THE USGET ITS DOLLAR ADVANTAGE?Imagine this: you are deep in debt but every day you write cheques for millionsof dollars you don't have -- another luxury car, a holiday home at the beach, theworld trip of a lifetime.Your cheques should be worthless but they keep buying stuff because thosecheques you write never reach the bank! You have an agreement with theowners of one thing everyone wants, call it petrol/gas, that they will accept onlyyour cheques as payment. This means everyone must hoard your cheques sothey can buy petrol/gas. Since they have to keep a stock of your cheques, theyuse them to buy other stuff too. You write a cheque to buy a TV, the TV shopowner swaps your cheque for petrol/gas, that seller buys some vegetables at thefruit shop, the fruiterer passes it on to buy bread, the baker buys some flour withit, and on it goes, round and round -- but never back to the bank.You have a debt on your books, but so long as your cheque never reaches thebank, you don't have to pay. In effect, you have received your TV free.This is the posi tion the USA has enjoyed for 30 years -- it has been getting afree world trade ride for all that time. It has been receiving a huge subsidy fromeveryone else in the world. As it debt has been growing, it has printed moremoney (written more cheques) to keep trading. No wonder it is an economicpowerhouse!Then one day, one petrol seller says he is going to accept another person's

    cheques, a couple of others think that might be a good idea. If this spreads,people are going to stop hoarding your cheques and they will come flying hometo the bank. Since you don't have enough in the bank to cover all the cheques,very nasty stuff is going to hit the fan!But you are big, tough and very aggressive. You don't scare the other guy whocan write cheques, he's pretty big too, but given a 'legitimate' excuse, you canbeat the tripes out of the lone gas seller and scare him and his mates intosubmission.And that, in a nutshell, is what the USA is doing right now with Iraq.AMERICA'S PRECARIOUSECONOMIC POSITIONAmerica is so eager to attack Iraq now because of the speed with which the

    euro fire could spread. If Iran, Venezuela and Russia join Iraq and sell largequantities of oi l for euros, the euro would have the leverage it needs to becomea powerful force in general international trade. Other nations would have to startswapping some of their dollars for euros.The dollars the USA has printed, the 'cheques' it has written, would start to flyhome, stripping away the illusion of value behind them. The USA's realeconomic condition is about as bad as it could be; it is the most debt-riddennation on earth, owing about US$12,000 for every single one of it's 280 millionmen, women and children. It is worse than the position of Indonesia when itimploded economically a few years ago, or more recently, that of Argentina.Even if OPEC did not switch to euros wholesale (and that would make a verynice non-oil profit for the OPEC countries, including minimising the variouscontrived debts America has forced on some of them), the US's difficultieswould build. Even if only a small part of the oil trade went euro, that would do twothings immediately:* Increase the attractiveness to EU members of joining the 'eurozone', which inturn would make the euro stronger and make it more attractive to oil nations as atrading currency and to other nations as a general trading currency.* Start the US dollars flying home demanding value when there isn't enough inthe bank to cover them.* The markets would over-react as usual and in no time, the US dollar's valuewould be spiralling down.THE US SOLUTIONAmerica's response to the euro threat was predictable. It has come out fighting.It aims to achieve four primary things by going to war with Iraq:

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    * Safeguard the American economy by returning Iraq to trading oil in US dollars,so the greenback is once again the exclusive oil currency.* Send a very clear message to any other oil producers just what will happen tothem if they do not stay in the dollar circle. Iran has already received onemessage -- remember how puzzled you were that in the midst of moderationand secularization, Iran was named as a member of the axis of evil?* Place the second largest reserves of oil in the world under direct Americancontrol.* Provide a secular, subject state where the US can maintain a huge force(perhaps with nominal elements from allies such as Britain and Australia) todominate the Middle East and its vital oil. This would enable the US to avoidusing what it sees as the unreliable Turkey, the politically impossible Israel andsurely the next state in its sights, Saudi Arabia, the birthplace of al Qaeda and ahotbed of anti-American sentiment.* Severe setback the European Union and its euro, the only trading bloc andcurrency strong enough to attack the USA's dominance of world trade throughthe dollar.* Provide cover for the US to run a covert operation to overturn thedemocratically elected government of Venezuela and replace it with anAmerica-friendly military supported junta -- and put Venezuala's oi l intoAmerican hands.Locking the world back into dollar oil trading would consolidate America's

    current position and make it all but impregnable as the dominant world power --economically and militarily. A splintered Europe (the US is working hard to splitEurope; Britain was easy, but other Europeans have offered support in terms ofUN votes) and its euro would suffer a serious setback and might take decadesto recover.It is the boldest grab for absolute power the world has seen in modern times.America is hardly likely to allow the possible slaughter of a few hundredthousand Iraqis stand between it and world domination.President Bush did promise to protect the American way of life. This is what hemeant.JUSTIFYING WARObviously, the US could not simply invade Iraq, so it began casting around for a

    'legitimate' reason to attack. That search has been one of increasingdesperation as each rationalization has crumbled. First Iraq was a threatbecause of alleged links to al Qaeda; then it was proposed Iraq might supply alQaeda with weapons; then Iraq's military threat to its neighbours was raised;then the need to deliver Iraqis from Saddam Hussein's horrendously inhumanerule; finally there is the question of compliance with UN weapons inspection.The USA's justifications for invading Iraq are looking less impressive by the day.The US's statements that it would invade Iraq unilaterally without UN support andin defiance of the UN make a total nonsense of any American claim that it isconcerned about the world body's strength and standing.The UN weapons inspectors have come up with minimal infringements of the UNweapons limitations -- the final one being low tech rockets which exceed therange allowed by about 20 percent. But there is no sign of the so-calledweapons of mass destruction (WMD) the US has so confidently asserted are tobe found. Colin Powell named a certain north Iraqi village as a threat. It was not.He later admitted it was the wrong village.'Newsweek' (24/2) has reported that while Bush officials have been trumpetingthe fact that key Iraqi defector, Lt. Gen. Hussein Kamel, told the US in 1995 thatIraq had manufactured tonnes of nerve gas and anthrax (Colin Powell's 5February presentation to the UN was just one example) they neglected tomention that Kamel had also told the US that these weapons had beendestroyed.Parts of the US and particularly the British secret 'evidence' have been shown tocome from a student's masters thesis.America's expressed concern about the Iraqi people's human rights and the

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    country's lack of democracy are simply not supported by the USA's history ofintervention in other states nor by its current actions. Think Guatemala, theCongo, Chile and Nicaragua as examples of a much larger pool of US actionsto tear down legitimate, democratically elected governments and replace themwith war, disruption, starvation, poverty, corruption, dictatorships, torture, rapeand murder for its own economic ends. The most recent, Afghanistan, is notlooking good; in fact that reinstalled a murderous group of warlords whichAmerica had earlier installed, then deposed, in favour of the now hated Taliban.Saddam Hussein was just as repressive, corrupt and murderous 15 years agowhen he used chemical weapons, supplied by the US, against the Kurds. Thecurrent US Secretary for Defence, Donald Rumsfeld, so vehement against Iraqnow, was on hand personally to turn aside condemnation of Iraq and blame Iran.At that time, of course, the US thought Saddam Hussein was their man -- theywere using him against the perceived threat of Iran's Islamic fundamentalism.Right now, as 'The Independent' writer, Robert Fisk, has noted, the US's effortsto buy Algeria's UN vote includes promises of re-arming the military which has adecade long history of repression, torture, rape and murder Saddam Husseinhimself would envy. It is estimated 200,000 people have died, and countlessothers been left maimed by the activities of these monsters. What price the US'shumanitarian concerns for Iraqis? (Of course, the French are also wooingAlgeria, their former north African territory, for all they are worth, but at least theyare not pretending to be driven by humanitarian concerns.)

    Indonesia is another nation with a vote and influence as the largest Muslimnation in the world. Its repressive, murderous military is regaining strength on theback of the US's so-called anti-terror campaign and is receiving promises ofopen and covert support -- including intelligence sharing.AND VENEZUELAWhile the world's attention is focused on Iraq, America is both openly andcovertly supporting the "coup of the rich" in Venezuela, which grabbed powerbriefly in April last year before being intimidated by massive public displays ofsupport by the poor for democratically-elected President Chavez Frias. Thecoup leaders continue to use their control of the private media, much of industryand the ear of the American Government and its oily intimates to causedisruption and disturbance.

    Venezuela's state-owned oil resources would make rich pickings for Americanoil companies and provide the US with an important oil source in its ownbackyard.Many writers have noted the contradiction between America's alleged desire toestablish democracy in Iraq while at the same time, actively undermining thedemocratically-elected government in Venezuela. Above the line, Americarushed to recognise the coup last April; more recently, President Bush hascalled for "early elections", ignoring the fact that President Chavez Frias haswon three elections and two referendums and, in any case, early elections wouldbe unconstitutional.One element of the USA's covert action against Venezuela is the behaviour ofAmerican transnational businesses, which have locked out employees insupport of "national strike" action. Imagine them doing that in the USA! There isno question that a covert operation is in process to overturn the legitimateVenezuelan government. Uruguayan congressman, Jose Nayardi, made itpublic when he revealed that the Bush administration had asked for Uruguay'ssupport for Venezuelan white collar executives and trade union activists "tobreak down levels of intransigence within the Chavez Frias administration". Theprocess, he noted, was a shocking reminder of the CIA's 1973 intervention inChile which saw General Pinochet lead his military coup to take over PresidentAllende's democratically elected government in a bloodbath.President Chavez Frias is desperately clinging to government, but with the mightof the USA aligned with his opponents, how long can he last?THE COST OF WARSome have claimed that an American invasion of Iraq would cost so many

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    billions of dollars that oil returns would never justify such an action.But when the invasion is placed in the context of the protection of the entire USeconomy for now and into the future, the balance of the argument changes.Further, there are three other vital factors:First, America will be asking others to help pay for the war because it isprotecting their interests. Japan and Saudi Arabia made serious contributionsto the cost of the 1991 Gulf war.Second -- in reality, war will cost the USA very little -- or at least, very little overand above normal expenditure. This war is already paid for! All the munitionsand equipment have been bought and paid for. The USA would have to spendhardly a cent on new hardware to prosecute this war -- the expenditure will comelater when munitions and equipment have to be replaced after the war. Butamunitions, hardware and so on are being replaced all the time -- contracts areout. Some contracts will simply be brought forward and some others will beramped up a bit, but spread over a few years, the cost will not be great. Andwhat is the real extra cost of an army at war compared with maintaining thestanding army around the world, running exercises and so on? It is there, but it isa relatively small sum.Third -- lots of the extra costs involved in the war are dollars spent outsideAmerica, not least in the purchase of fuel. Guess how America will pay forthese? By printing dollars it is going to war to protect. The same happens whenproduction begins to replace hardware components, minerals, etc. are bought in

    with dollars that go overseas and exploit America's trading advantage.The cost of war is not nearly as big as it is made out to be. The cost of not goingto war would be horrendous for the USA -- unless there were another way ofprotecting the greenback's world trade dominance.AMERICA'S TWO ACTIVE ALLIESWhy are Australia and Britain supporting America in its transparent Iraqi warploy?Australia, of course, has significant US dollar reserves and trades widely indollars and extensively with America. A fall in the US dollar would reduceAustralia's debt, perhaps, but would do nothing for the Australian dollar's valueagainst other currencies. John Howard, the Prime Minister, has long cherishedthe dream of a free trade agreement with the USA in the hope that Australia can

    jump on the back of the free ride America gets in trade through the dollar'sposition as the major trading medium. That would look much less attractive if theeuro took over a significant part of the oil trade.Britain has yet to adopt the euro. If the US takes over Iraq and blocks the euro'sincursion into oil trading, Tony Blair will have given his French and Germancounterparts a bloody nose, and gained more room to manouevre on the issue -- perhaps years more room.Britain would be in a position to demand a better deal from its EU partners forentering the "eurozone" if the new currency could not make the huge value gainsguaranteed by a significant role in world oil trading. It might even be in a positionto withdraw from Europe and link with America against continental Europe.On the other hand, if the US cannot maintain the oil trade dollar monopoly, theeuro will rapidly go from strength to strength, and Britain could be left begging tobe allowed into the club.THE OPPOSITIONSome of the reasons for opposition to the American plan are obvious --America is already the strongest nation on earth and dominates world tradethrough its dollar. If it had control of the Iraqi oil and a base for its forces in theMiddle East, it would not add to, but would multiply its power.The oil-producing nations, particularly the Arab ones, can see the writing on thewall and are quaking in their boots.France and Germany are the EU leaders with the vision of a resurgent, unitedEurope taking its rightful place in the world and using its euro currency as aworld trading reserve currency and thus gaining some of the free ride the UnitedStates enjoys now. They are the ones who initiated the euro oi l trade with Iraq.

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    Russia is in deep economic trouble and knows it will get worse the day Americastarts exploiting its take-over of Afghanistan by running a pipeline southwardsvia Afghanistan from the giant southern Caspian oi l fields. Currently, that oil ispiped northwards -- where Russia has control.Russia is in the process of ramping up oil production with the possibility oftrading some of it for euros and selling some to the US itself. Russia already hasenough problems with the fact that oil is traded in US dollars; if the US hascontrol of Iraqi oil, it could distort the market to Russia's enormousdisadvantage. In addition, Russia has interests in Iraqi oil; an American takeover could see them lost. Already on its knees, Russia could be beggaredbefore a mile of the Afghanistan pipeline is laid.ANOTHER SOLUTION?The scenario clarifies the seriousness of America's position and explains itsfrantic drive for war. It also suggests that solutions other than war are possible.Could America agree to share the trading goodies by allowing Europe to have anegotiated part of it? Not very likely, but it is just possible Europe can staredown the USA and force such an outcome. Time will tell. What about Europetaking the statesmanlike, humanitarian and long view, and withdrawing, leavingthe oil to the US, with appropriate safeguards for ordinary Iraqis and democracyin Venezuela?Europe might then be forced to adopt a smarter approach -- perhapsaccelerating the development of alternative energy technologies which would

    reduce the EU's reliance on oil for energy and produce goods it could trade foreuros -- shifting the world trade balance.Now that would be a very positive outcome for everyone.Geoffrey Heard is aMelbourne, Australia,writer on the environment, sustainability and human rights.Copyright Geoffrey Heard, 2003. Anyone is free to circulate this documentprovided it is complete and in its current form with attribution and no payment isasked. It is prohibited to reproduce this document or any part of it forcommercial gain without the prior permission of the author.

    Colin Nunan: Oil, Currency and the War on IraqIt will not come as news to anyone that the US dominates the world economicallyand militarily. But the exact mechanisms by which American hegemony hasbeen established and maintained are perhaps less well understood than theymight be. One tool used to great effect has been the dollar, but its efficacy hasrecently been under threat since Europe introduced the euro.

    The dollar is the de facto world reserve currency: the US currency accounts forapproximately two thirds of all official exchange reserves. More than four-fifths ofall foreign exchange transactions and half of all world exports are denominatedin dollars. In addition, all IMF loans are denominated in dollars.

    But the more dollars there are circulating outside the US, or invested by foreignowners in American assets, the more the rest of the world has had to providethe US with goods and services in exchange for these dollars. The dollars costthe US next to nothing to produce, so the fact that the world uses the currency inthis way means that the US is importing vast quantities of goods and servicesvirtually for free.

    Since so many foreign-owned dollars are not spent on American goods andservices, the US is able to run a huge trade deficit year after year withoutapparently any major economic consequences. The most recently publishedfigures, for example, show that in November of last year US imports were worth48% more than US exports. No other country can run such a large trade deficitwith impunity. The financial media tell us the US is acting as the 'consumer of

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    last resort' and the implication is that we should be thankful, but a moreenlightening description of this state of affairs would be to say that it is getting amassive interest-free loan from the rest of the world.

    While the US' position may seem inviolable, one should remember that the moreyou have, the more you have to lose. And recently there have been signs of how,for the first time in a long time, the US may be beginning to lose.

    One of the stated economic objectives, and perhaps the primary objective, whensetting up the euro was to turn it into a reserve currency to challenge the dollar

    so that Europe too could get something for nothing.

    This however would be a disaster for the US. Not only would they lose a largepart of their annual subsidy of effectively free goods and services, but countriesswitching to euro reserves from dollar reserves would bring down the value ofthe US currency. Imports would start to cost Americans a lot more and asincreasing numbers of those holding dollars began to spend them, the US wouldhave to start paying its debts by supplying in goods and services to foreigncountries, thus reducing American living standards. As countries andbusinesses converted their dollar assets into euro assets, the US property andstock market bubbles would, without doubt, burst. The Federal Reserve wouldno longer be able to print more money to reflate the bubble, as i t is currently

    openly considering doing, because, without lots of eager foreigners prepared tomop them up, a serious inflation would result which, in turn, would makeforeigners even more reluctant to hold the US currency and thus heighten thecrisis.

    There is though one major obstacle to this happening: oil. Oil is not just by far themost important commodity traded internationally, it is the lifeblood of all modernindustrialised economies. If you don't have oil, you have to buy it. And if you wantto buy oil on the international markets, you usually have to have dollars. Untilrecently all OPEC countries agreed to sell their oil for dollars only. So long asthis remained the case, the euro was unlikely to become the major reservecurrency: there is not a lot of point in stockpiling euros if every time you need tobuy oil you have to change them into dollars. This arrangement also meant that

    the US effectively part-controlled the entire world oil market: you could only buyoil if you had dollars, and only one country had the right to print dollars - the US.

    If on the other hand OPEC were to decide to accept euros only for its oil(assuming for a moment it were allowed to make this decision), then Americaneconomic dominance would be over. Not only would Europe not need as manydollars anymore, but Japan which imports over 80% of its oil from the MiddleEast would think it wise to convert a large portion of its dollar assets to euroassets (Japan is the major subsidiser of the US because it holds so many dollarinvestments). The US on the other hand, being the world's largest oil importerwould have, to run a trade surplus to acquire euros. The conversion from tradedeficit to trade surplus would have to be achieved at a time when its property

    and stock market prices were collapsing and its domestic supplies of oil andgas were contracting. It would be a very painful conversion.

    The purely economic arguments for OPEC converting to the euro, at least for awhile, seem very strong. The Euro-zone does not run a huge trade deficit nor is itheavily endebted to the rest of the world like the US and interest rates in theEuro-zone are also significantly higher. The Euro-zone has a larger share ofworld trade than the US and is the Middle East's main trading partner. Andnearly everything you can buy for dollars you can also buy for euros - apart, ofcourse, from oil. Furthermore, if OPEC were to convert their dollar assets toeuro assets and then require payment for oil in Euros, their assets wouldimmediately increase in value, since oi l importing countries would be forced toalso convert part of their assets, driving the prices up. For OPEC, backing the

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    euro would be a self-fulfilling prophesy. They could then at some later date moveto some other currency, perhaps back to the dollar, and again make hugeprofits.

    But of course it is not a purely economic decision.

    So far only one OPEC country has dared switch to the euro: Iraq, in November20002. There is little doubt that this was a deliberate attempt by Saddam tostrike back at the US, but in economic terms it has also turned out to have beena huge success: at the time of Iraq's conversion the euro was worth around 83

    US cents but it is now worth over $1.05. There may however be otherconsequences to this decision. One other OPEC country has been talkingpublicly about possible conversion to the euro since 1999: Iran, a country whichhas since been included in the George W. Bush's 'axis of evil'.

    A third OPEC country which has recently fallen out with the US government isVenezuela and it too has been showing disloyalty to the dollar. Under HugoChavez's rule, Venezuela has established barter deals for trading its oil with 12Latin American countries as well as Cuba. This means that the US is missingout on its usual subsidy and might help expl