The Euro And The War On Iraq
By Amir Butler
As Mark Twain once noted, prophecy is always difficult, particularly with
regards to 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 as the nation's oil currency.
In November 2000, Iraq began selling its oil for euros, moving away from the
post-World War II standard of the US dollar as the currency of international
trade. Whilst seen by many at the time as a bizarre act of political
defiance, it has proved beneficial for Iraq, with the euro gaining almost
25% against the dollar during 2001. It now costs around USD$1.05 to buy one
Iraq's move towards the euro is indicative of a growing trend. Iran has
already converted the majority of its central bank reserve funds to the
euro, and has hinted at adopting the euro for all oil sales. On December
7th, 2002, the third member of the axis of evil, North Korea, officially
dropped the dollar and began using euros for trade. Venezuela, not a member
of the axis of evil yet, but a large oil producer nonetheless, is also
considering a switch to the euro. More importantly, at its April 14th, 2002
meeting in Spain, OPEC expressed an interest in leaving the dollar in favour
of the euro.
If OPEC were to switch to the euro as the standard for oil transactions, it
would have serious ramifications for the US economy. Oil-consuming economies
would have to flush the dollars out of their central bank holdings and
convert them 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 a monetary evacuation by foreign investors abandoning the US
stock markets and dollar-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 a means of secure investment. With a large reduction in such
investment, the country 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. At
that point, the EU will represent an oil consumer 33% larger than the United
States. 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
half of OPEC oil production, such a change seems likely.
This is a scenario that America cannot afford to see eventuate. The US will
go to any length to fend off an attempt by OPEC to dump greenbacks as its
reserve currency. Attacking Iraq and installing a client regime in Baghdad
may have a preventative effect. It will certainly ensure that Iraq returns
to using dollars and provide a violent example to any other nation in the
region contemplating a migration to the euro.
An American-backed junta in Iraq would also enable the US to smash OPEC's
hold over oil prices. The US or its client regime could increase Iraqi oil
production to levels well beyond OPEC quotas, driving prices down worldwide
and weakening the economies of the oil producing nations, thus lessening
their likelihood of abandoning the dollar. It would have the short term
effect of reducing the profits of domestic oil companies, but the long term
effect of securing America's economic hegemony.
The frequently offered canard of the Left that this war is being fought to
secure oil revenues for American oil companies may have some truth to it.
However, a more plausible explanation may be that the Bush administration is
waging war to protect the dollar and smash the OPEC hold over international
oil prices. It's a war whose purpose is bigger than Halliburton or Exxon: :
it's a war being fought to maintain America's position in the world.
Attending the 1992 Earth Summit in Rio, George Bush Senior told the world
that, "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
------ End of Forwarded Message