Boldly breaking down the information barrier, we journey into the relatively untouched arena of petrodollar hegemony. What is the petrodollar and why does it matter? William R. Clark, the author, has written Petrodollar Warfare: Oil, Iraq and the Future of the Dollar
The Hypothesis
The United States dollar is the de facto world currency. Accordingly, almost all oil sales throughout the world are denominated in United States dollars (USD). According to proponents of the petrodollar warfare hypothesis, because most countries rely on oil imports, they are forced to maintain large stockpiles of dollars in order to continue imports. This creates a consistent demand for USDs and ostensibly supports the USD’s value, regardless of economic conditions in the United States. This in turn allegedly allows the US government to gain revenues through seignorage and by issuing bonds at lower interest rates than supposedly they otherwise would be able to.
As a result, the U.S. government, according to this theory, can run higher budget deficits at a more sustainable level than most other countries can. The theory points out that a stronger USD also means that goods imported into the United States are relatively cheap (although the country’s exports become relatively more expensive for the rest of the world).
Another component of the hypothesis is that the price of petroleum is more stable in the U.S. than anywhere else since importers do not need to worry about exchange rate fluctuations. Since the U.S. imports a great deal of oil, its markets are heavily reliant on oil and its derivative products (jet fuel, diesel fuel, gasoline, etc.) for their energy needs. As the price of oil can be an important political factor, U.S. administrations are quite sensitive to the price of oil. [1]
Clark does a fantastic job of breaking it all down and making it clear to the average reader what petrodollar politics is all about. The American Century chapter details in 1971 how the dollar lost its gold backing. By 1975 all of OPEC adopted a petrodollar recycling system.
We must get past the illusions that are created by the propagandists to get a grip on the subject matter. Trade imbalance, high unemployment, and failed fiscal policy are themes that should be covered and are covered in order to lay the groundwork.
Clark postulates that the American economy is no longer sustainable. The U.S. economy has been propped up with the status of the dollar as the world currency, but this is the weak link in the economy, an economy that is on the verge of collapse.
Furthermore, the illusion of a strong U.S. economy has been perpetuated by brute military force. Even so, military might must be backed with economic might, and other countries must have confidence in the dollar. There are signs that trust in the dollar is waning. Countries are growing distrustful of U.S. foreign policy also. The evidence is there.
The author explains the three phases in the American Century, the recycling of petrodollars, and the petroeuro challenge.
What really caught my attention was the threat of the petroeuro against the petrodollar. Clark makes his most valid point on this assessment.
It’s vital to realize the importance of this hidden aspect of politics and economics. There’s been almost complete silence in the American press about Petrodollar Warfare. However, there are important agreements that are currently taking place in the news. Iran is front and center.
For instance: “Iran and Russia are set to finalize an agreement they have reached for broader economic and trade cooperation, Iran’s Oil Minister Bijan Namdar Zanganeh says.” [2] Iran teaming with Russia poses a serious threat to western hegemony. And this is why the west has imposed such harsh sanctions on Iran. It’s Petrodollar Warfare you see.
And there’s more to the big picture. March 20, 2012: “The Iranian oil bourse will no longer trade oil in the dollar but start trading oil in other currencies like the euro, yen, yuan, rupee or a basket of currencies.” [3] Not good news for the west.
“Having the world’s second largest oil reserves of 136 gigabarrels, Iran will likely extend its influence on financial markets when the IOB opens. Although under-reported by the media, this historical shift and its consequences should be watched closely.” [4] For real.
There could come a time when Russia attacks the petrodollar: “The US dollar’s position as the base currency for global energy trading gives the US a number of unfair advantages. It seems that Moscow is ready to take those advantages away.” [5]
Getting back to the core of the petrodollar threat brings us to Saddam Hussein and the need to replace him. Why? This is another mysterious piece of the puzzle that gets quite interesting.
“In the autumn of 2000, Saddam Hussein emerged from a meeting of his government and announced that Iraq would soon transition its oil-export transactions to the euro.” [6] The rationale for intervening by the U.S. was not just the control of the oil, but also a means to control the global markets. It was an attempt to keep the petrodollar alive.
Clark may have published this in 2005, but I’ll bet you never caught this on the evening news!
With acrimony, Clark presents analysis that conveys the blunders carried out by reckless neocons. The Iraq agenda was a total failure and has cast a black eye on the United States. This is what greed and poor leadership can do for you. The world is wary of America’s military aggression.
I give Petrodollar Warfare a big thumbs up. Clark has broken down the barriers and he let the cat out of the bag. He mentions the poor media coverage following this angle of the story and this should be of no surprise to anyone. Basically, the euro challenges U.S. dollar hegemony. Throw the Iranian oil bourse into the mix and you have a tense situation unfolding. [7] This historic saga is unfolding in front of our very eyes.
Once you understand what Petrodollar Warfare is about, it’s not so difficult to follow the storyline in the news. Petrodollar Warfare is very relevant to today’s politics. My only regret is not getting a copy in my hands sooner! It’s informative and presented very well.
Sources:
1. Petrodollar — Wikipedia
2. Iran, Russia to finalize trade deal soon: Iran oil minister — PressTV
3. US wants SWIFT war on Iran — Asia Times
4. Iranian Oil Bourse Opening — Oil-Price.net
5. Russia prepares to attack the petrodollar — Voice Of Russia
6. Petrodollar Warfare
7. Iranian oil bourse — Wikipedia
[...] black and white as the press make it out to be. The big advantage that the United States has is the petrodollar. If the world traded oil in Russia’s currency, we wouldn’t be discussing this [...]