12thharmonic Blog

The bogus war on terror and the real reserve currency war.

If the US’s
efforts against the war on terror seem inadequate or misplaced it is because
there is no war on terror. The real war is not only about securing US oil supplies,
but also about who gets to be the reserve currency. This is a war the US
may not be able to win.
Following on from the New
Statesman article I pointed to the other day, I am coming across more and
more stories about countries who may be planning to
drop the dollar as their oil trading currency. As the New Statesman put it:
…Rejection of the dollar is increasingly being
used as an act of political aggression, and nowhere more acutely than in oil-producing
countries. The trailblazer was none other than Saddam Hussein who, in 2000,
announced that Iraq
would henceforth make all its oil trades in euros, a decision that conspiracy
theorists - and not a few eminent Middle Eastern experts - say triggered the
US
invasion.

The article explains that this would have a devastating effect on the US Economy
at a time when it is very vulnerable.

Venezuela,
another country that has been on the receiving end of US political interference, mooted the
idea of switching its oil deals to the Euro in March 2001. Russia
has been considering it too.

A Feb 2004 article at EU
Business says:

“With all this talking,
the euro makes slowly and surreptitiously its way in the price fixing mechanism,”
an analyst at the Dresdner-Kleinwort-Wasserstein brokerage firm in London
said.

“What’s more, Russia,
one of OPEC’s competitors, has been threatening for several months now to switch
its oil market to euros”, the source said.

The question has now built into
a behind-the-scenes battle of minds at OPEC, which groups Algeria,
Kuwait,
Indonesia,
Iran,
Iraq,
Qatar,
Libya,
Nigeria Saudi Arabia, the United
Arab Emirates and Venezuela.

Post-war Iraq
remains outside of the cartel’s quota system, which has currently fixed the
group’s output at 24.5 million barrels per day.

Saudi Oil Minister Ali al-Nouaimi,
whose country is considered the cartel’s heavyweight, OPEC Secretary General
Purnomo Yusgiantoro of Indonesia
and Algerian Energy Minister Chakib Khelil
have ruled out switching to the euro.

Their OPEC partners, however,
are not as categorical.

“If the dollar/euro value
remains the same in 2004 as in 2003, prices will climb to unrealistic levels,”
said Hojjatollah Ghanimifard,
acting deputy for international affairs at the National Iranian Oil Company.

A trader at the Rothschild bank
in London
added: “Trading in petrol involves enormous sums of money. If the dollar
loses its role as a currency of reference, the United
States, the world’s largest oil
importer, will no longer be able to have outside countries finance
its abyssal trade deficit.”

Vladimir Putin
intervened when a Russian Oil Company was about to do a deal with an American
company in 2003 - Times
Online reported (September 04):

…languishing in a Russian
jail where he has been for nearly a year is Mikhail Khodorkovsky.
This time last year, Mr Khodorkovsky
was the richest man in Russia, working as the chief
executive of Yukos, the country’s biggest oil
company, preparing it for a mooted takeover by ExxonMobil
or another American company….

Mr Khodorkovsky, (is)
seen as being punished for daring to challenge President Putin
politically…

…Already
Mr Putin is taking
direct command of Russia’s
oil output. Last week he reassured other European leaders that all Russia’s
(ostensibly privately owned) oil companies “without exception” would
“continue to increase the extraction of oil and they will increase their
deliveries to the global market”. Germany’s
Chancellor Gerhard Schroder thanked President
Putin for the promise, saying: “Otherwise we
would certainly have worries that the world economy could suffer.”

In January 2003 (two months before the invasion) Russia
who opposed the US
invasion of Iraq,
had struck an oil
deal with Saddam Hussein.

In
October 2003 Russia
had talks with Germany.
Global
Policy Online reported:

President Vladimir Putin
said Thursday Russia could switch its trade in oil from dollars to euros, a
move that could have far-reaching repercussions for the global balance of power
– potentially hurting the U.S. dollar and economy and providing a massive boost
to the euro zone. “We do not rule out that it is possible. That would be
interesting for our European partners,” Putin
said at a joint news conference with German Chancellor Gerhard Schroeder in
the Urals town of Yekaterinburg,
where the two leaders conducted two-day talks. “But this does not depend
solely on us. We do not want to hurt prices on the market,” he said. “Putin’s
putting a big card on the table,” said Youssef
Ibrahim, managing director of the Strategic Energy
Investment Group in Dubai and a member of the U.S. Council on Foreign Relations,
an influential body of leading world thinkers thought to help set the United
States’ foreign policy agenda. “In the context of what is happening worldwide,
this statement is very important,” he said.

Putin’s
words come in the wake of a protracted drive by the EU to attract more countries’
trade and currency reserves into euros, in a bid to chip away at U.S.
hegemony over the global economy and money supply. A move by Russia,
as the world’s second largest oil exporter, to trade oil in euros, could provoke
a chain reaction among other oil producers currently mulling a switch and would
further boost the euro’s gradually growing
share of global currency reserves. That would be a huge boon to the euro zone
economy and potentially catastrophic for the United
States. Dollar-based global oil
trade now gives the United
States carte blanche to print
dollars without sparking inflation — to fund huge expenses on wars, military
build-ups, and consumer spending, as well as cut taxes and run up huge trade
deficits.

Almost two-thirds of the world’s
currency reserves are kept in dollars, since oil importers pay in dollars and
oil exporters keep their reserves in the currency they are paid in. This effectively
provides the U.S.
economy with an interest-free loan, as these dollars can be invested back into
the U.S.
economy with zero currency risk. If a Russian move to the euro were to prompt
other oil producers to do the same, it could be a “catastrophe” for
the United
States, Ibrahim
said. “There are already a number of countries within OPEC that would prefer
to trade in euros.” Iran,
the world’s No. 5 oil exporter, has also openly mulled a move into euros.

Perhaps things have got to the
point where Bush’s out of control spending has become a bigger liability to
the countries that are floating the US
economy than the danger of incurring US wrath. At the same time the EU
has overtaken the US in GDP:

The
European Union has grown to become the third-largest governing institution in
the world. Though its land mass is half the size of the continental United States,
its $10.5-trillion (U.S.) gross domestic product now eclipses the U.S. GDP,
making it the world’s largest economy. The EU is already the world’s leading
exporter and largest internal trading market. Sixty-one of the 140 biggest companies
on the Global Fortune 500 rankings are European; only 50 are U.S.
companies.

The
EU seems to be trying to gain currency ascendancy by negotiation and the US
is trying to retain it by force. If the Euro becomes the reserve currency, Europe would inherit the economic safety net that the US
currently enjoys and the US
economy would crash. This would be compounded by the fact that Europe style=’font-family:Georgia’> would have done so without the considerable expense
the style=’font-family:Georgia’>US’s
militaristic stance is incurring. The Middle
East could be seen
as both the scapegoat for and the battleground of a covert struggle between
the two.

Is this a no win situation for
the US?
They are stuck in a downward spiral wherein the more aggressively they attempt
to retain their currency advantage, the more money they spend, the bigger the
deficit gets, the more of a liability they become to countries floating the
US Economy giving them more incentive to drop the dollar. By not adopting the
Euro, Blair might be backing the wrong horse.

It has been suggested (I am
reserving judgement) that the US
and the UK
were behind the massacre in Beslan in an attempt
to destabilise Putin. VHeadline
reports:

The group that massacred 170
children and 130 adults in Beslan led by CIA
operative Shamil Basayev,
took their orders from abroad … there is no question this is an extension
of Anglo-American foreign policy to dismember Russia
as we predicted 12 years ago.

Russia
has retaliated by demanding that Akhmad Zakayew,
now being given sanctuary in London
and Ilyas Akhmadov
now residing in the US,
be turned over to Russia
for planning and conducting the Beslan massacre.

In fact, Ilyas
Akhmadov has political asylum in the US and receives a Reagan-Fascell monthly
stipend, medical insurance and an office, from which he engages in political
circles and informs the media.

The Fascell
Foundation is funded by Congress through the US State Department. Their actions
show they not only want to dismember Russia but they want to use the instability
they have caused to access oil in the Caspian region and in the process control
Georgia and Azerbaijan … if you remember in the late 1980s, the revolt against
the Soviet Union began in Azerbaijan.

Thus, we believe the UK and US want to drive Russia
out of the Caspian and Caucasus regions effectively neutering the country. The Beslan
event has driven a wedge between Ossetians, Ingushis
and Chechens, which will set the Caucasus aflame.

The article goes on to suggest
that the US
and the UK:

are
very fearful as a retaliatory measure that Russia
will accept euros for their oil … which Saddam Hussein did and for that and
other reasons he was deposed. This, of course, would destroy the dollar as a
reserve currency.

Once Russia
moves to the euro, and we believe they will after Beslan,
Iran,
Venezuela
and Indonesia
will follow.

China
has been increasing its oil deals with South American countries including Venezuela.
Russia
has also been in talks with China:

over style=’font-family:Georgia’> the potential £17 billion disposal of Yuganskneftegaz
– a division of the previously privatised Yukos which
accounts for 60 per cent of its oil production.

The
more oil producing countries diversify their trading partners the fewer eggs
they need to have in the US currency basket.

In this light Bush’s hostility towards foreign powers
can be seen in a context bigger than mere global disapproval of US
militarism.

Oil producing countries began openly discussing
the possibility of adopting the Euro after Bush and his US
oil company cronies took power, but before 9/11. Conspiracy theorists might
suggest that 9/11 has provided the Bush regime with a number of convenient justifications.

They include the justification for aggression towards
oil producing countries that were or might be intending to switch to the Euro.
It justified US
aggression towards Afghanistan,
where the US
have done what they set out to do: Install Hamid style=’font-family:Georgia’> Karzai a former
top adviser to Unocal and revive the CentGas pipeline
construction project thus securing Afghan oil supplies for the US.
Osama bin Laden was merely an excuse to do
this and, at least for the time being the mission has been accomplished, hence
the withdrawl of US troops and their reassignment
to Iraq.
A green party article in
2002 noted that:

Karzai style=’font-family:Georgia’> worked with Zalmay
Khalilzad on the pipeline deal. Khalilzad
is now President Bush’s Special National Security Assistant and presidential
Special Envoy for style=’font-family:Georgia’>Afghanistan.
The Bush White House does not mention Karzai’s
and Khalilzad’s ties to Unocal and the pipeline. Greens
also note that Enron conducted the feasability study
for the pipeline, and that Halliburton, at which Vice President Cheney served
as CEO, will be a major benefactor from the pipeline deal.

In December 2003 Bush appointed James Baker as his personal envoy in Iraq.
Baker’s law firm also represents BP’s oil interests in style=’font-family:Georgia’>Afghanistan.
International Action Organisation commented:

This
appointment is especially interesting given Baker’s oil interests: Baker is
Senior partner at Baker Botts LLP, which is
heavily invested in Middle East oil (
target=”_blank”>View More Information ),
and he sits on the US-Azerbaijan Chamber of Commerce (Azerbaijan & the Caspian
Sea are estimated to be the largest untapped oil supplies outside of the Middle
East). With Iraq
in his pocket, Baker III will be in a position to influence over 70% of the
world’s oil supplies.

style=’font-family:Georgia’>America
is the world’s biggest oil junkie consuming
25% of the world’s annual supplies whilst representing only 4% of the world’s
population. Its own supplies are dwindling and would run out within the next
15 years if the style=’font-family:Georgia’>US
had to rely solely on them. This habit has been at the expense of other countries
because of the dollar being the reserve currency. This is now under threat.
Without this advantage the US
could not afford to support its consumption. Like any junkie America
needs to become the dealer if it wants to support its habit. It is no coincidence
that the countries considering the Euro are the same countries that are on the
receiving end of US
aggression. In seeking a militaristic solution to the problem the neocons may
have sounded the death knell for the US
economy.

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