If you want to enter this year with a better understanding of the large geopolitical forces shaping such events, you could do much worse than reading this book.
By Ryan McGreal
Published January 27, 2006
Petrodollar Warfare: Oil, Iraq and the Future of the Dollar
After a winter of overheated rhetorical sparring with Iran, the International Atomic Energy Agency, under duress from the United States, refers Iran to the UN Security Council. America pushes hard for a resolution to order Iran to abandon its nuclear program, but China resists and Russia sits smugly on the sidelines.
US President Bush warns that Iran's actions threaten the security of the United States and its allies, and that Iran's refusal to abandon its nuclear energy program presents a grave and gathering danger. Iranian President Mahmoud Ahmadinejad denounces American hypocrisy and expresses again his desire to wipe Israel off the map.
America threatens a military offensive. In protest, Iran shuts off all oil exports to the west. Oil spikes over $100 a barrel, and Israel launches a missile strike against Iran's uranium conversion facility in Isfahan.
While sitting in line to buy gas at $2.50 a litre, you're scratching your head, wondering what the hell's going on and terrified over what will happen next.
Granted, this is just one scenario among countless possibilities, admittedly chosen for provocation. However, it's as plausible as any, and more than some. So what's really going on?
The common refrain in the news is that Iran seeks nuclear weapons to threaten America and its allies, but some viewers will notice the sharp difference between how America regards Iran and, say, Pakistan or India, two US allies that possess nuclear weapons and refuse to sign the Non-Proliferation Treaty.
Other warning bells go off, like former Secretary of State Colin Powell's warning that Iran is going down the same path as Iraq. TV viewers are sleepy, but they're not entirely comatose, and many will notice they've heard it all before.
Some older readers who recall the Cold War will wonder why the threat of mutually assured destruction (MAD) no longer obtains. Certainly President Ahmadinejad is presented as a madman on network television, but we were always told the Soviet leaders were madmen as well.
If you want to enter this year with a better understanding of the large geopolitical forces shaping such events, you could do much worse than reading William R. Clark's book Petrodollar Warfare: Oil, Iraq and the Future of the Dollar (New Society Publishers, 2005).
Iran's plan to launch an energy trading exchange supports its desire to establish a geopolitical bloc with a Eurasian epicentre, anchored by Iran, China, Russia, and Europe, preferably including India (which is why America is bribing India with nuclear technology).
That threatens the US government's efforts to maintain a unipolar global political economy driven by American consumption and dependent on the centrality of the US dollar.
Clark's thesis is that America's military and diplomatic activities over the past five years are best understood as means of preserving what Clark calls "petrodollar hegemony," or the global system whereby countries must buy oil with US dollars, negotiated with OPEC in the 1970s.
He builds his case carefully, starting with the postwar economic order defined by the Bretton Woods agreement, its unraveling in 1971 when President Nixon reneged on America's promise to redeem US dollars for gold and found a new mechanism in oil pricing to maintain global demand for the dollar.
Clark builds on American power politics with a close examination of the looming peak oil phenomenon and the latest round of powerbrokering to secure access to diminishing hydrocarbon reserves. Then he examines the various ways that America has used its military to protect its geostrategic interests, giving special interest to the manoeuvring that neutralized the UN and made the Iraq invasion inevitable.
But his central premise is that the military actions serve the larger goal of preserving dollar hegemony, now protected by the requirement that other countries buy oil for US dollars. (See my August 2005 essay Iran in the Crosshairs for a more detailed explanation.
Amazingly, analysts on the on the left, who have been following the scent of American imperialism, are meeting up with analysts on the right, who have been tracking American macroeconomics. Both are arriving at the same conclusion: the US economy is headed for serious trouble.
Former Federal Reserve Chair Paul Volcker, who infamously jacked the prime rate up to 21 percent in 1981, now warns of a "75 percent chance of a dollar crash in the next five years."
Asian countries hold approximately $2 trillion in dollars and dollar denominated securities. China has already announced its intention to diversity its foreign asset holdings, and India is considering a similar course.
The Iranian oil bourse could be the pebble that starts an avalanche.Petrodollar Warfare will help you pick through the rubble.
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