War is against Euro as oil currency

As the United States and British coalition forces strove to the height of their illegal and indiscriminate war against Iraq, what is now surfacing in the rubble of this war is the unsettling reality that it has nothing to do with “Saddam’s weapons of mass destruction” or his links with Usama bin Laden, or “the liberation of the people of Baghdad”.

Although completely suppressed by the media, the war is not only being carried out with the view to taking over Iraq’s oil reserves, but is intended to cancel the contracts of rival Russian and European oil companies as well as to exclude France, Russia and China from the region.

In the Balkans, the US “shared spoils” with Germany and France , in the context of military operations under NATO and UN auspices.

However, the invasion of Iraq is intended to establish US hegemony while weakening Franco-German and Russian influence in the region.

Beneath the smoke and mirrors of the international diplomatic crisis that surfaced at the UN between the US/Britain super-power axis and Russia/China/France and Germany superpower axis over the invasion of Iraq, the core of their dispute had less to do with the invasion of Iraq , and more to do with who will gain the geo-strategic control of Iraqi oil uninterrupted and secured.

This is a war of conquest, which also targets rival oil conglomerates including those of Russia and France which have sizeable oil interests in Iraq and Iran .

Michael Chossudovsky, a European political expert noted that the Anglo-American oil giants – BP-Amoco, Chevron-Texaco, Exxon-Mobile, Shell – supported by the Anglo-American military axis are clashing with Europe’s oil giant Total-Fina-Elf and Italy ‘s ENI which have sizeable interests in Iraq , Iran , and Central Asia .

Anglo-American oil giants

Due to sanctions against Iraq, the Anglo-American oil giants (i.e. BP, Chevron-Texaco, Shell, Exxon) are all absent from Iran and Iraq oil contracts and production agreements signed with French, Russian, and Chinese oil companies.

According to Washington Post of September 15 2002, “a US-led ouster of Iraqi President Saddam Hussein could open a bonanza for American oil companies long banished from Iraq, scuttling oil deals between Baghdad and Russia, France and other countries, and reshuffling world petroleum markets.

A proposed $ 40 billion (about R320 billion) Iraq-Russian economic agreement also reportedly includes opportunities for Russian companies to explore for oil in Iraq ‘s western desert. The French company Total-Fina-Elf has negotiated for rights to develop the huge Majnoon field, near the Iranian border, which may contain up to 30 billion barrels of oil”.

Another enigma to the story is that oil is the single most compelling force to this war. Beyond the America ‘s desire to get its grubby hands on that oil, it is becoming clear that the US is in this war in order to prevent the Organisation of the Petroleum Exporting Countries (OPEC) momentum shift towards the euro as an oil transaction currency standard.

What precipitated US president George Bush’s single-minded drive to conquer Baghdad is not so much a sudden realisation that Saddam is a nasty guy who has gassed his people, but it was Iraq ‘s November 6 2000 switch to the euro as the currency for its oil transactions.

Switch to euro

At the time when Iraq undertook the switch it appeared to be economic suicide in terms of giving up such a lot of oil revenue to make a political statement, namely, to punish the US for applying sanctions against Iraq.

Since this political statement, the world has witnessed the steady depreciation of the dollar against the euro, thus providing Iraq good profits from switching its reserve and transaction currencies.

As a result of this single action, the euro has gained about 17 percent against the dollar, which also applies to the $10 billion (about R 80 billion) held in Iraq’s United Nations “oil for food” reserve fund.

Since late 2001, the euro has gained 25 percent against the dollar. What happens if OPEC makes a sudden switch to euros? In a nutshell, all hell breaks loose.

There are some good reasons for OPEC to follow Iraq and begin to value oil in euros. They would relish a situation where they could humble US hegemony after years of having to kowtow to the US .

Economically, the OPEC is attracted more to the euros because EU enlargement plans would eclipsed US as a major importer of oil and petroleum and, moreover, the EU represents a closer and lesser domineering market compared to the US . In addition, compared to the US , the EU share of global trade is now bigger than the US .

More pertinently, the US has a huge current account deficit while the EU enjoys more balanced external accounts.

Arguably, the effect of an OPEC switch to the euro would be that oil-consuming nations would have to flush dollars out of their (central bank) reserve funds and replace these with euros.

This could result in the crash of the dollar in value anywhere from 20-40 percent resulting in massive inflation. The likelihood is high that you might end up having foreign funds streaming out of the US stock markets and dollar denominated assets, surely resulting in a run on the banks similar to the 1930s great depression.

The current account deficit would become unserviceable, the budget deficit would go into default, and so on. You could end up with another world economic crisis scenario.

The point of Bush’s war against Iraq is to secure control of the oil fields and revert their valuation to dollars, then to increase production exponentially, forcing prices to drop. Secondly, Bush’s administration will threaten significant action against any of the oil producers who switch to the euro.

Finally, to cancel contracts of the rival European and Russian oil companies and place American companies in control. It is not Iraqi president Saddam Hussein who is the target, but the euro and therefore European conglomerates. There is no way uncle Sam will sit and let Europe eclipse her, let alone undermine the world’s finances.