Iran's Oil Exchange Threatens
by Mike Whitney
The Bush administration will never allow
the Iranian government to open an oil exchange (bourse) that trades
petroleum in euros. If that were to happen, hundreds of billions
of dollars would come flooding back to the United States crushing
the greenback and destroying the economy. This is why Bush and
Co. are planning to lead the nation to war against Iran. It is
straightforward defense of the current global system and the continuing
dominance of the reserve currency, the dollar.
The claim that Iran is developing nuclear
weapons is a mere pretext for war. The NIE (National Intelligence
Estimate) predicts that Iran will not be able to produce nukes
for perhaps a decade. So too, IAEA chief Mohammed ElBaradei has
said repeatedly that his watchdog agency has found "no evidence"
of a nuclear weapons program.
There are no nuclear weapons or nuclear
weapons programs, but Iran's economic plans do pose an existential
threat to America, and not one that can be simply brushed aside
as the unavoidable workings of the free market.
America monopolizes the oil trade. Oil
is denominated in dollars and sold on either the NYMEX or London's
International Petroleum Exchange (IPE), both owned by Americans.
This forces the central banks around the world to maintain huge
stockpiles of dollars even though the greenback is currently underwritten
by $8 trillion of debt and even though the Bush administration
has said that it will perpetuate the deficit-producing tax cuts.
America's currency monopoly is the perfect
pyramid-scheme. As long as nations are forced to buy oil in dollars,
the United States can continue its profligate spending with impunity.
(The dollar now accounts for 68% of global currency reserves up
from 51% just a decade ago) The only threat to this strategy is
the prospect of competition from an independent oil exchange;
forcing the faltering dollar to go nose-to-nose with a more stable
(debt-free) currency such as the euro. That would compel central
banks to diversify their holdings, sending billions of dollars
back to America and ensuring a devastating cycle of hyper-inflation.
The effort to keep information about
Iran's oil exchange out of the headlines has been extremely successful.
A simple Google search shows that NONE of the major newspapers
or networks has referred to the upcoming bourse. The media's aversion
to controversial stories which serve the public interest has been
evident in many other cases, too, like the fraudulent 2004 presidential
elections, the Downing Street Memo, and the flattening of Falluja.
Rather than inform, the media serves as a bullhorn for government
policy; manipulating public opinion by reiterating the specious
demagoguery of the Bush administration. As a result, few people
have any idea of the gravity of the present threat facing the
This is not a "liberal vs. conservative"
issue. Those who've analyzed the problem draw the very same conclusions;
if the Iran exchange flourishes the dollar will plummet and the
American economy will shatter.
This is what author Krassimir Petrov,
Ph.D in economics, says in a recent article The Proposed Iranian
"From a purely economic point of
view, should the Iranian Oil Bourse gain momentum, it will be
eagerly embraced by major economic powers and will precipitate
the demise of the dollar. The collapsing dollar will dramatically
accelerate U.S. inflation and will pressure upward U.S. long-term
interest rates. At this point, the Fed will find itself between
between deflation and hyperinflation-it will be forced fast either
to take its "classical medicine" by deflating, whereby
it raises interest rates, thus inducing a major economic depression,
a collapse in real estate, and an implosion in bond, stock, and
derivative markets, with a total financial collapse, or alternatively,
to take the Weimar way out by inflating, whereby it pegs the long-bond
yield, raises the Helicopters and drowns the financial system
in liquidity, bailing out numerous LTCMs and hyperinflating the
No doubt, Commander-in-Chief Ben Bernanke,
a renowned scholar of the Great Depression, will choose inflation.
The Maestro has taught him the panacea of every single financial
problem-to inflate, come hell or high water. To avoid deflation,
he will resort to the printing pressesand, if necessary, he will
monetize everything in sight. His ultimate accomplishment will
be the hyperinflationary destruction of the American currency
So, raise interest rates and bring on
"total financial collapse" or take the "Weimar
way out" and cause the "hyperinflationary destruction
of the American economy."
These are not good choices, and yet,
we're hearing the same pronouncements from right-wing analysts.
Alan Peter's article, "Mullah's Threat not Sinking In",
which appeared in FrontPage Magazine.com, offers these equally
sobering thoughts about the dangers of an Iran oil-exchange:
"A glut of dollar holdings by Central
Banks and among Asian lenders, plus the current low interest rate
offered to investor/lenders by the USA has been putting the dollar
in jeopardy for some time A twitching finger on currency's hair-trigger
can shoot down the dollar without any purposeful ill intent. Most
estimates place the likely drop to "floor levels" at
a rapid 50% loss in value for a presently 40% overvalued Dollar."
The erosion of the greenback's value
was predicted by former Fed-chief Paul Volcker who said that there
is a "75% chance of a dollar crash in the next 5 years".
Such a crash would result in soaring
interest rates, hyperinflation, skyrocketing energy costs, massive
unemployment and, perhaps, depression. This is the troubling scenario
if an Iran bourse gets established and knocks the dollar from
its lofty perch. And this is what makes the prospect of war, even
nuclear war, so very likely.
"With economies so interdependent and interwoven, a global,
not just American Depression would occur with a domino effect
throwing the rest of world economies into poverty. Markets for
acutely less expensive US exports would never materialize.
The result, some SME's estimate, might
be as many as 200 million Americans out of work and starving on
the streets with nobody and nothing able to rescue or aid them,
contrary to the 1920/30 Great Depression through soup kitchens
and charitable support efforts."
Liberal or conservative, the analysis
is the same. If America does not address the catastrophic potential
of the Iran bourse, Americans can expect to face dire circumstances.
Now we can understand why the corporate-friendly
media has omitted any mention of new oil exchange in their coverage.
This is one secret that the boardroom kingpins would rather keep
to themselves. It's easier to convince the public of nuclear hobgoblins
and Islamic fanatics than to justify fighting a war for the anemic
greenback. Never the less, it is the dollar we are defending in
Iraq and, presumably, in Iran as well in the very near future.
(Saddam converted to the euro in 2000. The bombing began in 2001)
There are peaceful solutions to this
dilemma, but not if the Bush administration insists on hiding
behind the moronic deception of terrorism or imaginary nuclear
weapons programs. Bush needs to come clean with the American people
about the real nature of the global energy crisis and stop invoking
Bin Laden and WMD to defend American aggression. We need a comprehensive
energy strategy, (including government funding for conservation
projects, alternative energy-sources, and the development of a
new line of "American-made" hybrid vehicles) candid
negotiations with Iran to regulate the amount of oil they will
sell in euros per year (easing away from the dollar in an orderly
way) and a collective "international" approach to energy
consumption and distribution (under the auspices of the UN General
Greater parity among currencies should
be encouraged as a way of strengthening democracies and invigorating
markets. It promises to breathe new life into free trade by allowing
other political models to flourish without fear of being subsumed
into the capitalist prototype. The current dominance of the greenback
has created a global empire that is largely dependent on debt,
torture, and war to maintain its supremacy.
Iran's oil bourse poses the greatest
challenge yet to the dollar-monopoly and its proponents at the
Federal Reserve. If the Bush administration goes ahead with a
preemptive "nuclear" strike on alleged weapons sites,
allies will be further alienated and others will be forced to
respond. As Dr. Petrov says, "Major dollar-holding countries
may decide to quietly retaliate by dumping their own mountains
of dollars, thus preventing the U.S. from further financing its
There is increasing likelihood that the
foremost champions of the present system will be the one's who
bring about its downfall.
Mike lives in Washington State with his
charming wife Joan and two spoiled and overfed dogs, Cocoa and