Capitalism under attack: Petrodollars, Petroeuros and the Iranian Oil Bourse

“This view of the US getting ready to attack Iran is simply ridiculous […]. That said, all the options are on the table ” (President George W. Bush, February 2005)

Who would have ever imagined it?

Forget the Prophet Mohammed, Islam, the Qur’an, President Ahmadinejad and his nuclear program, Islamofascism and al umpah-pah. The mullahs don’t like US dollars anymore. As reported by Reuters UK ([]Iran announced that it has ordered its central bank to start using euro for foreign transactions and to convert the nation’s dollar-denominated assets abroad into the single European currency. “The government has ordered the central bank to replace the dollar with the euro to limit executive agencies’ problems in commercial transactions, ” government spokesman Gholam Hossein Elham told reporters.

From OPEC’s fourth oil producer, this is a step that will undoubtedly have both deep economic reverberation and serious political repercussions worldwide. It certainly seems that Iran rather than & # 145; obliterating Israel ‘from the face of the earth sets the pace for obliterating American capitalism and influence everywhere. To understand the implications of such a move in economic affairs, one must first return to the importance of money in our economic systems and the effects that inflationary woes have on it.

Money is one of man’s most amazing inventions. Imagine the difficulties of our daily lives without these metal coins and colored pieces of paper. To make any kind of transaction – from buying groceries to buying a property, you would have to find someone who had what you want and who wanted what you have, and then you two could barter. In a world of thousands of products, one would spend most of their time looking for trading partners and spending very little time to actually earn an income. The alternative to avoiding having to find trading partners would be for each of us to do a little bit of everything ourselves.

But with money on stage, everything becomes more straightforward, simple and less time consuming, and we can all increase our productivity through and through specialization – doing what we do best and then trading with our partners. Therefore, as a direct and near consequence of our increased productivity, each of us can become richer. It is easy to lose sight of the very basic economic point of view that we all owe a large part of our high standard of living to the existence of money, their possession and the spending power that emanates from them.

But there is one catch: money works best when their value is stable over time. And this is nothing more true than in international trade.

Economically, the power of the US dollar and its influence in economic and financial affairs worldwide was born during the United Nations Monetary and Financial Conference in Bretton Wood, New Hampshire, in July 1944. The conference was attended by delegations from all 45 Allied nations, directly and indirectly is involved in the fight against the Axis powers – Nazi Germany, Imperial Japan and Fascist Italy and their socio-economic doctrines. As a result of the Bretton Woods Conference, an exchange rate between various currencies was established anchored on the US dollar, made convertible into gold – the denominator and measure of wealth worldwide. Thus became the US dollar de facto the world’s reserve currency, accepted and traded everywhere. This system remained in place until the early 1970s, enabling countries to accumulate reserves in U.S. dollars as opposed to gold.

When an economically reviving Western Europe in 1970-1971 began to demand payment for their US dollars when it became clear that the US government did not have enough gold reserves to buy back all those dollars, the US Treasury under the Nixon administration was in place of to default on its payment & # 145; anchored Greenback – that is, it cut the connection between Dollar and Gold. However, in order to avoid an international collapse of the US currency in world markets, the US Treasury had to replace gold with another valuable commodity to entice foreign countries to retain their foreign reserves in Dollars and continue to accept the US currency.

Thus, in 1972-73, an iron-clad agreement was reached with Saudi Arabia to support the power of the Saud House in return for accepting the U.S. only. Dollars for its oil. The rest of OPEC had to follow suit and accept US dollars only. Because the world had to buy oil from the Arab oil producing countries, it now had the reason to keep Dollars as a payment for oil. Because the world needed ever-increasing amounts of oil at ever-increasing oil prices, world demand for dollars could only rise. Although dollars could no longer be exchanged for gold, they could now be replaced with oil. Petrodollar was born.

In 2000, the first man to actually claim the euro for his oil was none other than Saddam Hussein from Iraq – and we all know what happened to him. To be more specific, in fact, Saddam Hussein Abd al-Majid al-Tikriti (1937-2006), former president of Iraq, made two strategic mistakes, the other of which would ultimately cost him his throat – literally.

First, on August 2, 1990, I have invaded Kuwait, a country that is very friendly with both the United Kingdom and the United States, and with approx. ten percent of the world’s oil reserves. Moreover, Saddam also became a real threat to Saudi Arabia. By invading Kuwait and threatening Saudi Arabia, Saddam violated the doctrine set by President Jimmy Carter in 1980, stating that “[…] any attempt by any external force to gain control of the Persian Gulf region would be considered an attack on the vital interests of the United States of America, and such attack would be rejected in all necessary ways, including military force. “The Carter Doctrine was later upheld by President George HW Bush in 1989 with the National Security Directive 26 declaring that” Access to Persian Gulf Oil and Security for Key Friendly States in the Area Are Crucial to US National Security […]. “The Gulf War occurred in January 1991.

Saddam’s second mistake was to start demanding payment for his oil in euros. First, his claims were met with ridicule, later with neglect, but as it became clearer that he meant business, the need arose to set an example for anyone who demanded payment in currencies other than the U.S. Dollars. The punishment came with a worsening of the geo-political situation following the 9/11 attacks on the twin towers and an increased perception and concern for Saddam’s weapons of mass destruction – which he had used extensively against the Kurds and his own citizens. President Bush’s shock-and-awe intervention in Iraq followed, ultimately leading to the death of the Iraqi dictator.

Simultaneous warfare has traditionally involved underlying conflicts in terms of economy and resources. Today, these intertwined conflicts also involve international currencies and thus increased complexity. The current geopolitical tensions between the United States and Iran go beyond the publicly expressed concerns about Iran’s nuclear intentions and likely include a proposed Iranian “petroeuro” system for oil trading – the Iranian oil exchange (‘Bourse’ is the French word for exchange). . The proposed Iranian Oil Bourse means that without some kind of US intervention, the Euro will establish a solid foothold in the international oil trade.

This is the case because Europeans no longer have to buy and hold Dollars to secure their payment for oil, but instead pay with their own currency. The introduction of the euro for oil transactions would give the European currency a reserve status that would benefit the Europeans on American spending. Given U.S. foreign debt levels and trade deficits, Tehran’s target represents a blatant interference with the dollar superiority of the crucial international oil markets, and America can hardly afford it. It is truly a case of deadly economic terrorism and economic warfare, a matter of life and death.

And when we talk about economic terrorism and economic warfare, it is very interesting and worth mentioning the link between oil and the euro on the one hand and Iran’s nuclear program on the other, made by Gholam Hossein Elham during the previous announcement. I have said: “the (the western) should put an end to their hostilities towards our nation and should also be aware that we are capable of obtaining nuclear technology through very transparent and legal methods – something they must respect. They must not waste their time venting hostility towards this nation, otherwise they will be harmed, more than us. “

If Iran follows the intention to charge the euro for its oil, the upcoming Iranian Bourse will introduce Petroeuro’s currency hedging in direct competition with traditional Petrodollars. More than that, politically, it will pit America, Israel and Sunni Muslims against Iran, Syria and Shiite Islam and fundamentally create new dynamism and competition in the largest markets in the world – those with global oil and gas trade. One of the Federal Reserve’s nightmares may well start to unfold if it seems that international buyers will choose to buy a barrel of oil for $ 60 on NYMEX and IPE – or buy a barrel of oil for & # 128; 45 – & # 128; 50 through the Iranian Bourse. In essence, America would no longer be able to successfully expand its debt financing with the issuance of US government bonds, and international demand and liquidity of the US dollar would decline. This is a very good reason to go to war.

Welcome to 2007.