Capitalism Is Under Attack: Petrodollar, Petrooros, and the Iranian Oil Exchange

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This notion that the United States is preparing to attack Iran is simply absurd […]. Having said that, all options are on the table. ” (President George W. Bush, February 2005)

Who would have imagined that?

Forget the Prophet Muhammad, Islam, the Qur’an, President Ahmadinejad, his nuclear program, Islamic fascism, and all the imams. The mullahs no longer like the US dollar. As reported by Reuters in the United Kingdom ([http://rtv.rtrlondon.co.uk/2006-12-18/3e56a070.html]Iran announced that it had ordered its central bank to start using the euro in foreign transactions, and to convert the dollar-denominated assets of the country held abroad into the single European currency. “The government ordered the central bank to replace the dollar with the euro to reduce the problems of the executive bodies in commercial transactions, Government spokesman Gholam Hussein Elham told reporters.

Coming from the fourth oil producer in OPEC, this is a move that will undoubtedly have profound economic repercussions and dangerous political consequences around the world. It certainly seems that rather than “wiping Israel” off the face of the planet, it is Iran that sets the pace for the eradication of American capitalism and influence everywhere. To understand the implications of such a move in financial affairs, one must first return to the importance of money in our economic systems and the effects that the ravages of inflation have on them.

Money is one of the most wonderful inventions of man. Imagine the difficulty of our daily life without those coins and colorful pieces of paper. To conduct any type of transaction – from grocery shopping to real estate asset purchases – you must find someone who has what you want and wants what you have, and then both of you can barter. In a world with thousands of products, one spends most of the time searching for business partners and allocates very little time to actually earn an income. The alternative to avoiding having to find business partners would be for each of us to do a little of everything ourselves.

But with money on the scene, everything becomes clearer, simpler, and less time-consuming, and we can all increase our productivity through and through specialization – that is, doing what we do best, and then trading with our partners. As a direct result of our increased productivity, each of us could become richer. It’s easy to lose sight of the key economic point that we all owe a large portion of our high standards of living to the existence, possession, and purchasing power that stems from it.

But there is a problem: money works best when its value is stable over time. This is nowhere more true than in international trade.

Economically speaking, the strength of the US dollar and its influence in economic and financial affairs around the world was born during the United Nations Monetary and Financial Conference held in Bretton Wood, New Hampshire in July 1944. The conference was attended by delegates of all the forty-five Allied countries. The countries directly and indirectly involved in the fight against the Axis powers – Nazi Germany, the Empire of Japan, and Fascist Italy, and their socio-economic doctrines. As a result of the Bretton Woods conference, the exchange rate system between different currencies was established anchored in the US dollar, which became convertible into gold – the common denominator and measure of wealth around the world. And so it became the American dollar De facto The reserve currency in the world, accepted and circulated everywhere. This system remained in effect until the early 1970s and allowed countries to accumulate reserves in US dollars, unlike gold.

When western Europe that recovered economically in 1970-1971 began to demand payment for its US dollars, as 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 rather than defaulted. . It prompted him to “decouple” the dollar – that is, to sever the link between the dollar and gold. To avoid the international collapse of the US currency in global markets, the US Treasury had to exchange gold for another valuable commodity in order to lure foreign countries to keep their foreign currency reserves in dollars and continue to accept the US currency.

Thus in 1972-1973 an iron-clad arrangement was concluded with Saudi Arabia to support the Al Saud power in exchange for accepting only US dollars in exchange for its oil. The rest of OPEC had to follow suit and also accept only the US dollar. And because the world had to buy oil from Arab oil-producing countries, it now had a reason to keep the dollar as a payment for the oil. Because the world needs increasing quantities of oil in light of ever-increasing oil prices, the global demand for dollars can only increase. Although dollars can no longer be exchanged for gold, they are now exchangeable for oil. Petrodollar was born.

In 2000, the first man to really start demanding euros for his oil was none other than Saddam Hussein in Iraq – and we all know what happened to him. To be more specific, in fact, Saddam Hussein Abd al-Majid al-Tikriti (1937-2006), the former president of Iraq, made two strategic mistakes, and the second would cost him his neck in the end – literally.

First, on August 2, 1990, he invaded Kuwait, which is a very friendly country with both the United Kingdom and the United States, and holds nearly 10 percent of the world’s oil reserves. Moreover, Saddam became a real threat to Saudi Arabia as well. By invading Kuwait and threatening Saudi Arabia, Saddam broke the Carter Doctrine that President Jimmy Carter had assumed in 1980, which states that “[…] An attempt by any outside power to control the Persian Gulf region will be considered an assault on the vital interests of the United States of America, and this attack will be repelled by any means necessary, including military force. Carter later endorsed President George H.W.Bush the doctrine in 1989 with National Security Directive No. 26, which declares that “access to Persian Gulf oil and the security of major friendly states in the region is vital to the national security of the United States.” […]. The Gulf War followed in January 1991.

Saddam’s second mistake was to demand that his oil be paid in euros. At first, his request was met with derision, then later neglect, but as it became clear that he intended to work, the need arose to set an example for anyone demanding payment in currencies other than the US dollar. The punishment came as the geopolitical situation deteriorated after the September 11 attacks on the Twin Towers and an increase in awareness and concern about Saddam’s weapons of mass destruction – which he used extensively against the Kurds and his citizens. This was followed by the intervention of President Bush in Iraq with shock and awe, which ultimately led to the Iraqi dictator’s demise.

Contemporary warfare has always involved fundamental struggles over economics and resources. These overlapping conflicts today also include international currencies, thus increasing complexity. The current geopolitical tensions between the United States and Iran extend far beyond publicly stated concerns about Iran’s nuclear intentions, and will likely include Iran’s proposed “petroleum euro” regime for oil trading – the Iranian Oil Exchange (“stock exchange” is the French word for stock exchange). The proposed Iranian oil exchange indicates that without some kind of US intervention, the euro would establish a strong foothold in international oil trade.

This is true, because Europeans will no longer have to buy and hold dollars in order to secure their payments for oil, but instead will pay in their own currency. Adopting the euro for oil transactions will provide the European currency with a reserve status that benefits the Europeans at the expense of the Americans. Given the US external debt levels and trade deficits, Tehran’s goal is a clear encroachment on the dollar’s ​​supremacy in crucial international oil markets, and America cannot afford to do so. It is, in fact, a case of deadly economic terrorism and financial war, a matter of life and death.

Speaking of economic terrorism and financial war, it is very interesting and worth noting the relationship between oil and the euro on one side and the Iranian nuclear program on the other side that Gholam Hossein Elham made during the previous declaration. He said:they (Westerners) They must put an end to their hostilities towards our nation and also realize that we can achieve nuclear technology through transparent and very legal methods – something they must respect. They should not waste their time venting against this nation, or they will be harmed more than us. “

If Iran continues with the intention of imposing fees in euros on its oil, the upcoming Iranian stock exchange will enter hedging from the Petro-Euro currency in direct competition with traditional oil dollars. More than that, politically, it would pit America, Israel, and Sunni Islam against Iran, Syria, and Shia Islam and would fundamentally create new dynamics and competition in the largest markets in the world – the global oil and gas trade markets. One of the Fed’s nightmares could start to arise if it appears that international buyers will have the option to buy a barrel of oil for $ 60 at NYMEX and IPE – or buy a barrel of oil for $ 45 – € 50 through the Iranian stock exchange. In essence, America will no longer be able to easily expand its debt financing through the issuance of US Treasuries, and international demand and liquidity for the US dollar will decline. This is a very good reason to go to war.

Welcome to 2007.

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