Iranian Threat

I don’t know about you, but this drum beat about the threat of an Iranian nuclear weapons program sounds suspect to me. It’s all over the TV news and newspapers. The cable Talking Heads rant about this daily. But what’s the real story?

A Washington Post article last August, laid out the intelligence estimate that came from a consensus of the government'sintelligence agencies. The article said this intelligence report “projected that Iran is about a decade away from manufacturing the key ingredient for a nuclear weapon, roughly doubling the previous estimate of five years, according to government sources with firsthand knowledge of the new analysis.” The article reiterates that this consensus comes from all US intelligence agencies. The administration’s mouthpieces are conspicuous in their avoiding “intelligence reports” in their screeds, but they all are saying, “a military response is on the table.”

So why the drumbeat for military action against an Iranian nuclear threat that is non-existent right now and is at least ten years down the road?

Try this analysis. First, in 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, our government made an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. Later, the rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil

Oil contracts are executed only on the exchanges in New York and London. Secondly, It is no coincidence that the enormous US foreign debt and trade deficit is denominated in US dollars and as this debt and trade deficit grows, the value of the US dollar declines. As the value of the US dollar drops, because of inflation, we still get cheaper goods and our trading partners’ dollar reserves continue to lose value. Fortunately, the holders of US dollars can at least buy oil with their surplus dollars and as their demand for oil grows, it will be a convenient way to use some of their US currency holdings. Suffice it to say that the Chinese, Saudis and other Asian countries are not comfortable holding huge US dollar reserves, that depreciate in value.

Enter Iran, a major oil supplier. Iran doesn’t like to keep it’s currency reserves in US dollars because of the rhetoric from Washington and experience in the past. The US supported Iraq, you’ll remember, back in the eighties, in it’s seven year war with Iran. Those who live in the middle-east have long memories. They do not forget. Just recently, Iran has begun to move it’s currency reserves into other currencies and other financial institutions. They also learned from Saddam that you can earn the wrath of the US for accepting euros for oil as Iraq did during the sanctions period. As a result of US policies and Iran’s yearning for respect, the Iranian government has finally developed the ultimate "nuclear" weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006. It will be based on a euro-oil-trading mechanism that naturally implies payment for oil in Euro. In economic terms, this represents a much greater threat to the hegemony of the dollar than Saddam's, because it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether.

You don’t need a Ph.D. in economics to figure out what that could mean to the US economy. As countries start trading in euros and get rid of US dollars, inflation in the US could surge into double digits, bringing on a deep recession and oil hits $100 or more, per barrel. As a result, the stock market tumbles as the value of the stock of Big Oil, Halliburton, the Carlyle Group, and the Wall Street backers of George Bu$h shrinks to a fraction of it's former worth.

Far fetched? You decide.






Tags: George Bush, Iran, and Oil