Economic Analysis of the Invasion of Iraq

(please give it a read, or at least give it a scan of sorts. it's a really interesting read and it makes a ton of sense.)

America's Bush administration has been caught in outright lies, gross

exaggerations and incredible inaccuracies as it trotted out its

litany of paper thin excuses for making war on Iraq. Along with its two

supporters, Britain and Australia, it has shifted its ground and

reversed its position with a barefaced contempt for its audience. It has

manipulated information, deceived by commission and omission and

frantically bought UN votes with billion dollar bribes.

Faced with the failure of gaining UN Security Council support for

invading Iraq, the USA has threatened to invade without

authorisation. It would act in breach of the UNs very constitution to

allegedly enforced UN resolutions. It is plain bizarre. Where does this

desperation for war come from?

There are many things driving President Bush and his administration to

invade Iraq, unseat Saddam Hussein and take over the country. But the

biggest one is hidden and very, very simple. It is about the currency

used to trade oil and consequently, who will dominate the world

economically, in the foreseeable future- the USA or the

European Union. Iraq is a European Union beachhead in that

confrontation. America had a monopoly on the oil trade, with the US

dollar being the fiat currency, but Iraq broke ranks in 1999, started to

trade oil in the EU's euros, and profited. If America invades Iraq and

takes over, it will hurl the EU and its euro back into the sea

and make America's position as the dominant economic power in the world

all but impregnable.

It is the biggest grab for world power in modern times.

America's allies in the invasion, Britain and Australia, are betting

America will win and that they will get some trickle-down benefits

for jumping on to the US bandwagon. France and Germany are the spearhead

of the European force - Russia would like to go European

but possibly can still be bought off. Presumably, China would like to

see the Europeans build a share of international trade currency

ownership at this point while it continues to grow its international

trading presence to the point where it, too, can share the leadership



Oddly, little or nothing is appearing in the general media about this

issue, although key people are becoming aware of it - note the recent

slide in the value of the US dollar. Are traders afraid of war? They are

more likely to be afraid there will not be war. But despite the silence

in the general media, a major world discussion is developing around this

issue, particularly on the internet. Among the many articles: Henry Liu,

in the Asia Times last June, it has been a hot topic on the Feasta

forum, an Irish-based group exploring sustainable economics, and W.

Clark's The Real Reasons for the Upcoming War with Iraq: A Macroeconomic

and Geostrategic Analysis of the Unspoken Truth has been published by

the Sierra Times,, This debate is not about whether America would suffer

from losing the US dollar monopoly on oil trading - that is a given -

rather it is about exactly how hard the USA would be hit. The smart

money seems to be saying the impact would be in the range from severe to

catastrophic. The USA could collapse economically.


The key to it all is the fiat currency for trading oil.

Under an OPEC agreement, all oil has been traded in US dollars since

1971 (after the dropping of the gold standard) which makes the US dollar

the de facto major international trading currency. If other nations have

to hoard dollars to buy oil, then they want to use that hoard for other

trading too. This fact gives America a huge trading advantage and helps

make it the dominant economy in the world. As an economic bloc, the

European Union is the only challenger to the USA's economic position,

and it created the euro to challenge the dollar in international

markets. However, the EU is not yet united behind the euro - there is a

lot of jingoistic national politics involved, not least in Britain - and

in any case, so long as nations throughout the world must hoard dollars

to buy oil, the euro can make only very limited inroads into the dollars


In 1999, Iraq, with the world's second largest oil reserves, switched to

trading its oil in euros. American analysts fell about laughing; Iraq

had just made a mistake that was going to beggar the nation. But two

years on, alarm bells were sounding; the euro was rising against the

dollar, Iraq had given itself a huge economic free kick by switching.

Iran started thinking about switching too; Venezuela, the 4th largest

oil producer, began looking at it and has been cutting out the dollar by

bartering oil with several nations including America's bete noir, Cuba.

Russia is seeking to ramp up oil production with Europe (trading in

euros) an obvious market. The greenback's grip on oil trading and

consequently on world trade in general, was under serious threat. If

America did not stamp on this immediately, this economic brushfire could

rapidly be fanned into a wildfire capable of

consuming the US's economy and its dominance of world trade.


Imagine this: you are deep in debt but every day you write cheques for

millions of dollars you don't have - another luxury car, a

holiday home at the beach, the world trip of a lifetime. Your cheques

should be worthless but they keep buying stuff because those cheques you

write never reach the bank! You have an agreement with

the owners of one thing everyone wants, call it petrol/gas, that they

will accept only your cheques as payment. This means everyone must hoard

your cheques so they can buy petrol/gas. Since they have to

keep a stock of your cheques, they use them to buy other stuff too. You

write a cheque to buy a TV, the TV shop owner swaps your cheque for

petrol/gas, that seller buys some vegetables at the fruit shop, the

fruiterer passes it on to buy bread, the baker buys some flour with it,

and on it goes, round and round - but never back to the

bank. You have a debt on your books, but so long as your cheque never

reaches the bank, you don't have to pay. In effect, you have received

your TV free.

This is the position the USA has enjoyed for 30 years - it has been

getting a free world trade ride for all that time. It has been receiving

a huge subsidy from everyone else in the world. As it debt has been

growing, it has printed more money (written more cheques) to keep

trading. No wonder it is an economic powerhouse! Then one day, one

petrol seller says he is going to accept another person's

cheques, a couple of others think that might be a good idea. Ifthis

spreads, people are going to stop hoarding your cheques and they will

come flying home to the bank. Since you don't have enough in the bank to

cover all the cheques, very nasty stuff is going to hit the fan! But you

are big, tough and very aggressive. You don't scare the other guy who

can write cheques, he's pretty big too, but given a 'legitimate' excuse,

you can beat the tripes out of the lone gas seller and scare him and his

mates into submission. And that, in a nutshell, is what the USA is doing

right now with Iraq.


America is so eager to attack Iraq now because of the speed with which

the euro fire could spread. If Iran, Venezuela and Russia join Iraq and

sell large quantities of oil for euros, the euro would have the leverage

it needs to become a powerful force in general international trade.

Other nations would have to start swapping some of their dollars for


The dollars the USA has printed, the cheques it has written, would start

to fly home, stripping away the illusion of value behind them. The USA's

real economic condition is about as bad as it could be; it is the most

debt-ridden nation on earth, owing about US$12,000 for every single one

of it's 280 million men, women and children. It is worse than the

position of Indonesia when it imploded economically a few years ago, or

more recently, that of Argentina.

Even if OPEC did not switch to euros wholesale (and that would make a

very nice non-oil profit for the OPEC countries, including minimizing

the various contrived debts America has forced on some of them), the

US's difficulties would build. Even if only a small part of the oil

trade went euro, that would do two things immediately: * Increase the

attractiveness to EU members of joining the eurozone, which in turn

would make the euro stronger and make it more attractive to oil nations

as a trading currency and to other nations as a general trading


* Start the US dollars flying home demanding value when there isn't

enough in the bank to cover them.

* The markets would over-react as usual and in no time, the US dollar's

value would be spiralling down.


America's response to the euro threat was predictable. It has come out


It aims to achieve four primary things by going to war with Iraq:

* Safeguard the American economy by returning Iraq to trading oil in US

dollars, so the greenback is once again the exclusive oil currency.

* Send a very clear message to any other oil producers just what will

happen to them if they do not stay in the dollar circle. Iran has

already received one message - remember how puzzled you were that in the

midst of moderation and secularization, Iran was named as a

member of the axis of evil?

* Place the second largest reserves of oil in the world under direct

American control.

* Provide a secular, subject state where the US can maintain a huge

force (perhaps with nominal elements from allies such as Britain and

Australia) to dominate the Middle East and its vital oil. This would

enable the US to avoid using what it sees as the unreliable Turkey, the

politically impossible Israel and surely the next state in its sights,

Saudi Arabia, the birthplace of al Qaeda and a hotbed of anti-American


* Severe setback the European Union and its euro, the only trading bloc

and currency strong enough to attack the USA's dominance of

world trade through the dollar.

* Provide cover for the US to run a covert operation to overturn the

democratically elected government of Venezuela and replace it with an

America-friendly military supported junta - and put Venezuela's oil into

American hands.

Locking the world back into dollar oil trading would consolidate

America's current position and make it all but impregnable as the

dominant world power - economically and militarily. A splintered Europe

(the US is working hard to split Europe; Britain was easy, but other

Europeans have offered support in terms of UN votes) and its euro would

suffer a serious setback and might take decades to recover.

It is the boldest grab for absolute power the world has seen in modern

times. America is hardly likely to allow the possible

slaughter of a few hundred thousand Iraqis stand between it and world


President Bush did promise to protect the American way of life. This is

what he meant.


Obviously, the US could not simply invade Iraq, so it began casting

around for a legitimate reason to attack. That search has been one of

increasing desperation as each rationalization has crumbled. First Iraq

was a threat because of alleged links to al Qaeda; then it was proposed

Iraq might supply al Qaeda with weapons; then Iraq's

military threat to its neighbours was raised; then the need to deliver

Iraqis from Saddam Hussein's horrendously inhumane rule; finally there

is the question of compliance with UN weapons inspection.

The USA's justifications for invading Iraq are looking less impressive

by the day. The US's statements that it would invade Iraq unilaterally

without UN support and in defiance of the UN make a

total nonsense of any American claim that it is concerned about the

world body's strength and standing.

The UN weapons inspectors have come up with minimal infringements of the

UN weapons limitations - the final one being low tech rockets which

exceed the range allowed by about 20 percent. But there is no sign of

the so-called weapons of mass destruction (WMD) the US has so

confidently asserted are to be found. Colin Powell named a certain north

Iraqi village as a threat. It was not. He later admitted it was the

wrong village.

Newsweek (24/2) has reported that while Bush officials have been

trumpeting the fact that key Iraqi defector, Lt. Gen. Hussein Kamel,

told the US in 1995 that Iraq had manufactured tonnes of nerve gas

and anthrax (Colin Powell's 5 February presentation to the UN was just

one example) they neglected to mention that Kamel had also told the US

that these weapons had been destroyed.

Parts of the US and particularly the British secret evidence have been

shown to come from a student's masters thesis.

America's expressed concern about the Iraqi people's human rights and

the country's lack of democracy are simply not supported by the USA's

history of intervention in other states nor by its current actions.

Think Guatemala, the Congo, Chile and Nicaragua as examples of a much

larger pool of US actions to tear down legitimate, democratically

elected governments and replace them with war, disruption,

starvation, poverty, corruption, dictatorships, torture, rape and murder

for its own economic ends. The most recent, Afghanistan, is

not looking good; in fact that reinstalled a murderous group of warlords

which America had earlier installed, then deposed, in favour of the now

hated Taliban.

Saddam Hussein was just as repressive, corrupt and murderous 15 years

ago when he used chemical weapons, supplied by the US, against the

Kurds. The current US Secretary for Defence, Donal Rumsfeld, so vehement

against Iraq now, was on hand personally to turn aside condemnation of

Iraq and blame Iran. At that time, of course, the US thought Saddam

Hussein was their man - they were using him against

the perceived threat of Iran's Islamic fundamentalism.

Right now, as The Independent writer, Robert Fisk, has noted, the US's

efforts to buy Algeria's UN vote includes promises of re-arming the

military which has a decade long history of repression, torture, rape

and murder Saddam Hussein himself would envy. It is estimated 200,000

people have died, and countless others been left maimed by

the activities of these monsters. What price the US's humanitarian

concerns for Iraqis? (Of course, the French are also wooing Algeria,

their former north African territory, for all they are worth, but at

least they are not pretending to be driven by humanitarian concerns.

Indonesia is another nation with a vote and influence as the largest

Muslim nation in the world. Its repressive, murderous military is

regaining strength on the back of the US's so-called anti-terror

campaign and is receiving promises of open and covert support --

including intelligence sharing.


While the world's attention is focused on Iraq, America is both openly

and covertly supporting the coup of the rich in Venezuela, which grabbed

power briefly in April last year before being intimidated by massive

public displays of support by the poor for democratically-elected

President Chavez Frias. The coup leaders continue to use their control

of the private media, much of industry and the ear of the American

Government and its oily intimates to

cause disruption and disturbance. Venezuela's state-owned oil resources

would make rich pickings for American oil companies and provide the US

with an important oil source in its own backyard.

Many writers have noted the contradiction between America's alleged

desire to establish democracy in Iraq while at the same time,

actively undermining the democratically-elected government in Venezuela.

Above the line, America rushed to recognise the coup last April; more

recently, President Bush has called for early elections, ignoring the

fact that President Chavez Frias has won three elections and two

referendums and, in any case, early elections would be unconstitutional.

One element of the USA's covert action against Venezuela is the

behaviour of American transnational businesses, which have locked out

employees in support of national strike action. Imagine them doing that

in the USA! There is no question that a covert operation is in process

to overturn the legitimate Venezuelan government. Uruguayan congressman,

Jose Nayardi, made it public when he revealed that the Bush

administration had asked for Uruguay's support for Venezuelan white

collar executives and trade union activists to break down

levels of intransigence within the Chive Frias administration. The

process, he noted, was a shocking reminder of the CIA's 1973

intervention in Chile which saw General Pinochet lead his military coup

to take over President Allende's democratically elected government in a


President Chavez Frias is desperately clinging to government, but with

the might of the USA aligned with his opponents, how long can he last?


Some have claimed that an American invasion of Iraq would cost so many

billions of dollars that oil returns would never justify such an action.

But when the invasion is placed in the context of the protection of the

entire US economy for now and into the future, the balance of the

argument changes. Further, there are three other vital factors: First,

America will be asking others to help pay for the war because it is

protecting their interests. Japan and Saudi Arabia made serious

contributions to the cost of the 1991 Gulf war.

Second? In reality, war will cost the USA very little - or at least,

very little over and above normal expenditure. This war is already paid

for! All the munitions and equipment have been bought and paid for. The

USA would have to spend hardly a cent on new hardware to prosecute this

war - the expenditure will come later when munitions and equipment have

to be replaced after the war. But munitions, hardware and so on are

being replaced all the time -- contracts are out. Some contracts will

simply be brought forward and some others will be ramped up a bit, but

spread over a few years, the cost will not be great. And what is the

real extra cost of an army at war compared with maintaining the standing

army around the world, running exercises and so on? It is there, but it

is a relatively small sum. Third - lots of the extra costs involved in

the war are dollars spent outside America, not least in the purchase of

fuel. Guess how America will pay for these? By printing dollars it is

going to war to

protect. The same happens when production begins to replace hardware,

components, minerals, etc. are bought in with dollars that go

overseas and exploit America's trading advantage.

The cost of war is not nearly as big as it is made out to be. The cost

of not going to war would be horrendous for the USA - unless there were

another way of protecting the greenback's world trade dominance.


Why are Australia and Britain supporting America in its transparent

Iraqi war ploy?

Australia, of course, has significant US dollar reserves and trades

widely in dollars and extensively with America. A fall in the US dollar

would reduce Australia's debt, perhaps, but would do nothing for the

Australian dollar's value against other currencies. John Howard, the

Prime Minister, has long cherished the dream of a free trade agreement

with the USA in the hope that Australia can jump on the back of the free

ride America gets in trade through the dollar's position as the major

trading medium. That would look much less attractive if the euro took

over a significant part of the oil trade.

Britain has yet to adopt the euro. If the US takes over Iraq and blocks

the euro's incursion into oil trading, Tony Blair will have given his

French and German counterparts a bloody nose, and gained more room to

manouevre on the issue- perhaps years more room. Britain would be in a

position to demand a better deal from its EU partners for entering the

eurozone if the new currency could not make the huge value gains

guaranteed by a significant role in world oil trading. It might even be

in a position to withdraw from Europe and link with America against

continental Europe. On the other hand, if the US cannot maintain the

oiltrade dollar monopoly, the euro will rapidly

go from strength to strength, and Britain could be left begging to be

allowed into the club.


Some of the reasons for opposition to the American plan are obvious -

America is already the strongest nation on earth and dominates world

trade through its dollar. If it had control of the Iraqi oil and a base

for its forces in the Middle East, it would not add to, but

would multiply its power. The oil producing nations, particularly the

Arab ones, can see the writing on the wall and are quaking in their

boots. France and Germany are the EU leaders with the vision of a

resurgent, united Europe taking its rightful place in the world and

using its euro currency as a world trading reserve currency and thus

gaining some of the free ride the United States enjoys now. They are the

ones who initiated the euro oil trade with Iraq. Russia is in

deep economic trouble and knows it will get worse the day America starts

exploiting its take-over of Afghanistan by running a pipeline southwards

via Afghanistan from the giant southern Caspian oil

fields. Currently, that oil is piped northwards - where Russia has

control. Russia is in the process of ramping up oil production with the

possibility of trading some of it for euros and selling some to the US

itself. Russia already has enough problems with the fact that oil is

traded in US dollars; if the US has control of Iraqi oil, it could

distort the market to Russia's enormous disadvantage. In addition,

Russia has interests in Iraqi oil; an American take over could see them

lost. Already on its knees, Russia could be beggared before a mile of

the Afghanistan pipeline is laid.


The scenario clarifies the seriousness of America's position and

explains its frantic drive for war. It also suggests that solutions

other than war are possible. Could America agree to share the trading

goodies by allowing Europe to have a negotiated part of it? Not very

likely, but it is just possible Europe can stare down the USA and force

such an outcome. Time will tell. What about Europe taking the

statesmanlike, humanitarian and long view, and withdrawing, leaving the

oil to the US, with appropriate safeguards for ordinary Iraqis

and democracy in Venezuela?

Europe might then be forced to adopt a smarter approach- perhaps

accelerating the development of alternative energy technologies which

would reduce the EU's reliance on oil for energy and produce goods it

could trade for euros- shifting the world trade balance. Now that would

be a very positive outcome for everyone
An interesting read indeed. I can't say that I believe all of it, but it could certainly explain some of the more questionable actions by the US in recent times.

What was your source?
I had always hated when people would simply say "Yeah man, it's about the oil." These were the people that had no idea what they were talking about and just needed something to say so they repeated what they heard on MSNBC or Fox News. At least this article provides a well-thought-out argument for why oil would be a major factor in the war. It answers a few questions such as "why d0 w3 need oilz? We have al4ska1!11"

I still don't think it was just about oil though. Several factors contributed to the war, which may or may not include the subject of oil.
Originally posted by Resident_Lurker@Apr 23, 2003 @ 05:18 AM

I still don't think it was just about oil though. Several factors contributed to the war, which may or may not include the subject of oil.

We could've, for a lot less money, sent troops to Venezuela and stopped the strikes/protests, and bought Ven. out of OPEC, and make them our sole distributor. A year ago that would've sounded far-fetched; sadly, it probably could've been a better idea.

But what do I know.
venezuela's just one country, the u.s. needs a middle east outpost from which to spread it's control. besides which, blowing the shit out of iraq pr'lly made israel really happy
I'm not sure that I believe it, but I've been told that the oil factor in Iraq isn't about securing cheap oil for the US (that part I do believe; war isn't cheap), but about denying cheap oil to potential rivals. Just another possibility to consider and/or debunk, I guess...
i heard something similar to that on the drive to work today

seems the e.u. had been gaining financial clout at the cost of the u.s. because they continued trade w/iraq. anyway, i'm glad that sadam's out of the picture, but unless the regeim that the u.s. installs in place of his is any better for the people of iraq all the bloodshed and wasted money of the past few months is totally for naught. 20 cents less a gallon for gas means very little when 1/2 the teachers in california are getting laid off. clinton may have been as scummy as all his prediscesors and his ursurper, but at least it seemed that we were making progress when he was in office. class sizes were diminishing, the economy was jumping, neccesary human rights were being maintained, ect. now i get up in the morning and before i get out of bed i say to my self "why bother". the only bright side i see is that everytime in the past that the paradigm has shifted to the moronic right, within 8 years it has shifted back. i say to myself constantly that i have no desire to have children, a few weeks ago it occured to me that i really would like to have kids, reproduciton being utimatley the only purpose of surivival, but not so long as i live in this country. maybe if i move ot france or canada....
Originally posted by sizone@Apr 24, 2003 @ 06:09 AM

venezuela's just one country, the u.s. needs a middle east outpost from which to spread it's control. besides which, blowing the shit out of iraq pr'lly made israel really happy

And alaska is just one state. Yet, it's the centerpiece of the energy plan proposed by Bush, Jr. Go figure.