Petrodollar warfare

The phrase petrodollar warfare refers to a hypothesis that a hidden, driving force of United States foreign policy over recent decades has been the status of the United States dollar as the world's dominant reserve currency and as the currency in which oil is priced. The term was coined by William R. Clark, who has written a book with the same title. The phrase "oil currency wars" is sometimes used with the same meaning.

Supporters of this hypothesis believe that the value of the U.S. dollar is determined by the fact that many key commodities (particularly oil and natural gas) are denominated in dollars. They believe that if the denomination changes to another currency, such as the euro, many countries would sell dollars and cause the banks to shift their reserves because they would no longer need dollars to buy oil and gas. This would weaken the dollar relative to the euro (see supply and demand). The core of the hypothesis is that U.S. administrations are greatly motivated by fear of the consequences of a weaker dollar, particularly higher oil prices. This motivation is seen as underlying and explaining many aspects of U.S. foreign policy, including the ongoing Iraq War.

Background

Most oil sales throughout the world are denominated in United States dollars (USD). [ [http://chinadaily.com.cn/world/2007-11/19/content_6264602.htm China Daily: Ahmadinejad: Remove US dollar as major oil trading currency] ] Because most countries rely on oil imports, they are forced to maintain large stockpiles of dollars in order to continue imports. This causes demand for USDs to remain high, regardless of economic conditions in the United States. This allows the US government to gain revenues through seignorage and by issuing bonds at lower interest rates than they otherwise would be able to. As a result the U.S. government can run higher budget deficits at a more sustainable level than can most other countries.

It also means that the price of oil is more stable in the U.S. than anywhere else, since importers do not need to worry about exchange rate fluctuations. Since the U.S. imports a great deal of oil, its markets are heavily reliant on oil and its derivative products (jet fuel, diesel fuel, gasoline, etc.) for their energy needs. The price of oil can be an important political factor; American administrations are quite sensitive to the price of oil.

Political enemies of the United States therefore have some interest in seeing oil denominated in euros or other currencies. The EU could also theoretically accrue the same benefits if the euro replaced the dollar. However, the European economy could also be seriously damaged if the euro were to appreciate significantly against the dollar or other world currencies.

In 2000, Iraq converted all its oil transactions under the Oil for Food program to euros. [ [http://www.rferl.org/features/2000/11/01112000160846.asp Iraq: Baghdad Moves To Euro] ] When U.S. invaded Iraq in 2003, it returned oil sales from the euro to the USD. [Carol Hoyos and Kevin Morrison, [http://search.ft.com/ftArticle?queryText=iraq+returns+to+the+international+oil+market&aje=true&id=030605006163&ct=0&nclick_check=1 Iraq returns to the international oil market] , Financial Times, June 5, 2003]

After considerable delay, Iran has now opened an oil bourse which does not accept U.S. Dollars. Proponents of this theory fear that it will give added reason for the U.S. to topple the Iranian regime as a means to close the bourse and revert Iran's oil transaction currency to USDs.

In mid-2006 Venezuela indicated support of Iran's decision to offer global oil trade in the euro currency. (See: “Venezuela Backs Plan to Sell Oil in Euros” Associated Press, June 1, 2006) [http://www.chron.com/disp/story.mpl/ap/fn/3920101.html]

As a result they have limited ability to influence the denomination of sales one way or the other. A large number of traders would have to agree to a change in denomination before a change occurred.

Of particular concern is America's dependence on foreign oil. Many economists feel that the recent rise in oil prices is at least partially tied to the fall of the US dollar relative to most currencies. Since oil is priced in dollars, sellers have increased prices to compensate for their "real" loss of income. Economists generally agree that higher oil prices pose a risk of inflation, recession, or both. Inflation would almost certainly rise if the dollar were to depreciate heavily.

At least one U.S. Representative, Republican Ron Paul of Texas, has made very strong statements advancing similar views, using the phrase “dollar hegemony” to describe U.S. policy and proposing related reforms. [ [http://www.house.gov/paul/congrec/congrec2006/cr021506.htm The End of Dollar Hegemony ] at www.house.gov] Many editorialists and bloggers have supported the theory. Fact|date=April 2008

Project Censored Awards in 2004 and 2006

The topic of oil currency warfare under the title "U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq" won a 2003 Project Censored award in [http://www.projectcensored.org/publications/2004/19.html 2004] .

"Iran’s New Oil Trade System Challenges U.S. Currency" won a 2006 Project Censored award in [http://www.projectcensored.org/censored_2006/index.htm#9 Top 25 Censored Stories for 2006 | Project Censored ] at www.projectcensored.org.

These two essays were written by the author of the book "Petrodollar Warfare", William Clark.

ee also

* Petrodollar
* Iranian oil bourse
* Petroeuro
* Petroruble
* Petrodollar recycling
* Peak oil
* Oil reserves
* Dollar hegemony
* [http://www.stingflation.com Cheap oil & P3 doctrine]

Further reading

* Clark, William R.: "Petrodollar Warfare : Oil, Iraq and the Future of the Dollar", New Society Publishers, 2005, ISBN 0-86571-514-9
* cite book
first = Phillips | last = Peter | authorlink = Phillips Peter | year = 2003
title = The Top 25 Censored Stories: U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq
publisher = Seven Stories Press | location = New York
* Engdahl, F. William, "A New American Century? Iraq and the hidden euro-dollar wars", Current Concerns, No 4, June 2003
* Engdahl, F. William: "A Century of War: Anglo-American oil politics and the New World Order", Pluto Press, 2004, ISBN 0-7453-2309 X

References

Books

*Clark, William R.: " [http://www.petrodollarwarfare.com/ Petrodollar Warfare: Oil, Iraq and the Future of the Dollar] ", ISBN 978-0865715141

External links

Background

* [http://www.cpa.org.au/garchve06/1276dollar.html How much longer can the dollar reign supreme?] by Linda Heard. "The Guardian" (Australia), July 6, 2006. This article discusses exchange rates and the dollar's slowly declining role as the dominant reserve currency.
* [http://web.mit.edu/krugman/www/seignor.html Don't worry about the euro] by Paul Krugman. April 27, 1998. Krugman claims concerns about the dollar's reserve currency status are overblown. This column pre-dates the current debate by several years.
* [http://energybulletin.net/13081.html Norwegian Bourse Director wants oil bourse - priced in euros] by Laila Bakken and Petter Halvorsen, NRK.no, December 27, 2005
* [http://www.maavak.net/maavak/maavak053.html Brinkmanship of Energy Geopolitics] by Mathew Maavak, Panoptic World, March 3, 2006
* [http://www.stingflation.com Atlantic Unbundling, The Only way Out] by Stephan Tychon, duality counsel WSC, May, 2008.

Pro views

* [http://www.petrodollarwarfare.com/PDFs/Hysteria_Over_Iran_and_a_New_Cold_War_with_Russia.pdf Hysteria Over Iran and a New Cold War with Russia: Peak Oil, Petrocurrencies, and the Emerging Multi-Polar World] , by William Clark, December 30, 2006
* [http://americandaily.com/article/12466 The Attack on the U.S. Dollar and Energy Needs] by Alan Caruba. March 19, 2006. An editorial.
* [http://www.republic-news.org/archive/135-repub/135_dan_adleman.htm The Rise of the Petroeuro] by Dan Adleman. "The Republic of East Vancouver", July 20, 2006.
* [http://www.raisethehammer.org/article/235 Petrodollar Warfare] by Ryan McGreal, "Raise the Hammer", January 27, 2006. A review of William Clark's book.
* [http://www.energybulletin.net/12987.html Talk in congress: The End of Dollar Hegemony] by Congressman Ron Paul, February 15, 2006
* [http://www.globalpublicmedia.com/interviews/646 Petrodollar Warfare Interview] (audio) with William R. Clark and Jim Puplava of the Financial Sense Newshour.
* [http://usa.mediamonitors.net/content/view/full/17450 Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil Bourse] by William R. Clark. Media Monitors Network, August 5, 2005.
* [http://www.feasta.org/documents/review2/nunan.pdf Petrodollar or Petroeuro? A new source of global conflict] by Cóilín Nunan, Feasta Review no. 2
* [http://www.opednews.com/articles/opedne_mike_whi_060131_battle_plans_for_ira.htm Battle Plans for Iran] by Mike Whitney, OpEdNews, January 31, 2006.
* [http://www.antiwar.com/blog/index.php?id=P2651 US Paper Money and Iran's Oil Bourse] an abstract of a speech by Congressman Ron Paul, February 17, 2006.
* [http://neontetra.blogspot.com/2006/02/where-will-oil-trade-new-york-london.html Where will oil trade: New York? London? Tehran?] by NeonTetra. Sandcastle in the tide Blog, February 27, 2006.
* [http://www.globalresearch.ca/index.php?context=viewArticle&code=KEE20060210&articleId=1936 Petrodollars and Nuclear Weapons Proliferation: Understanding the Planned Assault on Iran] , Centre for Research on Globalization, February 10, 2006.
* [http://www.ratical.org/ratville/CAH/RRiraqWar.pdf The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth] , Essay by William R. Clark, January 2004.
* [http://www.projectcensored.org/publications/2004/19.html U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq] by Project Censored.
* [http://www.opednews.com/articles/opedne_mike_whi_060123_iran_92s_oil_exchange_.htm Iran’s Oil Exchange threatens the Greenback] by Mike Whitney, OpEdNews, January 23, 2006.
* [http://www.informationclearinghouse.info/article11613.htm The Proposed Iranian Oil Bourse] by Krassimir Petrov. Informationclearinghouse.info, January 19, 2006.
* [http://www.tomdispatch.com/index.mhtml?pid=2312 Oil, Geopolitics, and the Coming War with Iran] by Michael T. Klare. Tom Dispatch, April 11, 2005.
* [http://www.indybay.org/uploads/history_of_oil.ram History of Oil video] by Robert Newman.
* [http://mathaba.net/news/?x=530827 The Beginning of the End of the Petrodollar: What Connects Iraq to Iran] by Dr. Bulent Gokay, 15 March, 2006.
* [http://www.mathaba.net/news/?x=551732 Cost, abuse and danger of the dollar] by Rudo de Ruijter, Mathaba News, March 7, 2007.

Critical views

* [http://web.nps.navy.mil/~relooney/Rel_MEJ_S04.pdf Petroeuros: A Threat to U.S. Interests in the Gulf?] by R. Looney, Middle East Policy, 11, (2004), 1, pp. 26-37
* [http://www.econbrowser.com/archives/2006/01/strange_ideas_a.html Strange ideas about the Iranian oil bourse] by James D. Hamilton, Econbrowser, January 20, 2006
* [http://www.atimes.com/atimes/Middle_East/HA21Ak01.html What the Iran 'nuclear issue' is really about] by Chris Cook, "Asia Times Online", January 21, 2006
* [http://www.atimes.com/atimes/Middle_East/HC10Ak01.html Why Iran's oil bourse can't break the buck] by F. William Engdahl, "Asia Times Online", March 10, 2006