Mike Whitney: Iran’s Oil Bourse Could Topple The Dollar


Richard Moore


Iran's Oil Bourse Could
Topple The Dollar
By Mike Whitney

Two weeks ago George Bush was sent on a mission to the Middle East to deliver a 
horse's head. We all remember the disturbing scene in Francis Ford Coppola's 
"The Godfather" where Lucca Brassi goes to Hollywood to convince a recalcitrant 
movie producer to use Don Corleone's nephew in his next film. The "Big shot" 
producer is finally persuaded to hire the young actor after he wakes up in bed 
next to the severed head of his prize thoroughbred. I expect that Bush made a 
similar "offer they could not refuse" to the various leaders of the Gulf States 
when he met with them earlier this month.

The media tried to portray Bush's trip to the Middle East as a "peace mission", 
but that just a smokescreen. In fact, three days after Bush left Jerusalem, 
Israel stepped-up its military operations in the occupied territories and 
resumed its merciless blockade of food, water, medicine and energy to the 1.5 
million people of Gaza. Clearly, Bush had green-lighted the operations or 
Israel's aggression would have been seen as a slap in the face of the President 
of the United States.

So, what was the real purpose of Bush's trip? After all, he has no interest in 
peace or in honoring his commitment to resolve the Israeli-Palestinian crisis. 
So, why would he choose to visit the Middle East just as his second term as 
president is winding down and there is no chance of success?

Sometimes personal visits are important; especially when the nature of the 
information is so sensitive that the message has to be made face to face. In 
this case, Bush went to the trouble of traveling half-way around the world to 
tell the Saudis and their friends in the Gulf States that they were going to 
continue linking their oil to the dollar or they were going to "sleep with the 
fishes". For the last two months, various sheiks and finance ministers have been
moaning and groaning about the falling dollar---threatening to break from the 
so-called "dollar-peg" and covert to a basket of currencies. Bush's trip appears
to have rekindled the spirit of brotherly cooperation. The grumbling has ceased 
and everyone is back "on board". The regional leaders now seem considerably less
bothered by the fact that inflation is gobbling up their economies and driving 
labor, food, energy and housing through the roof. Reuters summed it up like 

"After a flurry of public disagreements over currency reform last year, Gulf 
central bankers are trying to close ranks, talking up the pegs as a source of 
stability and playing down the dollar's weakness as a temporary phenomenon."

Looks like Bush smoothed things over.

In the last two weeks, the Gulf leaders have watched nervously while the Federal
Reserve has slashed rates by a whopping 125 basis points. The cuts are steadily 
eroding the $1 trillion of capital the sheiks have invested in US Treasuries and

"Inflation is at 16-year highs in Saudi Arabia and Oman, a 19-year peak in the 
United Arab Emirates. Gulf policymakers are intervening directly in loans, 
property and commodity markets to offset rate cut." (Reuters)

Property values have skyrocketed. Commercial property in the UAE has doubled 
since the beginning of 2007. The inflation-bomb has forced other Gulf states to 
provide food subsidies for their people and a "70% wage rise for some Emirati 
federal government employees."

Disgruntled migrant workers rioted in Dubai recently, demanding to be fairly 
compensated for the sharp increase in prices. The Saudi riyal has climbed to a 
21-year peak.

Currency traders expect another 8% rise in the dirham and riyal by April and 
they are predicting that interest rates will compel Central bankers throughout 
Gulf states to covert to either the euro or a basket of regional currencies. So 
far, however, the loyal Saudi princes have continued their support for the 

Defending Dollar Hegemony

So, how important is it that oil continue to be denominated in dollars? Would 
the United States wage war to defend the dollar's status as the world's "reserve

The answer to this question could come as early as this week, since the 
long-awaited Iranian Oil Bourse is scheduled to open between February 1-11. 
According to Iran's Finance Minister Davoud Danesh-Jafari, "All preparations 
have been made to launch the bourse; it will open during the 10-day Dawn (the 
ceremonies marking the victory of the 1979 Islamic Revolution in Iran) The 
bourse is considered a direct threat to the continued global dominance of the 
dollar because it will require that Iranian "oil, petrochemicals and gas" be 
traded in "non-dollar currencies". (Press TV, Iran)

The petrodollar system is no different than the gold standard. Today's currency 
is simply underwritten by the one vital source of energy upon which every 
industrialized society depends---oil. If the dollar is de-linked from oil; it 
will no longer serve as the de-facto international currency and the US will be 
forced to reduce its massive trade deficits, rebuild its manufacturing capacity,
and become an export nation again. The only alternative is to create a network 
of client regimes who repress the collective aspirations of their people so they
can faithfully follow directives from Washington.

As to whether the Bush administration would start a war to defend dollar 
hegemony; that's a question that should be asked of Saddam Hussein. Iraq was 
invaded just six months after Saddam converted to the euro. The message is 
clear; the Empire will defend its currency.

Similarly, Iran switched from the dollar in 2007 and has insisted that Japan pay
its enormous energy bills in yen. The "conversion" has infuriated the Bush 
administration and made Iran the target of US belligerence ever since. In fact, 
even though 16 US Intelligence agencies issued a report (NIE) saying that Iran 
was not developing nuclear weapons; and even though the UN's nuclear watchdog, 
the IAEA, found that Iran was in compliance with its obligations under the 
Nuclear Nonproliferation (NPT) Treaty; a preemptive US-led attack on Iran still 
appears likely.

And, although the western media now minimizes the prospects of another war in 
the region; Israel is taking the precautions that suggest that the idea is not 
so far-fetched. "Israel calls for shelter rooms to be set up in a bid to prepare
the public for yet another war, this time, one of raining missiles." (Press TV, 

"The next war will see a massive use of ballistic weapons against the whole of 
Israeli territory," claimed retired general Udi Shani. (Global 

Russia also sees a growing probability of hostilities breaking out in the Gulf 
and has responded by sending a naval task force into the Mediterranean Sea and 
the North Atlantic.

According to an article on the Global Research site:

"The flagship of Russia's Black Sea Fleet, the Moskva guided missile cruiser, 
joined up with Russian naval warships in the Mediterranean on January 18 to 
participate in the current maneuvers....The current operation is the first 
large-scale Russian Navy exercise in the Atlantic in 15 years. All combat ships 
and aircraft involved carry full combat ammunition loads.

(Global Research, http://globalresearch.ca/index.php?context=va&aid=7983)

France is also planning military maneuvers in the Straits of Hormuz. Operation 
"Gulf Shield 01," will take place off the coast of Iran and will employ 
thousands of personnel in combined arms operations that will include simulated 
attacks on oil platforms."

Exercises are scheduled to take place from Feb. 23 to March 5, and will involve 
1,500 French, 2,500 Emirate, and 1,300 Qatari personnel operating on land, at 
sea and in the air, the ministry said..."Around a half-dozen warships, 40 
aircraft and dozens of armored vehicles will be in the war games", Fusalba said.


Additionally, within the last week, three of the main underwater cables which 
carry Internet traffic have been cut off in the Persian Gulf and three-quarters 
of the international communications between Europe and the Middle East have been
lost. Large parts of the Middle East have been plunged into darkness.

Is this merely a coincidence or is something else going on just below the 

Ian Brockwell, of the American Chronicle said:

"On the assumption that the cables cut were no accident, we must ask ourselves 
who would do such a thing and why. Clearly Iran, who were most affected, would 
gain nothing from such an action and are perhaps the target of those 
responsible?...Maybe this is a prelude to an attack, or perhaps a test run for a
future one?

Communication has always been an important factor in military action, and 
cutting these cables might affect Iran´s ability to defend itself." (American 
Chronicle, http://www.americanchronicle.com/articles/51085)

Despite the lack of media coverage, tensions are mounting in the Gulf and the 
probability of a US-led attack on Iran is still quite high. Bush is convinced 
that if he doesn't confront Iran, then no one will. He also believes that if he 
doesn't militarily defend the dollar, then America's days as "the world's only 
superpower" will soon be over. So, the real question is whether Bush will 
realize that America is already hopelessly bogged-down in two "unwinnable" 
conflicts or if he will "go with his gut" once again and lead us into a ruinous 
region-wide conflagration.


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