Sinking the Petrodollar in the Persian Gulf

Published on Tom Dispatch, by Pepe Escobar, January 17, 2012.

These days, with a crisis atmosphere growing in the Persian Gulf, a little history lesson about the U.S. and Iran might be just what the doctor ordered.  Here, then, are a few high- (or low-) lights from their relationship over the last half-century-plus:  

  • Summer 1953: The CIA and British intelligence hatch a plot for a coup that overthrows a democratically elected government in Iran intent on nationalizing that country’s oil industry.  In its place, they put an autocrat, the young Shah of Iran, and his soon-to-be feared secret police.  He runs the country as his repressive fiefdom for a quarter-century, becoming Washington’s “bulwark” in the Persian Gulf — until overthrown in 1979 by a home-grown revolutionary movement, which ushers in the rule of Ayatollah Khomeini and the mullahs.  While Khomeini & Co. were hardly Washington’s men, thanks to that 1953 coup they were, in a sense, its own political offspring.  In other words, the fatal decision to overthrow a popular democratic government shaped the Iranian world Washington now loathes, and even then oil was at the bottom of things … //

… Follow the Money:

  • That Iranian isolation theme only gets weaker when one learns that the country is dumping the dollar in its trade with Russia for rials and rubles — a similar move to ones already made in its trade with China and Japan.  As for India, an economic powerhouse in the neighborhood, its leaders also refuse to stop buying Iranian oil, a trade that, in the long run, is similarly unlikely to be conducted in dollars. India is already using the yuan with China, as Russia and China have been trading in rubles and yuan for more than a year, as Japan and China are promoting direct trading in yen and yuan.  As for Iran and China, all new trade and joint investments will be settled in yuan and rial.
  • Translation, if any was needed: in the near future, with the Europeans out of the mix, virtually none of Iran’s oil will be traded in dollars.
  • Moreover, three BRICS members (Russia, India, and China) allied with Iran are major holders (and producers) of gold. Their complex trade ties won’t be affected by the whims of a U.S. Congress.  In fact, when the developing world looks at the profound crisis in the Atlanticist West, what they see is massive U.S. debt, the Fed printing money as if there’s no tomorrow, lots of “quantitative easing,” and of course the Eurozone shaking to its very foundations.
  • Follow the money. Leave aside, for the moment, the new sanctions on Iran’s Central Bank that will go into effect months from now, ignore Iranian threats to close the Strait of Hormuz (especially unlikely given that it’s the main way Iran gets its own oil to market), and perhaps one key reason the crisis in the Persian Gulf is mounting involves this move to torpedo the petrodollar as the all-purpose currency of exchange.
  • It’s been spearheaded by Iran and it’s bound to translate into an anxious Washington, facing down not only a regional power, but its major strategic competitors China and Russia.  No wonder all those carriers are heading for the Persian Gulf right now, though it’s the strangest of showdowns — a case of military power being deployed against economic power.
  • In this context, it’s worth remembering that in September 2000 Saddam Hussein abandoned the petrodollar as the currency of payment for Iraq’s oil, and moved to the euro. In March 2003, Iraq was invaded and the inevitable regime change occurred. Libya’s Muammar Gaddafi proposed a gold dinar both as Africa’s common currency and as the currency of payment for his country’s energy resources. Another intervention and another regime change followed.
  • Washington/NATO/Tel Aviv, however, offers a different narrative.  Iran’s “threats” are at the heart of the present crisis, even if these are, in fact, that country’s reaction to non-stop US/Israeli covert war and now, of course, economic war as well.  It’s those “threats,” so the story goes, that are leading to rising oil prices and so fueling the current recession, rather than Wall Street’s casino capitalism or massive U.S. and European debts. The cream of the 1% has nothing against high oil prices, not as long as Iran’s around to be the fall guy for popular anger.
  • As energy expert Michael Klare pointed out recently, we are now in a new geo-energy era certain to be extremely turbulent in the Persian Gulf and elsewhere.  But consider 2012 the start-up year as well for a possibly massive defection from the dollar as the global currency of choice. As perception is indeed reality, imagine the real world — mostly the global South — doing the necessary math and, little by little, beginning to do business in their own currencies and investing ever less of any surplus in U.S. Treasury bonds.
  • Of course, the U.S. can always count on the Gulf Cooperation Council (GCC) — Saudi Arabia, Qatar, Oman, Bahrain, Kuwait and the United Arab Emirates — which I prefer to call the Gulf Counterrevolution Club (just look at their performances during the Arab Spring). For all practical geopolitical purposes, the Gulf monarchies are a U.S. satrapy. Their decades-old promise to use only the petrodollar translates into them being an appendage of Pentagon power projection across the Middle East.  Centcom, after all, is based in Qatar; the U.S. Fifth Fleet is stationed in Bahrain. In fact, in the immensely energy-wealthy lands that we could label Greater Pipelineistan — and that the Pentagon used to call “the arc of instability” — extending through Iran all the way to Central Asia, the GCC remains key to a dwindling sense of U.S. hegemony.
  • If this were an economic rewrite of Edgar Allan Poe’s story, “The Pit and the Pendulum,” Iran would be but one cog in an infernal machine slowly shredding the dollar as the world’s reserve currency. Still, it’s the cog that Washington is now focused on.  They have regime change on the brain.  All that’s needed is a spark to start the fire (in — one hastens to add — all sorts of directions that are bound to catch Washington off guard).
  • Remember Operation Northwoods, that 1962 plan drafted by the Joint Chiefs of Staff to stage terror operations in the U.S. and blame them on Fidel Castro’s Cuba.  (President Kennedy shot the idea down.)  Or recall the Gulf of Tonkin incident in 1964, used by President Lyndon Johnson as a justification for widening the Vietnam War.  The U.S. accused North Vietnamese torpedo boats of unprovoked attacks on U.S. ships.  Later, it became clear that one of the attacks had never even happened and the president had lied about it.
  • It’s not at all far-fetched to imagine hardcore Full-Spectrum-Dominance practitioners inside the Pentagon riding a false-flag incident in the Persian Gulf to an attack on Iran (or simply using it to pressure Tehran into a fatal miscalculation).  Consider as well the new U.S. military strategy just unveiled by President Obama in which the focus of Washington’s attention is to move from two failed ground wars in the Greater Middle East to the Pacific (and so to China). Iran happens to be right in the middle, in Southwest Asia, with all that oil heading toward an energy-hungry modern Middle Kingdom over waters guarded by the U.S. Navy.
  • So yes, this larger-than-life psychodrama we call “Iran” may turn out to be as much about China and the U.S. dollar as it is about the politics of the Persian Gulf or Iran’s nonexistent bomb.  The question is: What rough beast, its hour come round at last, slouches towards Beijing to be born?

… (full long text).

Book: The American Way of War, How Bush’s Wars Became Obama’s, on Tom Dispatch, by Chase Madar, January 19, 2012.

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