The Petrodollar: America’s Achilles Heel
Virtual Chicano | 22.05.2006 11:10 | Analysis | Globalisation | Social Struggles
Sometime during the Nixon administration, around 1973, the U.S. decided to back its currency with oil. The gold standard had become too unstable because it was easy for foreign central banks to manipulate the dollar by buying and selling incredibly large quantities of gold. Domestically, Americans bought the “full faith and credit of the U.S. Government” line but abroad world leaders demanded something more tangible so that the dollar would hold its value against inflation. So the U.S. devised a plan to back the dollar with oil and that oil would be priced in markets that the U.S. would control, hence, the Petrodollar.
The United States then rode of a wave of constant returns to scale for three decades until some went and threw a wrench into that wheel. And that someone was Saddam Hussein.
In 2003, Saddam Hussein demanded payment for Iraq’s oil in Euros or “Petroeuros.” After 30 years many countries had grown discontent with the way the United States was inflating the dollar and thus making their dollar reserves lose value. So Saddam Hussein, with the blessing of the United Nations and, of course, Europe, refused to accept payment for its oil in anything but Petroeuros.
Of all the European countries, France had the most to gain because they had the bulk of contracts with the government of Iraq and Iraqi companies. This is why France did not support the war with Iraq. France did finally join in so as not to lose out on the rebuilding of Iraq, whenever that is. The U.S. has been stuck in the mud in this “liberation” of Iraq and has people recalling not just the Viet-Nam quagmire, but the stalemate in the Korean peninsula as well.
If you’ve been watching the news lately then you might know that the U.S. is finally ready to sign a peace treaty with North Korea, putting out the embers of war so that it can concentrate on Iran. Yes, Iran. Iran, not to be outdone by old Saddam, is creating its own oil trading market, The Iranian Oil Bourse, to compete with the New York Mercantile Exchange (NYMEX) and London’s International Oil Exchange (IPE). And guess which currency it will use, the Petroeuro. Is all the talk about a nuclear Iran is in reality an attempt by the U.S. to scare Iran out of establishing their Petroeuro based oil Bourse? Probably, because 70% of the world’s foreign currency reserves are help in dollars. Just a 10% drop in this figure might trigger a de-stabilizing of the American economy from which it might never recover.
Although the dollar being the only game in town ads inflationary pressures to it, it is still better for the Americans this way as opposed to losing their world currency monopoly.
The Empire of the United States reached the crest of world dominance with its success in Europe and Asia at the end of WW2. Economic de-stabilization could push it over the edge where, in an act of self preservation, might cause it to attack its weaker neighbors to the south, Venezuela and Mexico. Therefore, it is important that every Latino understand what the Petrodollar is and the potential ramifications of the establishment of a major competitor, the Petroeuro.
The Petrodollar is the Achilles heel of the United States. And all it will take to send the U.S. over the edge is for countries that have been either bullied or bombed (or both) by the U.S. to band together and dump the Petrodollar and to demand payment for their oil in Petroeuros instead.
The United States then rode of a wave of constant returns to scale for three decades until some went and threw a wrench into that wheel. And that someone was Saddam Hussein.
In 2003, Saddam Hussein demanded payment for Iraq’s oil in Euros or “Petroeuros.” After 30 years many countries had grown discontent with the way the United States was inflating the dollar and thus making their dollar reserves lose value. So Saddam Hussein, with the blessing of the United Nations and, of course, Europe, refused to accept payment for its oil in anything but Petroeuros.
Of all the European countries, France had the most to gain because they had the bulk of contracts with the government of Iraq and Iraqi companies. This is why France did not support the war with Iraq. France did finally join in so as not to lose out on the rebuilding of Iraq, whenever that is. The U.S. has been stuck in the mud in this “liberation” of Iraq and has people recalling not just the Viet-Nam quagmire, but the stalemate in the Korean peninsula as well.
If you’ve been watching the news lately then you might know that the U.S. is finally ready to sign a peace treaty with North Korea, putting out the embers of war so that it can concentrate on Iran. Yes, Iran. Iran, not to be outdone by old Saddam, is creating its own oil trading market, The Iranian Oil Bourse, to compete with the New York Mercantile Exchange (NYMEX) and London’s International Oil Exchange (IPE). And guess which currency it will use, the Petroeuro. Is all the talk about a nuclear Iran is in reality an attempt by the U.S. to scare Iran out of establishing their Petroeuro based oil Bourse? Probably, because 70% of the world’s foreign currency reserves are help in dollars. Just a 10% drop in this figure might trigger a de-stabilizing of the American economy from which it might never recover.
Although the dollar being the only game in town ads inflationary pressures to it, it is still better for the Americans this way as opposed to losing their world currency monopoly.
The Empire of the United States reached the crest of world dominance with its success in Europe and Asia at the end of WW2. Economic de-stabilization could push it over the edge where, in an act of self preservation, might cause it to attack its weaker neighbors to the south, Venezuela and Mexico. Therefore, it is important that every Latino understand what the Petrodollar is and the potential ramifications of the establishment of a major competitor, the Petroeuro.
The Petrodollar is the Achilles heel of the United States. And all it will take to send the U.S. over the edge is for countries that have been either bullied or bombed (or both) by the U.S. to band together and dump the Petrodollar and to demand payment for their oil in Petroeuros instead.
Virtual Chicano
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The Petrollar is an Achillesheel indeed:U.S. Pressure Yields Curbs on Iran in EU
22.05.2006 14:10
New York Times - Today, May 22, 2006:
U.S. Pressure Yields Curbs on Iran in Europe
by STEVEN R. WEISMAN
WASHINGTON, May 21 — Prodded by the United States with threats of fines and lost business, four of the biggest European banks have started curbing their activities in Iran, even in the absence of a Security Council resolution imposing economic sanctions on Iran for its suspected nuclear weapons program.
Top Treasury and State Department officials have intensified their efforts to limit Iran-related activities of major banks in Europe, the United States and the Middle East in the past six months, invoking antiterrorism and banking laws. They have also traveled to Europe and the Middle East to drive home the risky nature of dealing with a country that has repeatedly rebuffed Western demands over suspending uranium enrichment, and to urge European countries to take similar steps.
You can read the rest of the frantic arm twisting, blackmail, bribing and bullying in the PNAC's own propaganda press The New Yorl times - Url.:
THE PETRO-EURO: Mon May 22, 2006 - Foreign Press Foundation - Henk Ruyssenaars - Wall Street moves to European Headquarters - Url.:
FPF/HR - STRONGLY RELATED LINKS - Url.:
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More info on the petro dollar economy
22.05.2006 15:07
spizzoil
Collapse of the Petrodollar Looming
22.05.2006 15:12
May 21, 2006
civillibertarian.blogspot.com
The announcement by President Putin of a Russian bourse trading oil and gas in Roubles threatens the stability of the US Dollar far more than Iran's bourse alone would do, and continues the slide in relations between the old Cold War foes.
In his annual State of the Nation address to both houses of parliament on 10 May 2006, Novosti reports President Putin said that work on making the Rouble an internationally convertible currency would be completed by 1 July 2006, six months ahead of schedule. To promote the currency, he announced that an oil and gas stock exchange will be created in Russia, that would trade in Roubles.
"The rouble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for in roubles." - Putin
Russia's oil exports represent 15.2% of the world's export trade in oil, making it a much more significant player than Iran, with 5.8% of export volumes. Russia also produces 25.8% of the world's gas exports, while Iran is still only entering this market as an exporter.
GlobeAndMail.com is reporting that President Chavez of Venezuela is considering following Iran's move towards pricing oil in Euros. Venezuela has 5.4% of the export market, although since the bulk of his country's exports are of heavy oil to the US, where it needs special facilities to process it, it would be a very brave or foolhardy President that told the US to buy its oil in Euros, or else ... Nevertheless, you can see the attraction for any country wanting to apply some pressure on the world's superpower. And where Venezuela leads, Bolivia may not be far behind. You can see how this could quickly get out of control.
While the Iranians have been suffering numerous delays in implementing their bourse, Russia could have their oil market up and running almost as soon as their currency market is ready to take on the work load, which might only be a few months away.
Some commentators on the Iranian proposal have suggested that the impact on the US Dollar would not be so great because the greenback is used for all sorts of trade, not just oil, so 5.8% of the international oil trade is really only a small part of the bigger picture. This argument looks a bit weak if both Russia and Iran will be lowering the demand for Dollars to buy oil and gas.
In order to counter the reduced demand for US Dollars, the standard control lever available to the Federal Reserve is to increase interest rates, over and above what it was going to be doing. This has the usual unwelcome consequences of dampening the US economy, and squeezing people with mortgages, which in turn leads to rising wages, falling house prices and a slump in the construction industry.
At the same time, lower demand for Dollars will weaken its conversion rate, making imports more expensive. With rising wages, fuel bills and debt-servicing feeding through into prices for home-produced goods, the stage is set for either an inflationary spiral or a recession. In the short term, the inflationary route always looks to be the less painful, but it can only lead eventually to a crisis of confidence in US Dollars, when traders abandon the paper and rush for the exit.
US-Russian relations slide
It cannot have escaped the notice of the Russians that this announcement is a poke in the eye for the US. So its timing can hardly be an accident, coming less than a week after US Vice President Dick Cheney's address to a conference in Vilnius, Lithuania, where he attacked Russian energy policy, in front of an audience of European heads of state.
"No legitimate interest is served when oil and gas become tools of intimidation or blackmail, either by supply manipulation, or attempts to monopolise transportation", Cheney said, referring to the Ukrainian gas cut-back (that Ukraine provocatively passed on to the downstream customers in western Europe). The next day Russian Foreign Minister Sergei Lavrov fired back "[the] U.S. vice president should be informed that for the last 40 years neither the U.S.S.R. nor the Russian Federation has ever broken a single contract for oil and gas supplies abroad."
The antagonism continued to verberate when Lavrov met US Sectretary of State Condoleezza Rice at a foreign ministers' summit in New York on Iran's nuclear programme. As well as criticising Cheney's comments, Lavrov also attacked Rice's number three, Nicholas Burns, for his criticism of Russia's assistance with Iran's Bushehr nuclear facility. "This meeting isn't going anywhere", snarled Rice, perhaps angry that the rebuke of Burns reflected badly on her.
Burns himself was probably a bit cranky after his trip to Moscow in April, when he publicly asked Russia not to go ahead with the sale of Tor-M1 mobile anti-missile missiles to Iran, only to be bluntly rebuffed by Russian Chief of Staff, General Yury Baluyevsky.
Meanwhile the world looks on, hoping that the great powers really know what they are doing, and that World War 3 won't start because of a subtle miscalculation in brinkmanship.
spizzoil
Homepage:
http://globalresearch.ca/index.php?context=viewArticle&code=KIM20060521&articleId=2486
Iran imports gasoline - vast quantities of it...
22.05.2006 18:21
Also, the Norwegians have came to the rescue for developing the Ilam province resources:
Iran plans to expand gasoline production: oil minister
Arak, Markazi province, May 20, IRNA
Iran-Gasoline-Production
The oil minister said here Saturday that Arak Oil Refinery Complex's capacity will be increased 10 million liters daily.
Kazem Vaziri Hamaneh, on a tour of refining facilities in the province, said the refinery produces about 4.2 million liters of gasoline daily which with the planned increase in the refining capacity, the figure will exceed 15 million liters daily.
He said that Iran imports about 20 million liters of gasoline daily. With the implementation of the plan more gasoline will be produced domestically and imports will be cut down significantly, the oil minister added .
The country's refining capacity is slated to increase to 900,000 barrels daily within the next five years.
"Modernization and renovation of some of the older refineries is on the agenda," he added.
The 90-year old Abadan refinery is the oldest refinery in the country. The complex is undergoing some modernization and repair.
He added that Arak refinery complex will be cofigured to refine heavy fuel to light and airplane fuel.
He said the cost of production, up-keep of transmission and distribution of oil derivatives is approximately rls 16 billion annually.
The plan is to build these new refineries with gas condensate or heavy crude as feedstock. The exact locations of refineries are not definite yet, but will be announced in the near future.
A major problem facing the company is the rising energy use especially gasoline consumption in the country, he said.
He added the plan should be effective in preventing further rise in the rate of gasoline consumption in future years.
Gasoline imports, if the current consumption trends continue, will range dlrs 4-4.5 billion by the end of this year.
Gasoline budget shortfall for the first half of the current year stood around dlrs 900 million.
The total refining capacity is 40 million liters daily where as the gasoline consumption is estimated to exceed 64.5 million liters daily this year. "Hence, we have to import 24.5 million liters daily," he added.
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