Dollar collapse is near - real reason for Iraq war?

(Read The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets (Cornell Studies in Political Economy) by David E. Spiro, and Petrodollar Warfare: Oil, Iraq And The Future Of The Dollar by William R. Clark.)

During a what the OPEC ministers thought was a closed meeting, they expressed a need to discuss the impact of the falling dollar values on their income from selling oil & whether they should instead get Euros for their oil. But, it turns out the meeting was open and recorded.

Saudi Arabia, as expected, came to the defense of the US dollar and demanded that the falling dollar values should not even be mentioned lest it lead to the collapse of the US dollar:

"There will be journalists who will seize on this point and we don't want the dollar to collapse instead of doing something good for Opec."

Of course, he's couching it in terms of what's good for OPEC but Saudi Arabia is mostly concerned with what's good for Saudi Arabia. And to understand that, you have to understand petrodollar recycling:

You see, most of the money that the Saudis earn from selling their oil is re-invested in the US and is used to buy billions of dollars in US arms (with huge bribes and kickbacks going to the pockets of the Saudi heads of state - see the BAE investigation in the UK that was stopped by the Blair government.) This meant that the US could essentially borrow-back the money it had paid out to buy oil - a form of debt financing.

Thiings worked out fine as along as all the OPEC states were using the dollar. However, now that countries like Iran have started to trade their oil using Euros rather than dollar, the there's glitch in the cycle. Now, if the US can't borrow-back its dollars that it had paid for it, things will start to fall apart - especially when you consider that the US has an absolutely gigantic debt piled up.

This has led some to speculate that the reason for the war on Iraq - which no one else can explain adequately - was actually all about maintaining the dollar.

I don't know enough about international macro economics, but it seems to me that in the absence of any other reasonable explanation for the war on Iraq, I have to say that this theory is at least a candidate.

Comments

[Arnold Evans]

http://mideastreality.blogspot.com/2007/11/israel-to-blame-for-iraq-mess.html

Israel essentially is the reason the US invaded Iraq. Not necessarily directly but the US has a strategic interest in ensuring Iraq is not more powerful than the defanged Saudi Arabia that the US keeps in place.

This is not a natural interest. There are other regions with balances of power that do not require everyone to be weaker than the small population of Israel.

But that interest in weak states thoughout the regino makes policies such as the invasion of Iraq necessary when they otherwise would not be.