Essay: Hysteria Over Iran and a New Cold War with Russia

[Petrodollar Warfare]

For those interested in geopolitics, peak oil, economics, and how these issues are intertwined, here's the intro to 53-page essay that I hope others will find interesting and informative...

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 12, 2006

Hegemony, \He*gem`o*ny\, noun \Greek hegemonia, fr. – preponderant influence or authority especially of one nation over others
— Webster’s Ninth New Collegiate Dictionary

Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world.
— Henry A. Kissinger <1>

It is crucial to the dollar’s dominant role as a reserve currency that dollar pricing of oil should continue.
— Stephen Lewis, economist at London-based Monument Securities, February 2005 <2>

The 21st century will likely be defined by three overarching forces: climate change, Peak Oil, and macroeconomics. The twin issues of climate change and Peak Oil are intertwined variables, and each represent extremely important phenomena that have slowly begun to enter the public debate, at least among the more objective members of society. However, the third issue, macroeconomics, and more specifically the global trends regarding petrocurrencies, remains essentially unreported by the five US corporate media conglomerates. Nonetheless, from Washington to Caracas, from London to Moscow, and from Beijing to Tehran, in order to fully appreciate contemporary geopolitics, it is important to recognize the underlying momentum towards multiple petrocurrencies — and the growing challenge to US dollar supremacy.

The hypothesis outlined in my book, Petrodollar Warfare; Oil, Iraq and the Future of the Dollar, is that the geopolitical landscape of this century is increasingly being driven by increasing competition for energy supplies before global oil production peaks, and the erosion of dollar hegemony and emergence of new petrocurrency alignments. <3> The tragic war in Iraq is in many ways the first oil-depletion and oil-currency war of the 21st century.

This essay explores disparate energy and economic alignments that are poised to produce a multi-polar world order manifestly different from the post-World War II era (i.e., bi-polar Cold War period followed by a uni-polar world order). What is not yet clear is whether today’s unfolding energy, geopolitical, and macroeconomic alignments will ultimately produce a tri-polar distribution of global power or perhaps a quadri-polar world order. This deduction is based on multiple dynamics in the global political economy that are still somewhat fluid — but the underlying fissures are growing.

The principles of scientific research and empirical analysis tell us not to look for a single, isolated factor when studying the origins of any major change within a given environment. As noted by Jared Diamond in Collapse: How Societies Choose to Fail or Succeed, rarely is a major societal crisis triggered by a single isolated factor. <4> Likewise, contemporary geopolitically derived crises of the past century were most often the result of multiple but often disparate forces that coalesced to produce a conflict — with the underlying factors often involving strategic control of natural resources.

World War I provides a historical example of this universal law. The assassination in 1914 of Archduke Ferdinand does not adequately explain the multiple factors precipitating that War. As revealed in William Engdahl’s A Century of War: Anglo-American Oil Politics and the New World Order, the rationale for England declaring war against Austria-Germany was rooted in the economics of a declining British empire and London’s desperate desire to prevent Germany from gaining direct overland access via the Berlin-to-Baghdad railroad of the petroleum resources in what is now Iraq. <5> Other 20th century examples of multiple forces colliding to produce global crises include the Great Depression, World War II, and the twin oil shocks of the 1970s.

Turning to today’s complex geopolitical tensions, readers should not ascribe a one-dimensional perspective to the geopolitics surrounding the “Iranian nuclear crisis.” While the overt causes of this particular conflict are politically derived and thus are largely manufactured, the underlying forces driving geopolitical tensions between the US and Iran should more properly be viewed from the perspective of debt-based monetary policies and the immutable laws of geophysics.

The structural imbalances in the global economy, which are being exacerbated by the weak US dollar, mounting US trade deficits, and the emerging liquid fuel energy crisis that will inexorably follow the peak in global oil production, are not exceptions to the universal law that multiple independent factors can and will interact to produce new and unpredictable crises. The hypothesis outlined in this essay is that the post-World War II status of the US dollar as premier world reserve currency is quietly but assuredly eroding. There are three key variables to analyze concerning the changing status of the dollar’s reserve role in the global financial system:

1. Central banks may shift their reserves out of dollars (e.g. into euros, Asian currencies, etc.)
2. The Asian currencies could end their pegs to the US currency (e.g. China circa July 2005)
3. We could witness a breakdown in the pricing of commodities in dollars (e.g. a “basket of currencies” for global oil trade including the dollar, euro, ruble, renminbi and perhaps rial).

All three of these trends have become evident. Regarding the third item, the most important globally traded commodity is oil, and this is where erosion of the dollar’s world reserve currency status is significant. This segues into the larger issue of geopolitics, and corresponding attempts by Washington to retain its hegemonic status as the world’s sole superpower. Unfortunately, current US geostrategy is at odds with the interests of global stability: the two greatest challenges facing the world today are the need for global energy reform and monetary reform. The success or failure to create multilateral accords towards these two colossal undertakings will be the drivers of war and peace, and thereby define the human condition during the opening decades of the 21st century.

(much more on link)

...and here's the Table on Contents:

Introduction: Hegemony
Pursuit of Global Hegemony and Imperial Overstretch

Part I. Why Petrocurrencies Matter: Macroeconomic Effects of a Monopoly Petrodollar

1. Petrodollar Recycling and the Funding of the US Current Account Deficit
2. US versus Global Currency Risk for Imported Oil
3. US versus Global Gasoline Taxation Levels
4. Net Effect of the Monopoly Petrodollar Recycling System
The EU and OPEC on Petroeuros
Critics of the Petroeuro Challenge to the Petrodollar Supremacy

Part II. Manifest Subterfuge Déjà Vu: Unfolding Disinformation Campaign against Iran
Iran’s Oil Bourse and Washington’s Economic War to Undermine It

Part III. Russia’s Geopolitical Posturing for Energy Superstate Status
Cold War Part II: Introducing Russian Petrorubles

Part IV. Asia: An Emerging Pole of Global Power
Shanghai Petroleum Bourse Re-opens: China Enters the Fray

Part V. Recommended Reforms: Escaping the Destiny of Empires

Conclusion

References

[bemildred]

1. Downloaded a copy.

Just so you know. I may reply when I have time to digest it, if I think I have anything to say. :hi:

[bemildred]

5. Kick.

:kick:
Fine piece.

[USA_1]

2. I Also Downloaded A Copy ...

will give it a further look later on.

Thanks for sharing the news.

[leveymg]

3. Looks interesting. K&R. Is there a non-PDF version available?

Thanks.

[teryang]

4. I think this is a good summary of the big picture -

...great policy recommendations. Unlike the phony intellectuals from the neo-con think tanks, Clark's analysis and recommendations are based on fact, a realistic assessment of the limits of American power, and the wrong headed policies of outsourcing, tax cuts for the rich, military adventurism, and imperial over reach. He calls it overstretch.

I pretty much agree with every thing he says with two small caveat's. Other than China, I don't know of other major economies with higher interest rates than the US. Of course, this is a defensive move at this point as a result of the very trends he describes, to wit, the collapse of the dollar vis a vis the Euro. There has been some talk lately about pressures on France and Italy, whereby ECB interest rate spread decreases are hurting their exports.

My only other qualification is that it appears to be unknown what level of dollar imbalances are caused by US multinationals booking their revenues overseas (typically in Cayman Island type wholly owned subsidiaries) to avoid taxation in the US. This may be insignificant in terms of the current accounts deficit, but no one talks about it and no one seems to know how much it is. There should be full transparency on this so it could be properly considered or disregarded if it is not significant. My brother who is an author on corporate tax advisory service can't believe this is true, but it has been documented by the Center for Public Integrity as a major method of tax avoidance by American multi-nationals and a method to keep capital accumulations outside the US.