March 15, 2023: On March 20, the invasion of Iraq by Anglo-American forces in 2003 completes 20 uneasy years. While various reasons are dished out as possible motivation behind the illegal onslaught, it was actually all about the petrodollar system.
Empire Diaries founder editor Nadim Siraj authored an investigative book in 2019, shedding light on what the petrodollar is all about and precisely why Saddam was ousted from power. Here are some excerpts from the book Secret Notes From Iran: Diary Of An Undercover Journalist.
BEYOND OIL: THE PETRODOLLAR STORY
Not many people know that the petrodollar is key to American supremacy in West Asia. The petrodollar system helps us understand why the US military machine pursues a state of perpetual domination in the strategic region. It is why there is perpetual, uncompromising backing for unelected dictatorial regimes across the Gulf region.
Over the past decades and eras, we have all witnessed how the US-led West intervenes in West Asia to control oil resources. The petrodollar story tells us the story behind that how – it tells us why Western governments and foreign energy corporates are desperate to control the region’s oil resources.
Protect the petrodollar system – that, in a nutshell, is the core geopolitical agenda of America in West Asia.
It is necessary to first make sense of the term ‘petrodollar’. Ever since the mid-1970s, the oil-rich West Asian and North African nations (OPEC cartel) have been following an unusual, monopolistic de facto directive from Washington, DC. As per the directive, these countries must sell their crude oil to various national governments in exchange for only US dollars. It’s an undeclared diktat.
After selling their crude abroad for dollars, these oil-producing nations are then compelled by the US to buy American treasury bills and stocks. Basically, the dollars earned by the West Asian Big Oil nations eventually travel westwards and get parked in elite American banks. After that, those phenomenal sums of oil money (that travel from West Asia to US banks) are invested in the US economy and a few other Western economies, resulting in North America and Europe’s economic soundness, growth, and prosperity.
A MANDATED ARRANGEMENT
To understand why the US government deems the petrodollar system sacrosanct, one must simply understand this unofficially mandated arrangement: All oil-buying nations desperately require dollars to buy oil from the oil-producing countries. This worldwide demand for the dollar keeps the US currency permanently dominant and relevant.
This, in turn, places Washington, DC, the US Federal Reserve and the American economy in a perennially commanding position to dominate the rest of the world. One can say that nations that procure crude oil are generally at the mercy of the US, since they have a constant and desperate need to stockpile American currency, whether they like it or not.
This dollar-for-petroleum money earned by the oil-producing nations is called petrodollar, and the procedure of investing the oil money into the US in particular and the West in general is called petrodollar recycling. The system is now common knowledge. But what is not common knowledge are the shadowy circumstances in which the petrodollar was born in 1974, underlining an American masterstroke to inflate worldwide demand for the dollar.
1974: THE DOLLAR IS REBORN
The petrodollar’s fascinating origin is widely written about in the media and is well documented by historians of geopolitics and currency wars. The US-masterminded system was best exposed in an article published by Bloomberg on 31 May 2016 (The Untold Story behind Saudi Arabia’s 41-year US Debt Secret).
Journalist Andrea Wong wrote that in July 1974, the then US president, Richard Nixon, sent William Simon, the then US treasury secretary, along with his second-in-command, Gerry Parsky, on a discreet trip to Jeddah, to strike a formal deal with the ultra-conservative Saudi Arabian royal family, represented at the time by King Faisal Al Saud. As an interesting aside, King Faisal was assassinated on 25 March 1975.
The deal was struck between the Saudi central bank, known as SAMA (Saudi Arabian Monetary Authority), and the US treasury department. Henry Kissinger, the US secretary of state at the time, kept a close watch on the proceedings as the deal was rubber-stamped and formalised. The crux of that US-Saudi agreement was a game-changing move and highly monopolistic in nature.
As per the article, the story unfolded like this. The US government would import a steady, substantial and agreed-upon quantity of Saudi Arabian crude oil. In return, the US government would give the Sunni, pro-Wahhabi monarchy abundant and fool-proof military support as protection against Israel, a militarily well-equipped opponent in Saudi Arabia’s backyard.
Crucially, for all the crude oil the monarchy would peddle to countless nations all over the world, it would accept payment only in US dollars. The Saudi Arabian government would then inject over half of the oil-trade profits into the US economy (and partly into the British economy and other European economies).
The inflow of dollars into US banks, earned from Saudi’s sale of oil, would benefit the US on three fronts – easing the ballooning US debt, funding US military spending, and helping the economy stay flush with cash.
In the months following the emergence of the petrodollar, the ruling family in Riyadh and the US government managed to persuade other OPEC countries to switch over to the new dollars-only arrangement by mid-1975. The development resulted in a spiralling demand for US currency among governments the world over because the greenback was suddenly the only mode of payment for crude oil purchases from the OPEC suppliers.
In the 1988 book, Western Expansionism in the Persian Gulf, Russian diplomat-turned-writer Viktor Leonovich Mikhin quotes a Newsweek article to claim that this petrodollar set-up included a pledge from King Khalid of Saudi Arabia that his government would invest 50% of its oil profits in US treasury bonds. Mikhin reveals, “By investing 50% of its active balance in US bonds paying 7.5% [interest] for a 25-year term, Saudi Arabia was helping out the US credit and finance system, which was constantly suffering from a deficit.”
In return, Saudi Arabia was given the “right” to use the interest to purchase expensive weaponry and military hardware, exposes Mikhin in his well-researched work. In addition, says the writer, the US promised to “provide the Saudi Arabians with military cover” in the event of any threat that might arise in its backyard – basically from Israel.
SADDAM DEFIES THE DOLLAR
The US and its banks made the most of the oil-for-greenback system right up to the early 2000s. But after that, the tide slowly and steadily started to turn. In an apt reminder of Bob Dylan’s timeless classic, The Times They Are A-Changin’, a small but significant rebellion began brewing against the monopoly of the dollar.
The euro, Europe’s common currency, was already in circulation by then and China’s yuan was steadily gaining ground. After years of monopolistic dominance, the US currency was no longer the pet favourite of the Big Oil producers as it had been from the mid-1970s to the early 2000s.
Headed by the militarily-authoritative leader Saddam Hussein, the Iraqi government was the first country to put its hand up against the dollars-only arrangement. Saddam, a friend-turned-foe of the US government and a man with not a very clean human rights record, courageously announced that his country would detach its oil business from the petrodollar compulsion.
In 2000, Saddam began airing his intentions to sell Iraqi oil globally only in exchange for euros, not American dollars.
Soon after, Iraq, a country with a relatively healthy economy and at the time primarily a decently-run socialist nation, was crippled by the onset of brutal US-led economic sanctions. The debilitating sanctions were followed by America’s urge to invade Iraq in a desperate bid to remove Saddam from power.
In 2003, Iraq was infamously invaded by the Anglo-American coalition forces for its never-to-be-proven connections to the 9/11 terror strikes in the US and the never-to-be-found stockpiles of WMDs, as wrongfully claimed by British PM Tony Blair and US president George Bush.
Saddam was eliminated and his endgame advertised via the mainstream press as a chilling warning to other oil-producing countries to stay with the petrodollar system.
It is interesting to note that since the fall of Iraq, the country’s subsequent administrations have been trading Iraqi crude oil only for dollars – a fact not highlighted by the mainstream media. The toppling of Saddam and his Ba’ath Party ensured that plans to challenge the petrodollar set-up in Iraq were shelved.
GADDAFI DOES A SADDAM
After Iraq came the turn of Libya, whose illustrious leader Muammar Gaddafi announced plans of launching a pan-African, gold-backed currency, popularly hailed as the “gold dinar”, during the mid-2000s. Basically, Gaddafi did a Saddam – choosing to move away from the petrodollar.
In an article published in The Guardian on 21 April 2011 (Libya: Another Neocon War), journalist David Swanson writes that as per Gaddafi’s audacious proposal, Libya wanted to sell its oil only for the newly-planned currency. The Libyan boss wanted the proposed gold dinar to become the common African currency. The result of that independent plan? Libya spun into chaos, thanks to the 2010-2012 Arab Spring revolutions and subsequent foreign intervention.
Hounded by NATO-backed forces, Gaddafi was knocked off following an airstrike in 2011, and the North African nation became unstable. It is worth adding here that Libya was forced to jettison the gold dinar dreams for good. The petrodollar hegemony victoriously survived the Gaddafi storm in Libya.
(The book was published by Mumbai-based Leadstart Publishing under the imprint Platinum Press.)
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