BOOK REVIEW: PETRODOLLAR WARFARE
AUTHOR: William R. Clark
Two events this week could not have been better timed as I read the book “Petrodollar Warfare”.
One, Barrack Obama’s announcement that he would be withdrawing the bulk of the US soldiers from Afghanistan by this time next year and secondly, the ongoing Greek debt crisis that is causing sleepless nights for Eurozone’s finance ministers and putting the single currency under a lot of stress.
This book has as its central thesis that US is waging war and has done so across the world since the early 1970s, to protect oil sources.
Oil is the fuel that drives America economy who with less than five percent of the world population consumes one in every four barrels of oil produced, so it kind of makes sense that it cannot afford the the world’s oil reserves – mostly in the middle east, to fall into hostile hands.
But the even more potentially dangerous relationship is the connection between oil and the viability of the US dollar.
To step back into history.
After the Second World War world currencies were backed by gold, meaning every unit of currency was backed by a country’s gold reserves. However as a fallout of the Vietnam war the US went into so much debt, debt it found it could not honour because it did not have enough gold-backed dollars – in short the US actually went bankrupt.
To avert the catastrophe then President Richard Nixon pulled America off the gold standard, which allowed him print dollars to pay off his country’s obligations. However there were problems with this arrangement not least of all that the dollar was effectively worth less than before it reneged on the gold-standard but more importantly because it was the world’s reserve currency, everybody was saving their surpluses in dollars.
"To maintain the dollar’s preeminence the Nixon administration impressed upon Saudi Arabia and therefore OPEC (Organisation of Petroleum Exporting Countries) to sell their oil only in dollars. This did two things, it meant that oil sales supported the dollar and also allowed the US access to exchange risk free oil. To buy oil all America has to do is print more dollars. Free oil...
With an oil -backed subsequent US administrations have thrown fiscal prudence to the wind and lived beyond their means, spending more than they collect in revenues and importing more than they export. The net result today is that from being the biggest creditor nation, the US is now the biggest debtor nation and their budget is hundreds of billions in the red.
In classical economics the strength of a currency is determined by the strength of a given economy. Does the country export in goods and services more than it imports? Does the country produce more revenue than it consumes, is its budget in the black or at least balanced? Given these parameters were the dollar not backed by oil it would today not be worth the paper it is printed on.
So America propagates war to protect its oil supplies but even more importantly to safeguard the strength of the dollar.
The book wades through history in an attempt to prove this hypothesis and does quite a good job of it.
It shows that Saddam Hussein’s most recent problems and his demise were fuelled by his desire to see Iraq’s oil paid for in Euros not in dollars, forget about weapons of mass destruction. Recent sabre rattling by the US about Iran under the guise of protesting their nuclear development program, were actually because Tehran proposed a euro-denominated oil exchange and were willing to host it.
"The author also examines the neo-conservatism doctrine as practised by the Bush administration, which professed that there is no moral right except the right of the superior to rule over the inferior classes!...
While examining the concept of peak oil he raises the specter of the real danger of a world without oil and dismisses some alternative energy proposals doing the rounds.
It is a fascinating book whose only failing may be that the book’s flow is broken by continous references in the text to sources. The logic is compelling and gives a much needed alternative view to the world view propagated by western media and should be essential reading for all leaders of nations – actual or aspiring.