By Nalliah Thayabharan
At the end of WWII,
an agreement was reached at the Bretton Woods Conference which pegged the value of gold at US$35 per ounce
and that became the international standard against which currency was measured.
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But in 1971, US President Richard Nixon took the US$ off the gold standard
after he and others realized that the USA no longer had enough gold
to buy back every dollar that foreign governments were handing in.
In 1973, US President Richard Nixon and his new Secretary of State,
German born Henry Kissinger asked King Faisal of Saudi Arabia to accept only the US$ in payment for oil,
and to buy US Treasury bonds, notes and bills with their excess profits,
so that USA can continue spending money and not pay it back.
In return, the USA pledged to protect Saudi Arabian oil fields from seizure by USSR and other nations including Iraq and Iran.
The 1973 Arab-Israeli War upset this agreement,
and the Great Oil Embargo of 1974 was the result.
By 1975 the Great Oil Embargo was over
and all members of Organisation of Petroleum Exporting Countries (OPEC) accepted to sell their oil only in US$.
The US$ now became the reserve currency of the world.
Every country needed US$ to buy oil.
Ever since the US$ has been the most important global monetary instrument,
and only the US can print them.
However, there were problems with this arrangement
not least of all that the US$ was effectively worthless 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 US$.
The OPEC oil sales supported the US$ and also allowed the USA access to exchange risk free oil.
Since it is the USA that prints the US$, they control the flow of oil.
Period.
When oil is denominated in US$ through US state action and the US$ is the only fiat currency for trading in oil,
an argument can be made that the USA essentially owns the world’s oil for free.
Now over $1.3 trillion of newly printed US$ by US Federal Reserve is flooding into international commodity markets each year.
So long as almost three quarter of world trade is done in US$, the US$ is the currency which central banks accumulate as reserves.
But central banks, whether China or Japan or Brazil or Russia, do not simply stack US$ in their vaults.
Currencies have one advantage over gold.
A central bank can use it to buy the state bonds of the issuer,
the USA.
Most countries around the world are forced to control trade deficits or face currency collapse.
Not the USA.
This is because of the US$ reserve currency role.
And the underpinning of the reserve role is the petrodollar.
Every nation needs to get US$ to import oil,
some more than others.
This means their trade targets US$ countries.
Because oil is an essential commodity for every nation,
the Petrodollar system, which exists to the present,
demands the buildup of huge trade surpluses in order to accumulate US$ surpluses.
This is the case for every country but one — the USA which controls the US$ and prints it at will or fiat.
Because today the majority of all international trade is done in US$,
countries must go abroad to get the means of payment they cannot themselves issue.
The entire global trade structure today works around this dynamic, from Russia to China, from Brazil to South Korea and Japan.
Everyone aims to maximize US$ surpluses from their export trade.
The Petrodollar system nearly broke down during the US President James Earl “Jimmy” Carter’s presidential tenure,
mainly due to double digit inflation of the US$.
US President Ronald Reagan removed all controls on oil and fuel prices and all restrictions on oil drilling to restore the stability of the US$.
Oil flooded the market, prices fell, and petrodollars became more valuable.
These were some of the most prosperous years that the US had.
But the danger remained,
because the US continued to spend more US$ than it earned.
The reality is that the value of the US$ is determined by the fact that oil is sold in US$.
If the denomination changes to another currency, such as the euro,
many countries would sell US$and cause the banks to shift their reserves, as they would no longer need US$ to buy oil.
This would thus weaken the US$ relative to the euro.
The USA propagates war to protect its oil supplies, but even more importantly, to safeguard the strength of the US$.
The fundamental underlying motive of the US in the Iraq war, even more than the control of the oil itself,
is an attempt to preserve the US$ as the leading oil trading currency.
The fear of the consequences of a weaker US$,
particularly higher oil prices
is seen as underlying and explaining many aspects of the US foreign policy,
including the Iraq and Libyan War.
Until November 2000, no OPEC country dared violate the US$ price rule.
So long as the US$ was the strongest currency, there was little reason to as well.
But November 2000 was when France and other EU members finally convinced Iraq’s Saddam Hussein to defy the USA
by selling Iraq’s oil-for-food not in US$,
‘the enemy currency’ as Saddam Hussein named it,
but only in euros.
Few months before the US moved into Iraq to take down Saddam Hussein,
Iraq had made the move to accept Euros instead of US$ for oil,
and this became a threat to the global dominance of the US$ as the reserve currency,
and its dominion as the petrodollar.
The euros were on deposit in a special UN account of the leading French bank, BNP Paribas.
This Iraq move to defy the US$ in favor of the euro, in itself, was insignificant.
Yet, if it were to spread, especially at a point the US$ was already weakening,
it could create a panic selloff of US$ by foreign central banks and OPEC oil producers.
In the months before the latest Iraq war, hints in this direction were heard from Russia, Iran, Indonesia and even Venezuela.
An Iranian OPEC official, Javad Yarjani,
delivered a detailed analysis of how OPEC at some future point might sell its oil to the EU for euros not US$.
He spoke in April, 2002 in Oviedo Spain at the invitation of the EU.
All indications are that the Iraq war was seized on as the easiest way to deliver a deadly pre-emptive warning to OPEC and others,
not to flirt with abandoning the Petro-dollar system in favor of one based on the euro.
The Iraq move was a declaration of war against the US$.
As soon as it was clear that the UK and the US had taken Iraq,
a great sigh of relief was heard in the UK Banks.
First Iraq and then Libya decided to challenge the petrodollar system and stop selling all their oil for US$,
shortly before each country was attacked.
The cost of war is not nearly as big as it is made out to be.
The cost of not going to war would be horrendous for the US
unless there were another way of protecting the US$’s world trade dominance.
The US pays for the wars by printing the US$ it is going to war to protect.
After considerable delay, Iran opened an oil bourse which does not accept US$.
Many people fear that the move will give added reason for the USA to overthrow the Iranian regime
as a means to close the bourse and revert Iran’s oil transaction currency to US$.
In 2006 Venezuela indicated support of Iran’s decision to offer global oil trade in euros.
In 2011 Russia begins selling its oil to China in rubles.
Muammar Qaddafi made a similarly bold move:
he initiated a movement to refuse the US$ and the euro,
and called on Arab and African nations to use a new currency instead,
the gold dinar.
Muammar Qaddafi suggested establishing a united African continent,
with its 200 million people using this single currency.
The initiative was viewed negatively by the USA and the European Union (EU),
with French president Nicolas Sarkozy calling Libya a threat to the financial security of mankind;
but Muammar Qaddafi continued his push for the creation of a united Africa.
Muammar Gaddafi’s recent proposal to introduce a gold dinar for Africa
revives the notion of an Islamic gold dinar floated in 2003 by Malaysian Prime Minister Mahathir Mohamad,
as well as by some Islamist movements.
The notion, which contravenes IMF rules and is designed to bypass them,
has had trouble getting started.
But today Iran, China, Russia, and India are stocking more and more gold rather than US$.
If Muammar Qaddafi were to succeed in creating an African Union backed by Libya’s currency and gold reserves,
France,
still the predominant economic power in most of its former Central African colonies,
would be the chief loser.
The plans to spark the Benghazi rebellion were initiated by French intelligence services in November 2010.
In February 2011, Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF),
has called for a new world currency that would challenge the dominance of the US$ and protect against future financial instability.
In May 2011 a 32 year old maid, Nafissatou Diallo, working at the Sofitel New York Hotel,
alleges that Strauss-Kahn had sexually assaulted her after she entered his suite.
Accepting Chinese yuans for oil, Iran and Venzuela have constantly been threatened by the US.
If euros, yens, yuans or rubles were generally accepted for oil,
the US$ would quickly become irrelevant and worthless paper.
This petro dollar arrangement is enforced by the U.S. military.
On Aug 18 2011, Venezuelan President Hugo Chavez announces a plan to pull Gold reserves from US and European Banks.
Venezuela reportedly has the largest oil reserves in the world.
Venezuelan President Hugo Chavez has been a strong proponent for tighter Latin America integration
– which is a move away from the power of the US banking cartels.
Venezuelan President Hugo Chavez formed oil export agreements with Cuba,
directly bypassing the Petrodollar System.
Cuba was among those countries that were later added to the “Axis of Evil” by the USA.
Venezuelan President Hugo Chavez has accused the US of using HAARP type weapons to create earthquakes.
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On Aug 24, 2001 a 7 magnitude earthquake rocks Northern Peru bordering Venezuela which doesn’t use the Petrodollar system
and Brazil which has been engaged in discussions to end US$ denominated oil transactions.
Is it a coincidence that these uncommonly powerful earthquakes are occurring in historically uncommonly large numbers
during such a short period of time ?
And that they are occurring in or close to countries that have been seriously discussing plans to leave the Petrodollar system,
or are already outside it?
HAARP (High Frequency Active Auroral Research Program) is an ionospheric research program that is jointly funded by the US Air Force,
the US Navy, the University of Alaska and the Defense Advanced Research Projects Agency.
The HAARP program operates a major Arctic facility, known as the HAARP Research Station,
located on an US Air Force owned site near Gakona, Alaska.
HAARP has the ability to manipulate weather and produce earthquakes,
since it is capable of directing almost 4 Mega Watts of energy in the 3 to 10 MHz region of the HF band up into the ionosphere.
This energy can be bounced off of the ionosphere and directed back down at the earth to create earthquakes.
HAARP could potentially be used by adversaries to produce such events.
Depending on the frequency, focusing, wave shape, one can induce a variety of effects such as earthquakes,
induced at a distant aiming point,
severe disturbances in the middle and upper atmosphere over the target area
and anomalous weather effects known as the “Tesla effect”.
HAARP based technology is being actively used to emit powerful radio waves that permeate the earth
and subsequently cause strong enough oscillations along fault lines of targeted areas to produce earthquakes.
The high power radio waves of HAARP can be used to produce such intense vibrations as to cause an earthquake.
HAARP based technology can be used to encourage and produce various weather phenomena such as hurricanes, flooding, or drought
through manipulation of the ionosphere.
Already Russia, China and Venezuela have suggested that a HAARP type technology weapon is capable of such and attack
and been used against several countries causing severe destructions in Haiti, Japan, Russia, China, Iran, Chile, New Zealand, Afghanistan, India etc.
What would the probable response be to such a HAARP attack be?
An armed conflict with USA?
Or the elimination of the Petrodollar system and a subsequent dumping of surplus US$ into the international and US financial markets
resulting in the quick collapse of the US$.
Attacking these countries with HAARP would destabilize their economies and currencies
and to prevent a move away from the US$ and the Petrodollar system.