William Engdahl: Iraq and the euro-dollar war

2005-06-16

Richard Moore

Friends,

In the superb article below, William Engdahl gives us the Big
Picture of today's geopolitics, and the all-important role of
currency-hegemony in world affairs. We've seen other
treatments of some of these issues, but Engdahl brings a
deeper historical perspective, in a very clear writing style.
Not only does he explain the economic forces involved, but he
shows how that has affected, and is affecting, the strategic
actions of the various world leaders. I'll follow up this
posting with another, "The Ties That Bind China, Russia and
Iran", by Jephraim P. Gundzik. The two together give us a
comprehensive geopolitical overview, at this time when nuclear
war is more likely than at any previous time in history.

I'd also like to heartily recommend Engdahl's book, "A Century
of War: Anglo-American Oil Politics and the New World Order",
from Pluto Press Ltd. ISBN: 074532309X (available on Amazon
and Alibris). I'm still in the process of reading it, and I've
already worn out a highlighter pen. It's a tour de force of
geopolitical history, going behind the scenes of the secret
planning that has guided geopolitical affairs over the past
century, and the economic forces that drove that planning. 
I'll share a few glimpses, based on the first 68 pages...

One of the themes I found most intriguing were the many
parallels that exist between the histories of Britain and the
U.S. - separated by about a century in time. One sample
scenario: In both cases you had a powerful industrial economy,
developed under protectionist economic policies, bringing the
nation to world-power status. And then in both cases a shift
occurs,when banking and financial elites decide their future
lies in controlling international financial flows, rather than
in domestic industrial production. Free-trade policies are the
result, along with a severe deterioration in the domestic
economy and industrial production. The domestic economy
becomes simply one more territory to be financially exploited,
as well as being a source of military support for financial
imperialism globally.

Engdahl's treatment of World War I is fascinating, the insider
story being much more dramatic than the mainstream accounts of
the period. Britain had passed that shifting point, where the
financial interests of The City (London's financial district)
came to dominate national policy. The continued success of The
City depended on the dominance of the Pound in world trade,
and Germany's remarkable economic development was seen as a
threat to that dominance. Of particular concern was Germany's
pursuit of a Berlin-Baghdad rail line, which would provide
Germany with a reliable oil supply (whose future importance
was recognized by all), and which would become an important
route for carrying goods, shifting trade-dominance away from
British-controlled sea lanes.

As a result of such considerations, Britain secretly planned
the war, surrounded Germany with a system of mutual-defense
alliances - which were largely kept secret from Germany -  and
in various other covert ways created the conditions to bring
about war. There was only one problem in their scheme: The
British treasury was essentially bankrupt. Britain turned to
J.P. Morgan & Co of New York, and Morgan agreed to raise the
money to finance the war. Soon after this deal was agreed to,
war 'broke out', as they say in the Matrix.

As the war progressed, the sums raised by Morgan, for Britain
and for France, became staggering - the largest private
fund-raising project ever seen. If Britain were to lose the
war, Morgan would be bankrupt - the investment in Britain's
success was a monumental gamble. By various kinds of
international intrigue, and with the help of Morgan-controlled
newspapers, Morgan was able to bring the U.S. into the war on
the side of Britain, thus guaranteeing the success of the
gamble.

At the end of the war, the debts to Morgan were so great that
Morgan basically owned Europe. As a consequence, it was
Morgan representatives, in Versailles, who drafted the terms
of post-war reparations, designed to maximize Morgan's debt
recovery. The truth is a more interesting story, I think, than
the Matrix version where, for example, the personal
vindictiveness and short-sightedness of people like Clemenceau
is typically blamed for the disastrous reparations regime. Ironically,
it was a Morgan representative who drafted the "German War Guilt" 
portion of the treaty!  That's hutzpah.

I'm sorry for going on so long, but I find the book really
exciting and eye-opening. I'll shut up now and let you read
Engdahl's article.

rkm

--------------------------------------------------------
A New American Century?
Iraq and the euro-dollar war

By F. William Engdahl
May, 2003

Despite the apparent swift US military success in Iraq, the US
dollar has yet to benefit as safe haven currency. This is an
unexpected development, as many currency traders had expected
the dollar to strengthen on the news of a US win. Capital is
flowing out of the dollar, largely into the Euro. Many are
beginning to ask whether the objective situation of the US
economy is far worse than the stock market would suggest. The
future of the dollar is far from a minor issue of interest
only to banks or currency traders. It stands at the heart of
Pax Americana, or as it is called, The American Century,  the
system of arrangements on which America's role in the world
rests.

Yet, even as the dollar is steadily dropping against the Euro
after the end of fighting in Iraq, Washington appears to be
deliberately worsening the dollar fall in public comments.
What is taking place is a power game of the highest
geopolitical significance, the most fateful perhaps, since the
emergence of the United States in 1945 as the world's leading
economic power.

The coalition of interests which converged on war against Iraq
as a strategic necessity for the United States, included not
only the vocal and highly visible neo-conservative hawks
around Defense Secretary Rumsfeld and his deputy, Paul
Wolfowitz. It also included powerful permanent interests, on
whose global role American economic influence depends, such as
the influential energy sector around Halliburton, ExxonMobil,
ChevronTexaco and other giant multinationals. It also included
the huge American defense industry interests around Boeing,
Lockheed-Martin, Raytheon, Northrup-Grumman and others.  The
issue for these giant defense and energy conglomerates is not
a few fat contracts from the Pentagon to rebuild Iraqi oil
facilities and line the pockets of Dick Cheney or others. It
is a game for the very continuance of American power in the
coming decades of the new century. That is not to say that
profits are not made in the process, but it is purely a
byproduct of the global strategic issue, not the cause.

In this power game, least understood is the role of
preserving the dollar as the world reserve currency, as a
major driving factor contributing to Washington's power
calculus over Iraq in the past months. American domination in
the world ultimately rests on two pillars-its overwhelming
military superiority, especially on the seas; and its control
of world economic flows through the role of the dollar as the
world's reserve currency. More and more it is clear that the
Iraq war was more about preserving the second pillar--the
dollar role--than the first, the military. In the dollar role,
oil is a strategic factor.


American Century: the three phases

If we look back over the period  since the end of World War
II, we can identify several distinct phases of evolution of
the American role in the world. The first phase, which began
in the immediate postwar period 1945-1948 and the onset of
Cold War, could be called the Bretton Woods Gold Exchange
system.

Under the Bretton Woods system in the immediate aftermath of
the World War, the order was relatively tranquil. The United
States had emerged from the War clearly as the one sole
superpower, with a strong industrial base and the largest gold
reserves of any nation. The initial task was to rebuild
Western Europe and to create a NATO Atlantic alliance against
the Soviet Union. The role of the dollar was directly tied to
that of gold. So long as America enjoyed the largest gold
reserves, and the US economy was far the most productive and
efficient producer, the entire Bretton Woods currency
structure from French Franc to British Pound Sterling and
German Mark was stable. Dollar credits were extended along
with Marshall Plan assistance and credits to finance the
rebuilding of war-torn Europe. American companies, among them,
oil multinationals, gained nicely from dominating the trade at
the onset of the 1950's. Washington even encouraged creation
of the Treaty of Rome in 1958 in order to boost European
economic stability and create larger US export markets in the
bargain. For the most part, this initial phase of what Time
magazine publisher Henry Luce called "The American Century,"
in terms of economic gains, was relatively "benign" for both
the US and Europe. The United States still had the economic
flexibility to move.

This was the era of American liberal foreign policy. The
United States was the hegemonic power in the Western community
of nations. As it commanded overwhelming gold and economic
resources compared with Western Europe, or Japan and South
Korea, the United States could well afford to be open in its
trade relations to European and Japanese exports. The tradeoff
was European and Japanese support for the role of the United
Sates during the Cold War. American leadership was based
during the 1950's and early 1960's less on direct coercion,
and more on arriving at consensus, whether in GATT trade
rounds or other issues. Organizations of elites such as the
Bilderberg Meetings, were organized to share the evolving
consensus, between Europe and the United States.

This first, more benign phase of the American Century came to
an end by the early 1970's.

The Bretton Woods Gold Exchange began to break  down, as
Europe got on its feet economically and began to become a
strong exporter by the mid-1960's. This growing economic
strength in Western Europe coincided with soaring US public
deficits as Johnson escalated the tragic war in Vietnam. All
during the 1960's, France's de Gaulle began to take its dollar
export earnings and demand gold from the US Federal Reserve,
legal under Bretton Woods at that time. By November 1967 the
drain of gold from US and Bank of England vaults had become
critical. The weak link in the Bretton Woods Gold Exchange
arrangement was Britain, the "sick man of Europe." The link
broke as Sterling was devalued in 1967. That merely
accelerated the pressure on the US dollar, as French and other
central banks increased their call for US gold in exchange for
their dollar reserves.  They calculated with the soaring war
deficits from Vietnam, it was only a matter of months before
the United States itself would be forced to devalue against
gold, so better to get their gold out at a high price.

By May 1971 the drain of US Federal Reserve gold had become
alarming, and even the Bank of England joined the French in
demanding US gold for their dollars. That was the point where
rather than risk a collapse of the gold reserves of the United
States, the Nixon Administration opted to abandon gold
entirely, going to a system of floating currencies in August
1971. The break with gold opened the door to an entirely new
phase of the American Century. In this new phase, control over
monetary policy was, in effect, privatized, with large
international banks such as Citibank, Chase Manhattan or
Barclays Bank assuming the role that central banks had in a
gold system, but entirely without gold. "Market forces" now
could determine the dollar. And they did with a vengeance.

The free floating of the dollar, combined with the 1973 rise
in OPEC oil prices by 400% after the Yom Kippur War, created
the basis for a second phase of the American Century, the
Petrodollar phase.


Recycling petrodollars

Beginning the mid-1970's the American Century system of global
economic dominance underwent a dramatic change. An
Anglo-American oil shock suddenly created enormous demand for
the floating dollar. Oil importing countries from Germany to
Argentina to Japan, all were faced with how to export in
dollars to pay their expensive new oil import bills. OPEC oil
countries were flooded with new oil dollars. A major share of
these oil dollars came to London and New York banks where a
new process was instituted. Henry Kissinger termed it,
"recycling petrodollars."  The recycling strategy was
discussed already in May 1971 at the Bilderberger meeting in
Saltsjoebaden, Sweden. It was presented by American members of
Bilderberg, as detailed in the book, Mit der Ölwaffe zur
Weltmacht. (1.)

OPEC suddenly was choking on dollars it could not use. US and
UK banks took the OPEC dollars and relent them as Eurodollar
bonds or loans, to countries of the Third World desperate to
borrow dollars to finance oil imports.  The buildup of these
petrodollar debts by the late 1970's, laid the basis for the
Third World debt crisis in the 1980's. Hundreds of billions of
dollars were recycled between OPEC, the London and New York
banks and back to Third World borrowing countries.

By August 1982 the chain finally broke and Mexico announced it
would likely default on repaying Eurodollar loans. The Third
World debt crisis began when Paul Volcker and the US Federal
Reserve had unilaterally hiked US interest rates in late 1979
to try to save the failing dollar. After three years of record
high US interest rates, the dollar  was "saved," but the
entire developing sector was choking economically under
usurious US interest rates on their petrodollar loans. To
enforce debt repayment to the London and New York banks, the
banks brought the IMF in to act as "debt policeman." Public
spending for health, education, welfare was slashed on IMF
orders to ensure the banks got timely debt service on their
petrodollars.

The Petrodollar hegemony phase was an attempt by the United
States establishment to slow down its geopolitical decline as
the hegemonic center of the postwar system. The IMF
"Washington Consensus" was developed to enforce draconian debt
collection on Third World countries, to force them to repay
dollar debts, prevent any economic independence from the
nations of the South, and keep the US banks and the dollar
afloat. The Trilateral Commission was created by David
Rockefeller and others in 1973 in order to take account of the
recent emergence of Japan as an industrial giant and try to
bring Japan into the system. Japan, as a major industrial
nation, was a major importer of oil. Japanese trade surpluses
from export of cars and other goods was used to buy oil in
dollars. The remaining surplus was invested in US Treasury
bonds to earn interest. The G-7 was founded to keep Japan and
Western Europe inside the US dollar system.  From time to time
into the 1980's various voices in Japan would call for three
currencies-dollar, German mark and yen-to share the world
reserve role. It never happened. The dollar remained dominant.

From a narrow standpoint, the Petrodollar phase of hegemony
seemed to work. Underneath, it was based on ever-worsening
economic decline in living standards across the world, as IMF
policies destroyed national economic growth and broke open
markets for globalizing multinationals seeking cheap
production outsourcing in the 1980's and especially into the
1990's.

Yet, even in the Petrodollar phase, American foreign economic
policy and military policy was dominated by the voices of the
traditional liberal consensus. American power depended on
negotiating periodic new arrangements in trade or other issues
with its allies in Europe, Japan and East Asia.


A Petro-euro rival?

The end of the Cold War and the emergence of a new Single
Europe and the European Monetary Union in the early 1990's,
began to present an entirely new challenge to the American
Century. It took some years, more than a decade after the 1991
Gulf War, for this new challenge to emerge full-blown. The
present Iraq war is only intelligible, as a major battle in
the new, third phase of securing American dominance.  This
phase has already been called, "democratic imperialism," a
favorite term of  Max Boot and other neo-conservatives.  As
Iraq events suggest, it is not likely to be very democratic.

Unlike the earlier periods after 1945, in the new era, the US
freedom to grant concessions to other members of the G-7 is
gone. Now raw power is the only vehicle to maintain American
long-term dominance. The best expression of this argument
comes from the neo-conservative hawks around Paul Wolfowitz,
Richard Perle, William Kristol and others.

The point to stress, however, is that the neo-conservatives
enjoy such influence since September 11 because a majority in
the US power establishment finds their views useful to advance
a new aggressive US role in the world.

Rather than work out areas of agreement with European
partners, Washington increasingly sees Euroland as the major
strategic threat to American hegemony, especially "Old Europe"
of Germany and France. Just as Britain in decline after 1870
resorted to increasingly desperate imperial wars in South
Africa and elsewhere, so the United States is using its
military might to try to advance what it no longer can by
economic means. Here the dollar is the achilles heel.

With creation of the Euro over the past five years, an
entirely new element has been added to the global system, one
which defines what we can call a third phase of the American
Century. This phase, in which the latest Iraq war plays a
major role, threatens to bring a new, malignant or imperial
phase to replace the earlier phases of  American hegemony. The
neo-conservatives are open about their imperial agenda, while
more traditional US policy voices try to deny it. The economic
reality faced by the dollar at the start of the new Century,
defines this new phase in an ominous way.

There is a qualitative difference emerging between the two
initial phases of the American Century--that of 1945-1973, and
of 1973-1999-and the new emerging phase of continued
domination in the wake of the 9.11 attacks and the Iraq War.
Post-1945 American power before now, was predominately that of
a hegemon. While a hegemon is the dominant power, in an
unequal distribution of power, its power is not generated by
coercion alone, but also by consent among its allied powers.
This is because the hegemon is compelled to perform certain
services to the allies such as military security or regulating
world markets for the benefit of the larger group, itself
included. An imperial power has no such obligations to allies,
and not the freedom for such, only the raw dictates of how to
hold on to its declining power-what some call "imperial
overstretch." This is the world which neo-conservative hawks
around Rumsfeld and Cheney are suggesting America has to
dominate, with a policy of pre-emptive war.

A hidden war between the dollar and the new Euro currency for
global hegemony is at the heart of this new phase.

To understand the importance of this unspoken battle for
currency hegemony, we first must understand that since the
emergence of the United States as the dominant global
superpower after 1945, US hegemony has rested on two
un-challengeable pillars. First, the overwhelming US military
superiority over all other rivals.  The United States today
spends on defense more than three times the total for the
entire European Union, some $396 billion versus $118 billion
last year, and more than the next 15 largest nations combined.
Washington plans an added $2.1 trillion over the coming five
years on defense.  No nation or group of nations can come
close in defense spending. China is at least 30 years away
from becoming a serious military threat.  No one is serious
about taking on US military might.

The second pillar of American dominance in the world is the
dominant role of the US dollar as reserve currency. Until the
advent of the Euro in late 1999, there was no potential
challenge to this dollar hegemony in world trade. The
Petrodollar has been at the heart of the dollar hegemony since
the 1970's.  The dollar hegemony is   strategic to the future
of American global pre-dominance, in many respects as
important if not more so, than the overwhelming military
power.


Dollar fiat money

The crucial shift took place when Nixon took the dollar off a
fixed gold reserve to float against other currencies. This
removed the restraints on printing new dollars. The limit was
only how many dollars the rest of the world would take. By
their firm agreement with Saudi Arabia, as the largest OPEC
oil producer, the "swing producer"   Washington guaranteed
that the world's largest commodity, oil, the essential for
every nation's economy, the basis of all transport and much of
the industrial economy, that oil could only be purchased in
world markets in dollars. The deal had been fixed in June 1974
by Secretary of State Henry Kissinger, establishing the
US-Saudi Arabian Joint Commission on Economic Cooperation. The
US Treasury and the New York Federal Reserve would "allow" the
Saudi central bank, SAMA, to buy US Treasury bonds with Saudi
petrodollars.  In 1975 OPEC officially agreed to sell its oil
only for dollars. A secret US military agreement to arm Saudi
Arabia was the quid pro quo.

Until November 2000, no OPEC country dared violate the dollar
price rule. So long as the dollar was the strongest currency,
there was little reason to as well. But November was when
French and other Euroland members finally convinced Saddam
Hussein to defy the United States by selling Iraq's
oil-for-food not in dollars, "the enemy currency" as Iraq
named it, but only in euros. The euros were on deposit in a
special UN account of the leading French bank, BNP Paribas.
Radio Liberty of the US State Department ran a short wire on
the news and the story was quickly hushed.  (2.)

This little-noted Iraq move to defy the dollar in favor of the
euro, in itself, was insignificant. Yet, if it were to spread,
especially at a point the dollar was already weakening, it
could create a panic selloff of dollars 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
dollars. 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.

Informed banking circles in the City of London and elsewhere
in Europe privately confirm the significance of that
little-noted Iraq move from petro-dollar to petro-euro. "The
Iraq move was a declaration of war against the dollar,"one
senior London banker told me recently. "As soon as it was
clear that Britain and the US had taken Iraq, a great sigh of
relief was heard in London City banks. They said privately,
'now we don't have to worry about that damn euro threat.'"

Why would something so small be such a strategic threat to
London and New York, or to the United States that an American
President would apparently risk fifty years of alliance
relations globally, and more to make a military attack whose
justification could not even be proved to the world?

The answer is the unique role of the petro-dollar to underpin
American economic hegemony.

How does it work? So long as almost 70% of world trade is done
in dollars, the dollar is the currency which central banks
accumulate as reserves. But central banks, whether China or
Japan or Brazil or Russia, do not simply stack dollars in
their vaults. Currencies have one advantage over gold. A
central bank can use it to buy the state bonds of the issuer,
the United States. Most countries around the world are forced
to control trade deficits or face currency collapse. Not the
United States. This is because of the dollar reserve currency
role. And the underpinning of the reserve role is the
petrodollar.  Every nation needs to get dollars to import oil,
some more than others. This means their trade targets dollar
countries, above all the US.

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 dollar
surpluses. This is the case for every country but one-the
United States which controls the dollar and prints it at will
or fiat. Because today the majority of all international trade
is done in dollars, 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 dollar surpluses from their export trade.

To keep this process going, the United States has agreed to be
"importer of last resort" because its entire monetary hegemony
depends on this dollar recycling.

The central banks of Japan, China, South Korea, Russia and the
rest all buy US Treasury securities with their dollars. That
in turn allows the United States to have a stable dollar, far
lower interest rates, and run a $500 billion annual balance of
payments deficit with the rest of the world. The Federal
Reserve controls the dollar printing presses, and the world
needs its dollars. It is as simple as that.


The US foreign debt threat

But, not so simple perhaps. This is a highly unstable system,
as US trade deficits and net debt or liabilities to foreign
accounts are now well over 22% of  GDP as of 2000, and
climbing rapidly. The net foreign indebtedness of the United
States-public as well as private-is beginning to explode
ominously.  In the past three years since the US stock
collapse and the re-emergence of budget deficits in
Washington, the net debt position, according to a recent study
by the Pestel Institute in Hanover, has almost doubled. In
1999, the peak of the dot.com bubble fury, US net debt to
foreigners was some $1.4 trillions. By the end of this year,
it will exceed an estimated $3.7 trillion! Before 1989, the
United States had been a net creditor, gaining more from its
foreign investments than it paid to them in interest on
Treasury bonds or other US assets. Since the end of the Cold
War, the United States has become a net foreign debtor nation
to the tune of $3.7 trillion! This is not what Hilmar Kopper
could call "peanuts."

It does not require much foresight to see the strategic threat
of these deficits to the role of the United States. With an
annual current account (mainly trade) deficit of some $500
billion, some 5% of GDP, the United States must import or
attract at least $1.4 billion every day, to avoid a dollar
collapse and keep its interest rates low enough to support the
debt-burdened corporate economy. That net debt is getting
worse at a dramatic pace. Were France, Germany, Russia and a
number of OPEC oil countries to now shift even a small portion
of their dollar reserves into euro to buy bonds of Germany or
France or the like, the United States would face a strategic
crisis beyond any of the postwar period. To pre-empt this
threat, was one of the most strategic hidden reasons for the
decision to go for "regime change" as it is known, in Iraq. It
is as simple and as cold as this. The future of America's sole
superpower status depended on pre-empting the threat emerging
from Eurasia and Euroland especially. Iraq was and is a chess
piece in a far larger strategic game, one for the highest
stakes.


The euro threatens the hegemony

When the euro was launched at the end of the last decade,
leading EU government figures, bankers from Deutsche Bank's
Norbert Walter, French President Chirac and others went to
major holders of dollar reserves-China, Japan, Russia-and
tried to convince them to shift out of dollars at least a part
of their reserves, and into euros. However, that clashed with
the need to devalue the over-valued euro, so that German
exports could stabilize Euroland growth. A falling euro was
the case until early 2002.

Then, with the debacle of the US dot.com bubble bursting, the
Enron and Worldcom finance scandals, and the recession in the
US, the dollar began to lose its attraction for foreign
investors. The euro gained steadily until the end of 2002.
Then, as France and Germany prepared their secret  diplomatic
strategy to block war  in the UN Security Council, rumors
surfaced that the central banks of Russia and China had
quietly began to dump dollars and buy euros. The result was a
dollar free-fall on the eve of war. The stage was set should
Washington lose the Iraq war, or it turn into a long, bloody
debacle. A major dollar collapse was possible for the first
time since 1979, and possibly far worse.

But Washington, leading New York banks and the higher echelons
of the US establishment clearly knew what was at stake. Iraq
was not about ordinary chemical or even nuclear weapons of
mass destruction. The "weapon of mass destruction" was the
threat that others would follow Iraq and shift to euros out of
dollars, creating mass destruction of the United States'
hegemonic economic role in the world. As one economist termed
it, an end to the dollar reserve role would be a "catastrophe"
for the United States. Interest rates of the Federal Reserve
would have to be pushed higher than in 1979 when Paul Volcker
raised rates above 17% to try to stop the collapse of the
dollar then. Few realize that 1979 dollar crisis was also a
direct result of moves by Germany, and France, under Schmidt
and Giscard, to defend Europe together with Saudi Arabia and
others who began selling US Treasury bonds to protest Carter
Administration policy. It is also worth recalling that after
the Volcker dollar rescue, the Reagan Administration, backed
by many of today's neo-conservative hawks, began a huge US
military defense spending to challenge the Soviet Union.


Eurasia versus the Anglo-American Island Power

This fight over petro-dollars versus petro-euros, which
started in  Iraq, is by no means over, despite the apparent
victory of the United States in Iraq. The euro was created by
French geopolitical strategists for establishing a multipolar
world after the collapse of the Soviet Union. The aim was to
balance the overwhelming dominance of the US in world affairs.
Significantly, French strategists rely on a British
geopolitical strategist to develop their rival power
alternative to the US, namely Sir Halford Mackinder.

This past February, a French intelligence-connected
newsletter, Intelligence Online, wrote a piece, "The Strategy
Behind Paris-Berlin-Moscow Tie." Referring to the UN Security
Council bloc of France-Germany-Russia to try to prevent the
US-British war moves in Iraq, the Paris report notes the
recent efforts of European and other powers to create a
counterpower to that of the United States. Referring to the
new ties  of France with Germany and more recently with Putin,
they note, "a new logic, and even dynamic seems to have
emerged. An alliance between Paris, Moscow and Berlin running
from the Atlantic to Asia could foreshadow a limit to US
power. For the first time since the beginning of the 20th
Century, the notion of a world heartland-the nightmare of
British strategists-has crept back into international
relations." (3.)

Mackinder, father of British geopolitics, wrote in his
remarkable paper, "The Geographical Pivot of History" that the
control of the Eurasian heartland, from Normandy France to
Vladivostock, was the only possible threat to oppose the naval
supremacy of Britain. British diplomacy until 1914 was based
on preventing any such Eurasian threat, that time around the
expansion policy of the German Kaiser eastwards with the
Baghdad Railway and the Tirpitz German Navy buildup. World War
I was the result. Referring to the ongoing efforts of the
British and later Americans to prevent a Eurasian combination
as rival, the Paris intelligence report stressed, "That
strategic approach (i.e. to create Eurasian heartland unity)
lies at the origin of all clashes between Continental powers
and maritime powers (UK, US and Japan)...It is Washington's
supremacy over the seas that, even now, dictates London's
unshakeable support for the US and the alliance between Tony
Blair and Bush."

Another well-connected French journal, Reseau Voltaire.net,
wrote on the eve of the Iraq war that the dollar was "The
achilles heel of the USA." (4.) That is an understatement to
put it mildly.


Iraq was planned long before

This emerging threat from a French-led Euro policy with Iraq
and other countries, led some leading circles in the US policy
establishment to begin thinking of pre-empting threats to the
Petro-dollar system well before Bush was even President. While
Perle, Wolfowitz and other leading neo-conservatives played a
leading role in developing  a strategy to preserve the
faltering system, a new consensus was shaping which included
major elements of traditional Cold War establishment around
figures like Rumsfeld and Cheney.

In September 2000, during the campaign, a small Washington
think-tank, the Project for a New American Century, released a
major policy study: "Rebuilding America's Defenses:
Strategies, Forces and Resources for a New Century."  The
report is useful in many areas to better understand present
Administration policy. On Iraq, it states, "The United States
has sought for decades to play a more permanent role in Gulf
regional security. While the unresolved conflict with Iraq
provides the immediate justification, the need for a
substantial American force presence in the Gulf transcends the
issue of the regime of Saddam Hussein."

This PNAC paper is the essential basis for the September 2002
Presidential White Paper, "The National Security Strategy of
the United States of America."  The PNAC's paper supports a,
"blueprint for maintaining global US pre-eminence, precluding
the rise of a great power rival, and shaping the international
security order in line with American principles and interests
The American Grand Strategy must be pursued as far into the
future as possible." Further, the US must, "discourage
advanced industrial nations from challenging our leadership or
even aspiring to a larger regional or global role." (emphasis
added). The PNAC membership in 2000 reads like a roster of the
Bush Administration today. It included Cheney, his wife Lynne
Cheney, neo-conservative Cheney aide, Lewis Libby; Donald
Rumsfeld; Rumsfeld Deputy Secretary Paul Wolfowitz. It also
included NSC Middle East head, Elliott Abrams; John Bolton of
the State Department; Richard Perle, and William Kristol. As
well, former Lockheed-Martin vice president, Bruce Jackson,
and ex-CIA head James Woolsey were on board, along with Norman
Podhoretz, another founding neo-con. Woolsey and Podhoretz
speak openly of  being in "World War IV."

It is becoming increasingly clear to many that the war in Iraq
is about preserving  a bankrupt American Century model of
global dominance. It is also clear that Iraq is not the end.
What is not yet clear and must be openly debated around the
world, is how to replace the failed Petro-dollar order with a
just new system for global economic prosperity and security.

Now, as Iraq threatens to explode in internal chaos, it is
important to rethink the entire postwar monetary order anew.
The present French-German-Russian alliance to create a
counterweight to the United States requires not merely a
French-led version of the Petro-dollar system, some Petro-euro
system, that continues the bankrupt American Century, only
with a French accent, and euros replacing dollars. That would
only continue to destroy living standards across the world,
adding to human waste and soaring unemployment in industrial
as well as developing nations. We must entirely rethink what
began briefly with some economists during the 1998 Asia
crisis, the basis of a new monetary system which supports
human development, and does not destroy it.

End

Footnotes:

1. Engdahl, F. William, Mit der Ölwaffe zur Weltmacht, edition
steinherz, Wiesbaden, 2002. Chapter 9-10 detail the creation
and impact of the Petrodollar recycling and the secret 1973
Saltsjoebaden meeting in preparing the oil shock.

2. Radio Liberty/RFE press release, Charles Recknagel, "Iraq:
Baghdad moves to Euro," November 1, 2000. The wire was picked
up for about 48 hours by CNN and other media and promptly
vanished from the headlines. Since William Clark's article,
"The real but unspoken reasons for the upcoming Iraq war"
appeared in the Internet on February 2, 2003, a lively online
discussion of the oil-euro factor has taken place, but outside
occasional references in the London Guardian press, little in
mainstream media has been said of this strategic background
factor in the Washington decision to go against Iraq.

3. Intelligence Online, no.447: 20/02/2003. "The Strategy
Behind Paris-Berlin-Moscow Tie." Intelligence Online Editor,
Guillaume Dasquie, is a French specialist on strategic
intelligence and has worked for French intelligence services
on the bin Laden case and other investigations. His reference
to French Eurasian geopolitics clearly reflects high-level
French thinking.

4. Reseau Voltaire.net, "Suprematie du dollar: Le Talon
d'Achille des USA," appeared April 4, 2003. It details a
French analysis of the vulnerability of the dollar system on
the eve of Iraq war.

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