This is part 3/3 of an article on the petrodollar – click for pt1 or pt2
In part two of this series we looked at America’s military engagements and why preserving the dollar system is essential for the United States. American foreign policy and the necessity to preserve the petrodollar at all costs have led to a catalogue of unforeseen, devastating consequences for America, the Middle East, Europe, and the world at large. We’ll look at many of these consequences and the countries that continue to challenge the dollar system on the international stage.
Former Secretary of Defence, Donald Rumsfeld, once said:
“…we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know.”
In Rumsfeld’s words, the unknown became known on the morning of September 11th 2001 when terrorists attacked both the World Trade Centre in New York and the Pentagon in Virginia. The 9/11 attacks were in response to America’s ongoing meddling and interference in the Middle East. The symbolic nature of the attacks should not be missed either: bin Laden chose to attack centres of U.S. economic power and its intelligence apparatus. 9/11 was an attack on the dollar: bin Laden understood very well that the dollar was, and still is, the centre of gravity of the American empire. By attacking the dollar, he wanted to accelerate a run on the U.S. dollar which would have led to foreign investors divesting themselves of their dollar holdings and transferring them to other currencies. A collapse of the dollar would have meant that its status as the world’s reserve currency would have come to end meaning that, in effect, the U.S. could no longer maintain its vast military presence overseas, grant protection to the Saudi royal family indefinitely and providing subsidies to Israel, to say nothing of the massive structural imbalances in the U.S. economy that would need to be addressed if reserve currency status was lost.
The attacks on September 11th also echo a famous Isaac Newton quote: “Every action has an equal and opposite reaction.” From 9/11 onwards, terrorism has become a painful reality across the world, claiming the lives of hundreds of thousands of innocent people and injuring many more. Many of these attacks were done in retribution against the wars of aggression that America has conducted in the Middle East. The underlying causes of and reasons for Islamic terrorism is a highly contentious topic in itself but the correlation between U.S. military interventions in Islamic countries and the increase in global incidents of Islamic-related terrorism is obvious. However, to understand the full scope of violence and terror that has taken place as a result of U.S. foreign policy, one needs to zoom out to refocus and get a better picture of what has actually occurred since the forever wars began. There is violence perpetuated by the United States and its military; acts of terrorism by Muslims in the west; acts of retribution (also terrorism) by western citizens against Muslims; and the various insurgencies that have arisen in the Middle East since the invasions began. It is a spiral of terror, violence, and killing that seemingly knows no end and continues to this day.
In the Middle East, military interventions have destabilised these countries to the point where terror has become an almost daily occurrence: there is no freedom, no liberal democracy, no free markets, no Walmart or McDonald’s, just a trail of dead bodies and destruction. The application of brutal, unrelenting military force is nothing new to the United States. In World War Two there was the firebombing of Tokyo that killed 100,000 people (the most deadly single air attack in history); the two atomic bombs in Hiroshima and Nagasaki in Japan; the bombing of Dresden, along with British assistance, which took place after Germany surrendered causing a minimum of 20,000 casualties, that decimated much of the historic city; Operation Rolling Thunder in Vietnam in 1965, an indiscriminate carpet bombing campaign that levelled huge parts of Indochina and led to over 180,000 civilian loses. The policy of shock and awe that was used in the opening stages of the Iraq War echoes these devastating military attacks from history; shock and awe employed overwhelming force to demoralise the enemy into submission and led to the deaths of over 7,000 civilians. It is difficult to figure out the total number of people who have died from the petrodollar wars as there just isn’t one officially recognised source for data on all the invasions. A comprehensive study from Brown University however says that from the Iraq, Afghanistan and Pakistan wars and military engagements, up to October 2018, at least 480,000 people have been directly killed from the conflict but that the total human cost could easily reach over one million. While I regret that a full analysis of these figures is beyond the scope of this article, it is important to point out that the report says that it only “scratches the surface of the human consequences of 17 years of war.” Currently, Iraq and Afghanistan are the countries with the highest recorded incidences of terrorism in the world, whilstAl-Qaeda still operates in 17 countries.
Meanwhile, in Europe, there have been 10 major Islamic-related terrorist attacks since, including, the 2004 Madrid train bombings (using a simple metric of ten casualties or more as major). There have been five mid-level attacks (between five and nine casualties) 31 low-level attacks (incidents with between oneand fourcasualties) and 34 attacks with no reported fatalities. I will add that 40 plannedattacks were prevented by the authorities since 2000.
What is significant is that in the preceding decade there had been almost no major Islamic terrorist attacks in Europe (the only two of note both happened in France and yielded 11 casualties in total) which seems astonishing now considering how Islamic terrorism has become a lived reality for so many people in Europe. In the post-9/11 world, Europe has had more Islamic terrorist attacks than the United States, and life on the continent has been transformed with hundreds killed and thousands more injured. Compounding the death toll is that some western citizens have sought violent retribution against Muslims. Brenton Tarrant was one such individual, an Australian national who entered a mosque in Christchurch, New Zealand and killed 51 people in 2019. Another was Alexandre Bissonnette, who murdered six people at a mosque in Quebec City, Canada, in 2017. The motives are complex, many of these perpetrators having released detailed manifestos citing any number of causes for their heinous actions but the important thing to recognise is that both the Islamic attacks in the West and the acts of retribution all started in the 2000s after the petrodollar wars began. These invasions started this cycle of terror and violence that has engulfed us all: in Europe, Oceania, North America and across the Middle East. It is a climate of terror, fear, and violence commonly seen in Baghdad and Kabul but also Paris, London, and Berlin as well.
Using Bruce Lawrence’s Messages to the World (a book that translates and analyses speeches made by Osama bin Laden), James L. Payne concluded that 72% of the content was based on “criticism of U.S./Western/Jewish aggression, oppression, and exploitation of Muslim lands and peoples”. Veteran CIA analyst Michael Scheuer argues similarly that U.S. foreign policy has oppressed and killed Muslims in the Middle East and is the main reason for the aggressive stance that al-Qaeda takes against the U.S., stating that “They hate us for what we do, not who we are.”
My work differs from much of the existing body of work on U.S. foreign policy which proposes that there has been no real benefit for the U.S. from these invasions and that Washington hasn’t gained anything from these wars. You hear this rhetoric a lot in the media but I beg to differ because the dollar’s World Reserve Currency status endures and the dollar system continues to this day. What is important to grasp here is that a major attack on U.S. soil poses a significant threat to the stability of the U.S. dollar and the long-term viability of the dollar system. As I alluded to in part two, the petrodollar wars are part of a wider policy of containment, undertaken to repel any attack against the dollar. The more the dollar declines in value the less all the dollar holdings and assets are worth, and the more likely foreign nations are to dump the dollar ultimately threatening its reserve currency status and the U.S. economy as a whole. But an attack against the United States overseas is much less of a threat in terms of how it impacts the dollar. The fact that another 9/11 has been avoided is a success for Washington even set against the backdrop of all the attacks in other countries around the world. It doesn’t matter about train bombings in Spain or gunmen holding theatre patrons hostage in Paris, France or truck attacks in Christmas markets in Germany what matters is that the U.S. is spared another attack on the homeland like 9/11 and so far, it has been. America did not invade Afghanistan after the 1998 terrorist attacks at the American embassies in Tanzania and Kenya by al-Qaeda, indeed, these attacks did not have the same casualty counts as 9/11, yes, but the point is that those attacks did not constitute a threat to the dollar system as 9/11 did. They also predate the introduction of the euro, so at the time of the two African embassy terrorist attacks, there was no rival currency to the dollar that posed a threat.
America’s wars of aggression have led to the biggest mass migration of people on the European continent since the Second World War. The result of America’s military interventions in the Middle East was increased instability across the whole region and the result was the 2015 migrant crisis that saw 1.3 million people arrive in Europe. The Syrian Civil War was also a contributing factor but to be fair that does not immediately relate to the United States (although Washington did arm the Syrian rebels). Some may point to the civil war in Libya in 2014 and the internal conflict in Iraq between 2014-2017 as the more immediate cause of the migrant crisis but these conflicts were the result of civil unrest that Gaddafi and Saddam had largely contained and when the two leaders were removed from power tensions escalated, eventually evolving in all-out civil war. Indeed, the removal of Colonel Gaddafi is also highly significant in all of this; it is well known that Libya was the bottleneck for migrants coming up from sub-Saharan Africa and Gaddafi was making sure that they would not make their way to Europe. Italy under Silvio Berlusconi had signed a deal worth $5 billion with Libya for their cooperation in controlling the flow of migrants, but once the colonel was removed and instability set in, that bottleneck was smashed and huge waves of migrants poured over the Mediterranean Sea and into Europe. The mass movement of people into Europe has led to unprecedented problems: social unrest, welfare dependency, unemployment, scarcity, increasing crime, ethnic and religious tension, and even mass rapes like what took place in Cologne, Germany. A popular saying in diplomatic circles, “America starts the wars, Europe gets the refugees”, has more than a kernel of truth to it. The tidal wave of migrants into Europe is seemingly never-ending and this is all the result of the forever wars and U.S. foreign policy. The flow of people into the United Kingdom continues to this day, with around 1,000 coming across the English Channel from France daily. The migrant crisis has led to an internal, diplomatic fallout in Europe as well, weakening the European Union as a whole as countries have engaged in very open and public disagreements and clashes as to who should take responsibility for the migrants.
America has, arguably, created more enemies as a result of its various military engagements than it had before the petrodollar wars. Indeed, war rarely unfolds as the protagonists predict or want it to and that is often the most dangerous aspect of it. There is a disturbing pattern that has repeated throughout the region with America’s military interventions: when America leaves the chasm is filled by extremists of one kind or another, extremists that had been otherwise contained or subdued before the U.S. arrived. From the chaos of the Iraq War, the group Islamic State emerged as a response to the violence and instability brought about by the U.S. invasion. Though there is some dispute as to its precise origins, it rose to prominence after the U.S. fully withdrew from Iraq, by 2014 ISIS had overrun northern Iraq and eastern Syria, smashing through the border and capturing the city of Mosul in the process. The crimes and atrocities ISIS have committed are extensive, including public beheadings, destruction of cultural and historical sites, untold human rights abuses, genocide against Christian minorities, war crimes, crimes against humanity and the violent persecution of Shia Muslims. Furthermore, like al-Qaeda before them, ISIS has gone on to embolden Muslims in Europe to commit more acts of heinous terrorism there. Bluntly stated, there was no ISIS when Saddam was in power and before the U.S. invaded.
Libya has been in chaos ever since colonel Gaddafi was removed. In 2014, a civil war erupted in Libya that lasted for 6 years and has led to approximately 15,000 casualties, hundreds of thousands displaced and more than a million needing humanitarian aid. After disputed national elections, Islamists and nationalists clashed dividing Libya in two and leading to death and violence throughout the country, complicating matters further were the numerous countries that entered the conflict that backed different sides before al-Qaeda and ISIS both entered the frame. The civil war that engulfed Libya was more violent than anything Gaddafi presided over, his removal led to a complete breakdown of basic order and institutions as well as the near total militarisation of the country.
When Hussein and Gaddafi were removed, the power vacuums in those countries were filled by violent militias and warring factions, groups that were largely contained under the two deposed leaders. Patrick J. Buchanan, a former candidate for the Republican nomination for the presidency, said of the wars:
“We overthrew Saddam Hussein in 2003 and Moammar Gadhafi in 2012. Yet, the fighting, killing and dying in both countries have not ceased. Estimates of the Iraq civilian and military dead run into the hundreds of thousands.”
Politicians in the U.S. that stand against the policy of war are often ostracised and ridiculed by the political establishment in Washington and the media, whether they are Democrats or Republicans. The two that stand out the most are former presidential candidate Ron Paul and former Congresswoman for Hawaii Tulsi Gabbard, both vocal opponents of the forever wars. Conversely, many in Washington support further military engagements, particularly in the Middle East. It is well understood that in the 2008 presidential election, had Republican candidate John McCain won, America would have been at war in virtually every corner of the globe; McCain favoured military action in Iran, Sudan, Nigeria and, North Korea. More recently, the much-maligned Donald Trump chose to ignore the strong advice of John Bolton and not attack Iran. Indeed, Trump had the least interventionist policy of any sitting U.S. president in a long time and look how he was treated by the establishment.
In the 2002 State of the Union address, President George W. Bush made the famous remarks about the ‘axis of evil’: a group of countries that, apparently, spread evil across the world. These countries all have one thing in common that Mr. Bush conveniently failed to mention: they all trade or wanted to trade oil in currencies other than the U.S. dollar. They also all stand up to American aggression.
One of the countries that continue to defy America on the world stage is Iran. Iran and the U.S. have a long and turbulent history but Iran continues to challenge the petrodollar nonetheless. It is the seventh-largest producer of oil in the world today and in December 2007 Tehran stopped accepting U.S. dollars for oil transactions and now trades oil in a basket of currencies, much to Washington’s chagrin.
Iran has forged strong alliances that strengthen its geostrategic position. Iran and China have been moving closer and closer together. China imports crucial oil, gas, mineral, and chemical products from Iran and in total Chinese state-run corporations have signed deals worth hundreds of billions of dollars there, which includes Beijing investing billions in upgrading Tehran’s oil and gas infrastructure (additionally, areas of Iran that are under Chinese exploration and development are considered defacto Chinese territory in Beijing’s eyes). In return, Iran has purchased vast quantities of Chinese-manufactured weaponry: including anti-ship ballistic missiles, surface-to-air missiles, and other weapons systems. Iran and Russia have developed close ties as well, having collaborated most notably on the Bushehr Nuclear Power Plant and The International North-South Transport Corridor. A free trade zone between the two nations is currently being planned as well.
Apart from these alliances, Iran has another ace up its sleeve: the Straits of Hormuz. Iraq, Kuwait, Bahrain, the UAE, and Saudi Arabia transport most of their oil through the Straits, between 20 and 25% of the world’s oil passes through the Straits of Hormuz as well as one-third of the global supply of liquified natural gas. It is considered by many to be one of the most important choke points for trade in the world today. If Iran mined the Straits it would prevent oil tankers from entering or leaving the Persian Gulf, this would cause the price of oil to skyrocket, and overnight panic and disorder would likely ensue as a result. In the Persian Gulf, Iran has amassed an array of naval, air and missile forces at Qeshm Island, Abu Musa Island and the port city of Bandar Abbas, to say nothing of their smart mine and drone capabilities. Analysts believe that even a low-level attack could cause oil prices to spike.
Venezuela is another of these countries that have stood up to the United States on the world stage. Former Venezuelan president Hugo Chavez threatened on numerous occasions to switch oil trade from dollars to euros. Chavez pioneered the barter system, whereby Venezuela exchanges oil for goods and services with other Latin American nations in what is essentially a straight swap that circumvents the dollar entirely from the transaction. In response, the CIA sponsored an attempted coup against Chavez in 2002 that ultimately failed (a tactic they have employed numerous times in that region). In a strange twist of geopolitical fate that few predicted, it now turns out that Venezuela has the largest proven oil reserves in the world today (by some distance as well) and in 2017 Caracas stopped accepting dollars for oil transactions and transitioned to the Chinese yuan instead. Like Iran, Venezuela has extensive trade and diplomatic ties with China that have only increased as time has gone on. Beijing has invested heavily in Caracas’ oil infrastructure and Venezuela is now the fourth largest supplier of oil to China. The two countries have extensive trade and investment deals, with China investing in Venezuelan technology, nuclear energy, raw materials, telecommunications, and even housing. In reverse, Venezuela imports large stocks of Chinese-manufactured weapons.
Ultimately, America could not carry out military operations in Iran or Venezuela without incurring a huge geopolitical fallout. Deep trade and investment links with America’s geopolitical rivals have provided both Iran and Venezuela with a protective buffer against a potential U.S. invasion. Despite numerous proxy engagements and skirmishes across the Middle East, it is widely acknowledged in the U.S. State Department that there is no “military solution” to Iran.
The United States faced a legitimacy crisis at the end of the Iraq War. The international outcry against the invasion was overwhelming and led to protests the likes of which I have never seen in my lifetime: 36 million people protested against the invasion in 3,000 separate demonstrations across the world. With the strong resonances of the protests that took place against the Vietnam War in the 60s and 70s, Washington faced a seismic problem that could not be solved with either more bombs or high-level diplomacy. I think this played no small part in the U.S. not pursuing a direct confrontation with the likes of Iran, North Korea, and Venezuela, further military conflicts around this time would surely have given the U.S. a rogue nation status and could have resulted in a backlash that America could ill afford. I think the subsequent invasion of Libya, however, was a risk that Washington was prepared to run given that – as I covered extensively in part two – Gaddafi had proposed a pan-African, multilateral currency that really would have spelt big trouble for America.
It is important to add that these countries have never threatened the United States directly, whether we are talking about its national security or the safety of its people. In geopolitics, it is very easy to engage in ‘4-dimensional chess’ and look for deep, searching answers for the myriad of problems we face, however sometimes the exact opposite is required and asking simple questions is often more helpful. Have North Korea, Venezuela, or Iran ever threatened us in the west? Are these states our sworn enemies as the media would have us believe? By the same token, what did Saddam Hussein or Colonel Gaddafi ever really do to harm us? Ultimately, we need to ask if the petrodollar wars, and the policies that led to them, have made us safer, however, I think the answer is pretty obvious.
The war on terrorism should be renamed the ‘war for dollar supremacy’ as that is exactly what it is. The necessity of the U.S. to preserve the dollar’s World Reserve Currency status by defending the petrodollar no matter what has remade the very world we live in today, as the consequences of the petrodollar wars continue to play out across the world, with thousands killed and many more displaced. America’s military interventions have led to near-permanent instability in the Middle East, never-ending terrorism in Europe, 9/11, at least half a million dead across the region, probably the biggest humanitarian crisis since WWII that has led to an unprecedented mass movement of people into the European continent, and the creation of ISIS. Elsewhere, America continues to provoke countries that have never directly threatened it. Without a shadow of irrefutable doubt, U.S. foreign policy and the forever wars in the Middle East have been a disaster for Europe: America starts the wars and Europe gets both the terrorism and the refugees. We were told that the 2001 invasion of Afghanistan, the 2003 Iraq War and the 2011 Libya invasion would make the world safer, reduce terrorism, and increase freedom in those countries: in reality, it has done the complete opposite and it is highly unlikely that Afghanistan, Iraq or Libya will ever return to their pre-invasion state again. Meanwhile, al-Qaeda, ISIS, and the Taliban are still operating across the Islamic world (with cells in Europe as well). American foreign policy has nothing to do with spreading liberal democracy and freedom; it is about preserving the petrodollar, the World Reserve Currency status of the dollar and the dollar system more broadly: ultimately it is about consolidating control of the global economic system regardless of the consequences. Yet the U.S. continues to reap the benefits and privileges of reserve currency status as the dollar system still reigns supreme in the world today.