In January
2008, George Bush was sent on a mission to the Middle East to
deliver a horse's head. We all remember the disturbing scene in
Francis Ford Coppola's "The Godfather" where Lucca Brassi goes
to Hollywood to convince a recalcitrant movie producer to use
Don Corleone's nephew in his next film. The "Big shot" producer
is finally persuaded to hire the young actor after he wakes up
in bed next to the severed head of his prize thoroughbred. I expect
that Bush made a similar "offer they could not refuse"
to the various leaders of the Gulf States when he met with them in
January.
The media
tried to portray Bush's trip to the Middle East as a "peace
mission", but that is just a smokescreen. In fact, three days
after Bush left Jerusalem, Israel stepped up its military operations
in the occupied territories and resumed its merciless blockade
of food, water, medicine and energy to the 1.5 million people
of Gaza. Clearly, Bush had green-lighted the operations or Israel's
aggression would have been seen as a slap in the face of
the President of the United States.
So, what
was the real purpose of Bush's trip? After all, he has no interest
in peace or in honoring his commitment to resolve the Israeli-Palestinian
crisis. So, why would he choose to visit the Middle East just
as his second term as president is winding down and there is no chance
of success?
Sometimes
personal visits are important. They leave a lasting impression;
especially when the nature of the information is so sensitive
that the message has to be made face to face. In this
case, Bush went to the trouble of traveling half-way around
the world to tell the Saudis and their friends in the Gulf
States that they were going to continue linking their oil to the
dollar or they were going to "sleep with the fishes".
For the last two months, various sheiks and finance ministers
have been groaning about the falling dollar - threatening to break
from the so-called "dollar-peg" and convert to a basket of currencies.
Bush's trip appears to have rekindled the spirit of brotherly
cooperation. The grumbling has ceased and everyone is back
"on board". The regional leaders now seem considerably less
bothered by the fact that inflation is gobbling up their economies and
driving labor, food, energy and housing through the roof.
Reuters summed it up like this:
"After
a flurry of public disagreements over currency reform last year,
Gulf central bankers are trying to close ranks, talking up the
pegs as a source of stability and playing down the dollar's weakness
as a temporary phenomenon."
Looks
like Bush smoothed things over.
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George
Bush went to the trouble of traveling half-way around
the world to tell the Saudis and their friends in the
Gulf States that they were going to continue linking their
oil to the dollar or they were going to "sleep with the
fishes".
|
In the last
two weeks, the Gulf leaders have watched nervously while the Federal
Reserve has slashed rates by a whopping 125 basis points. The
cuts are steadily eroding the US$1 trillion of
capital the sheihks have invested in US Treasuries and securities.
"Inflation
is at 16-year highs in Saudi Arabia and Oman, a 19-year peak in
the United Arab Emirates. Gulf policymakers are intervening directly
in loans, property and commodity markets to offset rate cut."
(Reuters)
Property
values have skyrocketed. Commercial property in the UAE has doubled
since the beginning of 2007. The inflation-bomb has forced other
Gulf states to provide food subsidies for their people and a "70
per cent wage rise for some Emirati federal government employees."
Disgruntled
migrant workers rioted in Dubai recently, demanding to be fairly
compensated for the sharp increase in prices. The Saudi riyal
has climbed to a 21-year peak.
Currency
traders expect another 8 per cent rise in the dirham and riyal
by April and they are predicting that interest rates will compel
Central bankers throughout Gulf states to covert to either the
euro or a basket of regional currencies. So far, however, the
loyal Saudi princes have continued their support for the dollar.
Defending
Dollar Hegemony
So, how important
is it that oil continue to be denominated in dollars? Would the
United States wage war to defend the dollar's status as the
world's "reserve currency"?
The answer
to this question could come as early as this week, since the long-awaited
Iranian Oil Bourse is scheduled to open between February 1-11.
According to Iran's Finance Minister Davoud Danesh-Jafari: "All
preparations have been made to launch the bourse; it will open
during the 10-day Dawn (the ceremonies marking the victory of
the 1979 Islamic Revolution in Iran) The bourse is considered
a direct threat to the continued dominance of the dollar because
it will require that Iranian "oil, petrochemicals and gas" be
traded in "non-dollar currencies". (Press TV, Iran)
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If
the dollar is de-linked from oil; it will no longer serve
as the de-facto international currency and the US will be
forced to reduce its massive trade deficits, rebuild its
manufacturing capacity, and become an export nation again.
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The
petrodollar system is no different than the gold standard. Today's
currency is simply underwritten by the one vital source of energy
upon which every industrialized society depends - oil. If the
dollar is de-linked from oil; it will no longer serve as the de-facto
international currency and the US will be forced to reduce its
massive trade deficits, rebuild its manufacturing capacity, and
become an export nation again. The only alternative is to create
a network of client regimes who repress the collective aspirations
of their people so they can faithfully follow directives from
Washington.
As
to whether the Bush administration would start a war to defend
dollar hegemony; that's a question that should be asked of Saddam
Hussein. Iraq was invaded just six months after Saddam converted
to the euro. The message is clear; the Empire will defend its currency.
Similarly,
Iran switched from the dollar in 2007 and has insisted that Japan
pay its enormous energy bills in yen. The "conversion" has infuriated
the Bush administration and made Iran the target of US belligerence
ever since. In fact, even though 16 US Intelligence agencies issued
a report (NIE) saying that Iran was not developing nuclear weapons;
and even though the UN's nuclear watchdog, the IAEA, found that
Iran was in compliance with its obligations under the Nuclear
Nonproliferation (NPT) Treaty; a preemptive US-led attack on Iran
still appears likely.
And, although
the western media now minimizes the prospects of another war in
the region; Israel is taking the precautions that suggest that
the idea is not so far-fetched. "Israel calls for shelter rooms
to be set up in a bid to prepare the public for yet another war,
this time, one of raining missiles." (Press TV, Iran)
"The next
war will see a massive use of ballistic weapons against the whole
of Israeli territory," claimed retired general Udi Shani. (Global
Research http://globalresearch.ca/index.php?context=va&aid=7982)
Russia also
sees a growing probability of hostilities breaking out in the
Gulf and has responded by sending a naval task force into the
Mediterranean Sea and the North Atlantic.
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Iraq
was invaded just six months after Saddam converted to the
euro. The message is clear; the Empire will defend its currency.
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According
to an article on the Global Research site: "The flagship of Russia's
Black Sea Fleet, the Moskva guided missile cruiser, joined up
with Russian naval warships in the Mediterranean on January 18
to participate in the current maneuvers... The current operation
is the first large-scale Russian Navy exercise in the Atlantic
in 15 years. All combat ships and aircraft involved carry full
combat ammunition loads." (Global Research, http://globalresearch.ca/index.php?context=va&aid=7983)
France is
also planning military maneuvers in the Straits of Hormuz. Operation
"Gulf Shield 01" will take place off the coast of Iran and will
employ thousands of personnel in combined arms operations that
will include simulated attacks on oil platforms.
Exercises
are scheduled to take place from February 23 to March 5, and will
involve 1,500 French, 2,500 Emirate, and 1,300 Qatari personnel
operating on land, at sea and in the air, the ministry said...
Around a half-dozen warships, 40 aircraft and dozens of armored
vehicles will be in the war games, Fusalba said. http://www.defensenews.com/story.php?F=3346953&C=mideast.
Additionally,
within the last week, three of the main underwater cables which
carry Internet traffic have been cut off in the Persian Gulf and
three-quarters of the international communications between Europe
and the Middle East have been lost. Large parts of the Middle
East have been plunged into darkness.
Is this merely
a coincidence or is something else going on below the surface?
Ian Brockwell,
of the American Chronicle, said: "On the assumption that the cables
cut were no accident, we must ask ourselves who would do such
a thing and why. Clearly Iran, who were most affected, would gain
nothing from such an action and are perhaps the target of those
responsible?... Maybe this is a prelude to an attack, or perhaps
a test run for a future one?
Communication
has always been an important factor in military action, and cutting
these cables might affect Iran´s ability to defend itself."
(American Chronicle, http://www.americanchronicle.com/articles/51085)
Despite the
lack of media coverage, tensions are mounting in the Gulf and
the probability of a US-led attack on Iran is still quite high.
Bush is convinced that if he doesn't confront Iran, then no one
will. He also believes that if he doesn't militarily defend the
dollar, then America's days as "the world's only superpower" will
soon be over.
The question is whether Bush will realize that America is already
bogged-down in two "unwinnable" conflicts or if he will "go with
his gut" once again and lead us into a ruinous region-wide conflagration.
Note:
Mike Whitney is a well respected freelance writer living in Washington
state, interested in politics and economics from a libertarian
perspective. He can be reached at fergiewhitney@msn.com.
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