Protecting the PETRODOLLAR

OIL is TRADED in AMERICAN DOLLARS aka PETRODOLLARS

DICKHEAD Saddam wanted to switch to Euros back in 2000

A small but significant number of observers consider the issues around which the newspaper discussions of the Iraq war revolve to be nothing but a screen that hides other causes fueling the present conflict -- causes that require some knowledge of economics to grasp.

According to this view, a leading motive of the U.S. in the Iraq war -- perhaps the undamental underlying motive, even more than the control of the oil itself -- is an attempt to preserve the U.S. dollar as the leading oil trading currency, on the view that the institution of petrodollars, as these have developed since the early 1970s, is fundamental to well-being of the U.S. economy!

A corollary of this view is that the real underlying antagonism in the conflict is not a military or geopolitical or national-security issue between the U.S. and Iraq, but rather an economic struggle between the U.S. and Europe.

A petrodollar is a dollar earned by a country through the sale of oil. In 1972-74 the US government concluded a series of agreements with Saudi Arabia, known as the U.S.-Saudi Arabian Joint Economic Commission, to provide technical support and military assistance to the power of the House of Saud in exchange for accepting only US dollars for its oil. This understanding, much of it never publicised and little understood by public, provided Saudi ruling family the security it craved in a dangerous neighbourhood while assuring the US a reliable and very important ally in OPEC. Saudi Arabia has been the largest oil producer and the leader of OPEC. It is also the only member of the cartel that does not have an allotted production quota. It is the 'swing producer', meaning that it can increase or decrease oil production to bring oil draught or glut in the world market. As a result of this situation, Saudi Arabia practically determines oil prices. Soon after the agreement with Saudi government, an OPEC agreement accepted this, and since then all oil has been traded in US dollars. Hence the oil standard became the dollar standard.



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