Petro Dollar Vs Petrol Euro

No observer of the preparation of Iraq War has failed to notice that the cooperation between the Europe and America was extremely low. Disagreements prevailed upon lifting of sanctions and how the Iraq should be run, and this was, first time believed that continental Europe led by France and Germany was reluctant to follow the Americans politically, and thus, it was implied the Clash of Civilizations, is more exact is the clash of Economies.

Since, the Dollar remained dominant through the decades but some 60 years ago the Bretton Woods reinforced it through the agreement with international Monetary Organizations, like IMF and World Bank adopting the Dollar as sole currency of oil purchases and the loan given to the countries. As, lending of IMF and World Bank are scheduled and repaid denominated in Dollars, so the OPEC sales are performed in American currency which gives the American Economy an advantage of stabilizing and strengthening its own currency value. But due to the American foreign polices exclusively based on violence and military actions against its rivals, as now war on terrorism, once, in 1973, the OPEC did consider the sales denomination switch to other currency, but American president Nixon promptly responded and made secret agreements with Saudi Arabia, what Saudis did, OPEC followed.

At present 2/3rd world trade is conducted in Dollars, and 2/3rd world central banks are having their currency reserves in shape of Dollars, Being the oil crucial commodity of the daily life, all the sales and purchases are in Dollars denominated, the oil importing countries are encouraged to keep their dollar reserves corresponding to their currency revolving in their local markets, so that they enable themselves to buy oil directly and also, a sudden devaluation in their own currency can to prevent declining the exchange rate against the dollars.

For above, Hency Liu has written vividly in Asian Times (4/11/02)

The world trade is now game in which United States produces dollars and the rest of the world produces things that Dollars can buy. The worlds interlinked economy no longer trade to capture a comparative advantage, they compete in exports to capture needed dollars to service Dollar nominated foreign debts and to accumulate dollar reserves in their central bank to prevent any sudden devaluation in their own currencies, the worlds Central Banks must hold and acquire dollars in corresponding need as their currency in circulation, the higher the market pressure to devalue a particular currency, the more dollars reserves its central Banks must hold. This creates built in support for the dollar that in turn forces the world central banks to acquire and hold more dollar reserves making it stronger. This phenomenon is known a dollar hegemony.

American economy faces trade deficit year by year, as America’s imports are more than 50%, since, the America provide the world with dollars, and the rest of world buys it to get the oil. America imports goods and services from the world, and is not in corresponding need of foreign currency so America does not export goods and services to other world in return. America always spends more than she earns, and the rest of the world earn more than they spend. As long as the world needs the dollar to buy the oil, America can spend beyond its means and particularly increase its military strength.

Since, the introduction of Euro in 1999, the first OPEC oil Exporter country was Iraq in November 2000 actually, who switched the Dollar denominated sales to Euro, the real truth behind the War on Iraq instead the weapons of Mass Destruction indeed. Iran has also been talking to covert its oil sales in to Euro and another “Axis of evil” Venezuela, who also encouraging to OPEC, switch its sales to Euro, who widely suspected having part in Venezuela regime change recently. Talking the White House Spokesperson Ari Fleshier to Journalist he echoed Secretary of state Collin Powel Iraq war has “Anything to do with oil”.

Semi Official confirmations that petro-currency rivalry was at the heart of split between Germany and France on the one hand and the united states on the other, provided by Howard Fineman, the chief correspondent of Newsweek in 2003 in the aftermath of iraq war. Further he disclosed, that disagreement had nothing to do with lifting of sanctions on Iraq and search for weapons of mass destruction. Instead, fineman wrote that “who to sell- and buy, Iraqi oil” was the bone of contention between united States and Europe. The real source of wealth for Iraq, and what the currency to be denominated for the sales. Concluding the fineman said, the Iraqi oil once again will be switched back in Dollars.

America’s willingness to use violence to defend its economic interests in the name of its so-called “War on Terrorism”, does not seem to have been reduced the number of countries who intend to switch back their dollar reserves into Euros. Iran and Venezuela have switched their Billions of currency reserves into Euros. Talking the Iranian Vice president of the Central Bank said, Iran has actually sold some of its oil into Euros. Along with, Malaysia is thinking to develop a new Gold Backed Dinar to use in the Muslim world Trade and encouraging OPEC to switch their sales into EUROs. Iran has been talking for a separate oil Market in Middle east to compete and threatening to London and New York Stock exchanges (Nymex).

It is not surprising to note, that both Americans and European Union are dealing with Iran with a different ways. Russia and EU are engaged with Iran to talk and deal about its Nuclear program, but the US is not directly talking with Iran as America view Iran as the “Evil”. American Enterprise Institute, regarded highly influential American Think tank, recommended in its commission report for the change of regime. Though this policy is yet to be endorsed by the Bush Administration, the British press claimed in 2004, if Bush reelected, Bush Administration will interfere it the internal affairs of Iran for an attempt to change the Iranian Islamic Revolutionary Government.

Close inspection shows that the petro currency rivalry have played an important role in swinging the Exchange rate of Euro and Dollar in the one way or the other. In fundamental, it seems that market has realized what is happening around.

Hence, there is dire need of open discussion about Petro currency what kind of economic system we want, and the currency or currencies we want to use. Since, the debate in question, has huge implications of world economies and the peace and security in worlds oil exporting countries, the good start in this connection, would prove that no country will be allowed to dominate the world by currency or currencies used for oil. Further is it concluded, in order to prevent any catastrophe in this 21st century, American citizens more than others, must accept and undertake sacrifices for the betterment of humanity, specially American must live within their means as to develop new energy sustainable, and less voilent period thatn the opening decades of previous centurey. Humanity and morality demands nothing less.

“ the significant problems we face can not be solved at the same level of thing we were at when we created them”.