By Ryan McGreal
Published July 16, 2007
With the US the US current accounts deficit approaching $800 billion for 2007 and the dollar continuing to fall against other currencies (for example, a Canadian dollar is worth $0.951 US dollars at this writing), the US cannot afford for international demand for the dollar to fall.
One guaranteed source of demand for dollar demoninated assets is the petrodollar system, under which anyone buying oil from an OPEC member must buy it using US dollars.
This creates a guaranteed market for dollars and allows the US to run current accounts deficits (i.e. to import more than it exports every year). In fact, rising oil prices allow the US to run larger deficits, since oil importing countries must spend more on the oil they buy.
Into this milieu, Iran is escalating its dollar counter-hegemony by reducing its dollar reserves and asking Japanese buyers to start paying for its oil in yen instead of dollars.
The yen rose on speculation for an increase in demand for the currency, the result of Japan's annual 1.24 trillion yen ($10.1 billion) of oil imports from Iran. Central bankers in Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets because of the weakening currency.
This continues a global trend of countries acting to insulate themselves from the steadily weakening dollar:
Iran isn't alone in wanting to drop the dollar for pricing oil. Russia has been examining plans to price the Urals oil export blend in rubles to curb currency risks. The nation plans to open the Energy Stock Exchange in St. Petersburg in the first half of next year to trade oil in rubles, UBS AG reported June 14.
Venezuela, another "hostile" country whose president the US likes to threaten, has also gone off the petrodollar system.
As a result, we should not be surprised at all to learn that the Bush Administration is eager to initiate military action against Iran before President George W. Bush and Vice President Dick Cheney leave office.
This culminates an internal rift between the hawks and doves in the White House, pitting Condoleeza Rice against Dick Cheney.
The Guardian reports:
The Washington source said Mr Bush and Mr Cheney did not trust any potential successors in the White House, Republican or Democratic, to deal with Iran decisively. They are also reluctant for Israel to carry out any strikes because the US would get the blame in the region anyway.
Naturally, the ostensible reason for military strikes against Iran is its effort to develop nuclear energy, which is legal under the Non-Proliferation Treaty but which the US insists constitutes a covert effort on Iran's part to acquire nuclear weapons capability.
This ongoing US campaign against Iran represents the apex of neoconservative political strategy, which favours bellicose diplomacy and military action over the slower path of compromise and mutual respect; and which favours secrecy, propaganda and Plato's Noble Lie over democracy and the rule of law.
The real issue in Iran is its open opposition to US hegemony. The same people who, in 1992, drafted a Defense Policy Guidance in which they warned, "we must maintain the mechanisms for deterring potential competitors from even aspiring to a larger regional or global role" are today trying to prevent Iran from aspiring to a larger regional or global role.
In the Cold War era, this would have been called a non-aligned foreign policy. In other words, Iran refuses to kowtow to US interests.
Undermining dollar hegemony is only one aspect of this process. In a larger framework, Iran is building strategic alliances with Venezuela, China, Russia, and (to a lesser extent) India in a loose partnership that would engage the US not as a series of dependents but as a bloc with mutual interests and enough power to be taken seriously.
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