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19. U.S. Dollar vs. the Euro: Another Reason for the
Invasion of Iraq
IN TOP 25 CENSORED STORIES FOR 2004

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TOP 25 ARCHIVE
Sources:
PROJECT CENSORED VIDEOS
THE SIERRA TIMES, February 9, 2003
Title: “The Real Reasons for the Upcoming War with Iraq” INDEPENDENT NEWS SOURCES
Author: William Clark
OUR INTERNSHIP & WORKSTUDY
PROGRAMS
FEASTA, January 2003
Title: “Oil, Currency, and the War on Iraq” CENSORSHIP GUIDE FOR TEACHERS
Author: Cóilín Nunan
CORPORATE MEDIA OWNERSHIP

THE NATION, September 23, 2002 INVESTIGATIVE RESEARCH

Title: The End of Empire
2007 CONFERENCE ARCHIVE
Author: William Greider
TOP 25 CENSORED STORIES OF
Faculty Evaluators: Wingham Liddell Ph.D, Tony White Ph.D , Phil Beard Ph.D., 2009 IN SPANISH
Thom Lough Ph.D.
PROJECT CENSORED IN JAPANESE
Student Researchers: Effren Trejo, Kathleen Glover, Dylan Citrin-Cummins

President Richard Nixon removed U.S. currency from the gold standard in 1971. Since then, the world’s supply of oil
has been traded in U.S. fiat dollars, making the dollar the dominant world reserve currency. Countries must provide
the United States with goods and services for dollars - which the United States can freely print. To purchase energy
and pay off any IMF debts, countries must hold vast dollar reserves. The world is attached to a currency that one
country can produce at will. This means that - in addition to controlling world trade - the United States is importing
substantial quantities of goods and services for very low relative costs.

The Euro has begun to emerge as a serious threat to dollar hegemony and U.S. economic dominance. The dollar
may prevail throughout the Western Hemisphere, but the Euro and dollar are clashing in the former Soviet Union, Advertise Here
Central Asia, Sub-Saharan Africa, and the Middle East. Advertise here

In November 2000, Iraq became the first OPEC nation to begin selling its oil for Euros. Since then, the value of the
Euro has increased 17%, and the dollar has begun to decline. One important reason for the invasion and installation

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12/28/2009 19. U.S. Dollar vs. the Euro: Another Rea…
of a U.S. dominated government in Iraq was to force the country back to the dollar. Another reason for the invasion is
to dissuade further OPEC momentum toward the Euro, especially from Iran- the second largest OPEC producer,
who was actively discussing a switch to Euros for its oil exports.

It is estimated that the dollar is currently overvalued by at least 40%, burdening the United States with a huge trade
deficit. Conversely, the euro-zone does not run huge deficits, uses higher interest rates, and has an increasingly
larger share of world trade. As the euro establishes its durability and comes into wider use, the dollar will no longer
be the world’s only option. At that point, it would be easier for other nations to exercise financial leverage against the
United States without damaging themselves or the global financial system as a whole.

Faced with waning international economic power, military superiority is the United States’ only tool for world
domination. Although, the expense of this military control is unsustainable, says William Clark, “one of the dirty little
secrets of today’s international order is that the rest of the globe could topple the United States from its hegemonic
status whenever they so choose with a concerted abandonment of the dollar standard. This is America’s preeminent,
inescapable Achilles Heel.” If American power is ever perceived globally as a greater liability than the dangers of
toppling the international order, the U.S. systems of control can be eliminated and collapsed. When acting against
world opinion - as in Iraq - an international consensus could brand the United States as a “rogue nation.”

UPDATED BY WILLIAM CLARK: Only time will tell what will happen in the aftermath of the Iraq war and U.S.
occupation, but I am hopeful my research will contribute to the historical record and help others understand one of
the important but hidden macroeconomic reasons for why we conquered Iraq. The Bush/Cheney administration
probably believes that the occupation of Iraq and the installation of a large and permanent U.S. military presence in
the Persian Gulf region will stop other OPEC producers from even considering switching the denomination of their oil
sales from dollars to Euros. However, using the military to enforce dollar hegemony for oil transactions strikes me as
a rather unwieldy and inappropriate strategy. Regrettably, President Bush and his neo-conservative advisors have
exacerbated “anti-American” sentiments by applying a military option in Iraq that is in essence an economic
problem. History may not look kindly upon their actions.

Despite the U.S. media reporting otherwise, the current wave of ‘global anti-Americanism’ is not against the
American people or against American values - but against the hypocrisy of militant American Imperialism. The
foreign polices of the neoconservatives may be creating the regrettable emergence of a possible European-Russian-
Chinese alliance in an effort to counter American Imperialism. It appears that the structural imbalances in the U.S.
economy, along with the Bush administration’s flawed tax, economic, and most principally their overtly imperialist
foreign polices could result in the dollar’s reserve currency status and/or oil transaction currency status being placed
in jeopardy or at the very least significantly diminished over the next 1-2 years. In the event that my hypothesis
materializes, the U.S. economy will require restructuring in some manner to account for the reduction of either of
these two pivotal advantages.

What is needed is a multilateral meeting of the G-7 nations to reform the international monetary system. Given that
future wars will become more likely over oil and the currency of oil, the author advocates that the global monetary
system be reformed without delay. This would include the dollar and euro being designated as equal international
reserve currencies, and placed within an exchange band along with a dual-OPEC oil transaction currency standard.
Additionally, the G-7 nations should also explore a future third reserve currency option regarding a yen/yuan bloc for
East Asia. A compromise on the euro/oil issues via a multilateral treaty with a gradual phase-in of a dual-OPEC
transaction currency standard could minimize economic dislocations within the U.S.

While these proposed multilateral reforms may lower our ability to finance our current massive levels of debt and
maintain a global military presence, the benefits would include improving the quality of our lives and that of our
children by reducing animosity towards the U.S., while we rebuild our alliances with the E.U. and world community.
Creating balanced domestic fiscal polices along with global monetary reform is in the long-term national security
interest of the United States, and necessary for the Global economy. Hopefully these proposed monetary reforms
could mitigate future armed or economic warfare over oil, ultimately fostering a more stable, safer, and prosperous
global economy in the 21st century.

UPDATE BY CÓILÍN NUNAN: At the time this article was written, the suggestion that Iraq’s move to selling oil for
euros had something to do with the US threatening war against the country was just a theory. It still is a theory, but
a theory which subsequent US actions have done little to dispel: the US has invaded Iraq, installed its own authority
to rule the country and as soon as Iraqi oil became available to sell on the world market, it was announced that
payment would be in dollars only (1). But the story doesn’t end there: the US trade deficit is still widening and the
dollar falling. More and more oil exporters are talking openly about selling their commodity for euros instead of
greenbacks. While Indonesia has only been considering it (2), Malaysia’s Prime Minister Dr Mahathir has been
strongly encouraging his country’s oil industry to actually do it (3), which has led the European Union’s Energy
Commissioner, Loyola de Palacio, to comment that she could see the euro replacing the dollar as the main currency
for oil pricing (4). Iran meanwhile has been giving all the signs that it is about to switch to the euro: it has been
issuing eurobonds, converting its foreign exchange reserves from dollars to euros and having warm trade negotiations
with the EU. According to one recent report it has even started selling its oil to Europe for euros and encouraging
Asian customers to pay in euros too (5). Should US talk of ‘regime change’ in Iran not be seen in the light of these
facts? The media largely appear to think not since there has been little discussion of the dollar-euro connection with

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12/28/2009 19. U.S. Dollar vs. the Euro: Another Rea…
the ‘war on terror’. What discussion there has been may well be expanded upon in the future as neither the threat to
the dollar and the US economy or the US threat to world peace are likely to go away any time soon.

1. Carola Hoyos and Kevin Morrison, ‘Iraq returns to international oil market’, Financial Times, June 5 2003,
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1054416466875
2. Kazi Mahmood, ‘Economic Shift Could Hurt U.S.-British Interests In Asia’, March 30 2003, IslamOnline.net
3. Shahanaaz Habib, ‘Use euro for oil prices, says Dr M’, The Star, June 16 2003,
http://thestar.com.my/news/story.asp?file=/2003/6/17/nation/sboil&sec=nation
4. Reuters, ‘EU says oil could one day be priced in euros’, June 16 2003,
http://biz.yahoo.com/rf/030616/energy_euro_2.html
5. C. Shivkumar, ‘Iran offers oil to Asian union on easier terms’, June 16 2003,
http://thehindubusinessline.com/stories/2003061702380500.htm

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