I'm Interested in >
L. Todd Wood
As a young, inexperienced second lieutenant, you don’t think about it much. That is, you don’t think about why you are in Saudi Arabia with hundreds of thousands of other American military men and women opposing Saddam Hussein in the early 1990s – at least I didn’t think about it. You just do your job, in a patriotic and professional manner. Over the years, however, I did start to think about it more and more, and eventually came to my own conclusions.
The one comment that used to bother me, when discussing the Gulf wars with some of my pacifist friends, was their insistence that the wars were only about oil and money. No way, I would tell them. The wars were about American national security, aggression and weapons of mass destruction, I would insist. Over time, I came to change this view. I came to believe the wars were about oil and money. Let me tell you why.
Of course, the first reason, national security, was true in a sense. If you believe that America relies on oil, then of course oil was a national security issue, and access to the Strait of Hormuz, where forty percent of the world’s oil passed, was critical to maintaining this flow. It was critical to our economy and our way of life. So preventing Saddam Hussein from controlling Kuwait, in addition to the Iraqi oilfields, and being able to blackmail the world from this position, was inevitable.
But I always wondered about the cozy relationship between the U.S. and the Saudis. Here was a dictatorial kingdom, not something the U.S. usually wholeheartedly supports with blood and treasure, basically commanding the benefits of the United States military. American men and women were dying for the Saudis! Over time, I began to question this relationship more and more. It had acquired way too much of a mercenary feel for me.
The conflict with Iran in the 1980s was also predictable. When Iran began to mine the Strait and threatened the free passage of oil tankers on their way to American ports to offload their valuable cargo, of course the U.S. Navy would get involved. In the end, after a U.S. Navy ship was damaged by a mine, our Navy sank several Iranian ships and destroyed several Iranian oil platforms in the Gulf.
Today, America is actively attempting to prevent Iran from acquiring nuclear weapons, mostly for the stated purpose of preventing terrorism. But could the reason be something else?
Oil has been traded in U.S. dollars since the early 1970s. In turn, this has provided a robust demand for U.S. dollars worldwide. In addition to being the world’s primary reserve currency since the end of World War II, the petrodollar has provided an economic benefit to the United States. Having this global bid for its currency has allowed the United States to print as much money as it wants without fearing the consequences. However, this may be changing.
In the last decade, Iran opened an oil trading bourse on the Island of Kish, independent of U.S. dollars. They trade primarily in Euros and the Iranian currency. Saddam also wanted to trade independent of American currency, as well as Gaddafi in Libya. We know what happened to them. However, Russia, China, Australia and Switzerland – not to mention many others – have set up international swap agreements to trade in their home currencies, away from the dollar.
It is just a matter of time before the world shakes off the petrodollar system. It’s not a question of if, but when.
The question is, what will America do about it? She can’t fight the entire world as it moves away from the petrodollar. But if she allows the petrodollar system to collapse, the value of the U.S. dollar could collapse along with it.
Here’s the simple truth: The petrodollar ship has already sailed. America cannot stop the collapse of this one-sided system, one that draws the envy and/or ire of most other nations. It’s only a matter of time.