Fueled by Petrodollars
by GARIKAI CHENGU

Under the late King Abdullah, Saudi Arabia played a role most treacherous in world affairs: its oil fueled U.S. militarism and its money funded Islamic extremists.

Saudi Arabia is perhaps the greatest inherent contradiction of U.S. foreign policy.

Prior to the 20th century, the value of money was tied to gold. When banks lent money they were constrained by the size of their gold reserves. But in 1971, U.S. President Richard Nixon took the country off the gold standard. Nixon and Saudi Arabia came to an agreement whereby the only currency that Saudi Arabia could sell its oil in was the US dollar and the Saudi Kingdom would in turn ensure that its oil profits flow back into U.S. government treasuries and American banks.

In exchange, America pledged to provide the Saudi Royal family’s regime with military protection and military hardware.

It was the start of something great for America. Access to oil defined 20th-century empires and the petrodollar agreement was the key to the ascendance of the United States as the world’s sole superpower.

The petrodollar system spread beyond oil and the U.S. dollar slowly but surely became the reserve currency for global trades in most commodities and goods. This system allows America to maintain its position of dominance as the world’s only superpower, despite being $18 trillion in debt.

Threats by any nation to undermine the petrodollar system are viewed by Washington as tantamount to a declaration of war against the United States of America.

Within the last decade Iraq, Iran and Libya have all threatened to sell their oil in other currencies. Consequently, they have all been subject to crippling U.S. sanctions.

At the height of World War Two, President Truman issued an order for American bombers to drop “Fat Man” and “Little Boy” on the cities of Hiroshima and Nagasaki, killing 140,000 people instantly. The gruesome images that emerged from the rubble were broadcasted through television sets across the world and caused unprecedented outrage, forcing U.S. policy makers to devise a more subtle weapon of mass destruction: sanctions.

Sanctions are often viewed as a less destructive alternative to military force. Nothing could be further from the truth. American sanctions have killed more innocent people than all of the nuclear, biological and chemical weapons ever used in the history of mankind.

The Financial Times newspaper quoted sanctions expert Geoff Simons who proved that “two-thirds of the world’s population is subject to some sort of U.S. sanctions.”

Sanctions are clearly the 21st century’s most potent weapon of mass destruction.

They told us that Iraq was a nuclear threat; Iraq was a terrorist state; Iraq was tied to Al Qaeda. It all amounted to nothing. What the U.S. administration did not tell us was that the main reason for toppling Saddam, and putting sanctions on the people of Iraq, was the fact that Iraq had ditched the dollar-for-oil sales.

The United Nations estimates that 1.7 million Iraqis died due to Bill Clinton’s sanctions; 500,000 of whom were children. In 1996, a journalist asked former U.S. Secretary of State, Madeleine Albright, about these UN reports, specifically about the children. America’s top foreign policy official replied: “I think this is a very hard choice, but the price – we think the price is worth it.” Clearly, U.S. sanctions policy is nothing short of deliberate genocide and impoverishment.

In 1967 Colonel Gaddafi inherited one of the poorest nations in Africa; however, by the time he was assassinated, Gaddafi had turned Libya into Africa’s wealthiest nation. Perhaps, Gaddafi’s greatest crime, in the eyes of NATO, was his desire to put the interests of local labour above foreign capital and his quest for a strong and truly United States of Africa. Central to Gaddafi’s vision for a united Africa was a common African currency made from gold and Gaddafi planned to quit selling Libyan oilin U.S. dollars. In fact, in August 2011, President Obama confiscated $30 billion from Libya’s Central Bank, which Gaddafi had earmarked for the establishment of an African Central Bank and the African gold backed dinar currency.

Had Gaddafi sparked a gold-driven monetary revolution, the Colonel would certainly have done extremely well for his people, and for the world at large. But Africa has the fastest growing oil industry in the world and oil sales in a common African currency would have been especially devastating for the American dollar, the U.S. economy, and particularly the elite in charge of the system.

It is for this reason that President Clinton signed the now infamous Iran-Libya Sanctions Act. The Libyan people were unusually vulnerable to the effects of sanctions, because Libya imports 75 percent of its food, and oil exports make up 95 percent of its revenue. The United Nations Children’s Fund reported that these sanctions caused widespread suffering among civilians by “severely limiting supplies of fuel, access to cash, and the means of replenishing stocks of food and essential medications.” Clearly, U.S. sanctions are grievous crimes against humanity.

Not so long ago, Iraq and Libya were the two most modern and secular states in the Middle East and North Africa, with the highest regional standards of living. Nowadays, intervention and sanctions have turned Libya and Iraq into two of the world’s most troubled nations.

Iran is yet another nation increasingly troubled by American sanctions. An intelligence report published in 2012, endorsed by all sixteen U.S. intelligence agencies, confirms that Iran ended its nuclear weapons program in 2003. Truth is, any Iranian nuclear ambition, real or imagined, is as a result of American hostility towards Iran, and not the other way around. The last time Iran invaded another nation was in 1738. Since independence in 1776, the United States has engaged in over 50 military invasions and interventions.

Much like Iraq’s “weapons of mass destruction”, the United States has used the imaginary nuclear threat to enforce sanctions upon the people of Iran.

In early 2007, during an OPEC meeting, the Iranian President Mahmoud Ahmadinejad called for a “credible and good currency to take over the American dollar’s role and to serve oil trades”. By December 2007, Iran had stopped selling its oil in U.S. dollars. Three months later, the nation set up the Iranian Oil Bourse (IOB) on Kish Island, which allowed exchanges of oil, petrochemicals, and gas between countries in a basket of currencies other than U.S. dollar.

Iran’s petrodollar defiance resulted in America imposing a crippling set of sanctions on seventy-five million Iranian citizens. Sanctions of mass destruction have cost Iran $120 billion in lost revenue since 2010; and, they even include a ban on the importation of certain medicines and foodstuffs. Despite Iranian government subsidies intended to help the poor, prices for staples, such as milk, bread, rice, yogurt and vegetables, have at least doubled since the beginning of the sanctions regime, in some cases showing three and four fold increases. Senior U.S. politician, Brad Sherman, remarked, “critics of sanctions argue that these measures will hurt the Iranian people. Quite frankly, we need to do just that.”

Sanctions are as morally indefensible as they are counter-productive. The more America imposes sanctions on countries for non-dollar trading, the more those countries will respond to American sanctions with increased non-dollar trading. Therefore, imposing sanctions on nations for trading crude oil in other currencies is akin to crudely attempting to put out a fire by dousing it with petrol.

Ever since 1980, the United States has steadily devolved from the status of the world’s top creditor country to the world’s most indebted country. But thanks to the petrodollar system’s huge global artificial demand for U.S. dollars, America can continue exponential military expansion, record breaking deficits and unrestrained spending. Today, a global U.S. dollar reserve currency allows Americans to enjoy some of the best standards of living.

America’s largest export used to be manufactured goods made proudly in America. Today, America’s largest export is the U.S. dollar. Any nation that threatens that export is met with America’s second largest export: weapons, chief amongst which are sanctions of mass destruction.

Garikai Chengu is a scholar at Harvard University.