by Ben Cohen
A stunning report from the Independent that will have far reaching consequences for the U.S:
In the most profound financial change in recent
Middle East history, Gulf Arabs are planning – along with China,
Russia, Japan and France – to end dollar dealings for oil, moving
instead to a basket of currencies including the Japanese yen and
Chinese yuan, the euro, gold and a new, unified currency planned for
nations in the Gulf Co-operation Council, including Saudi Arabia, Abu
Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank
governors in Russia, China, Japan and Brazil to work on the scheme, which
will mean that oil will no longer be priced in dollars.
What does this mean for the U.S? Firstly, the loss of face will be a huge blow - the U.S has been top dog for the past 50 years, and it won't take lightly to the international community trading oil in another currency. Secondly, it could provoke a very serious reaction that could potentially turn nasty quickly. As the major super power, the U.S has traditionally come down hard on anyone willing to threaten the status quo. As the Independent notes:
Iran announced late last month that its foreign currency reserves would
henceforth be held in euros rather than dollars. Bankers remember, of
course, what happened to the last Middle East oil producer to sell its oil
in euros rather than dollars. A few months after Saddam Hussein trumpeted
his decision, the Americans and British invaded Iraq.
Taking on the entire Middle East, France, Russia, Japan and China is no small task, but there are a number of levers the U.S has in its arsenal should it decide to make a fuss (and it most certainly will). Although severely weakened economically, the ongoing war in Afghanistan and Iraq gives America leverage over the international community. Iraq is a giant oil producing nation, and Afghanistan could potentially be a fast route for natural gas transport from the Caspian Basin. With the U.S still controlling a large part of the world's major energy producing states, it can jack up prices, cut off access and bully others into acquiescing to its demands.
It can also decide to expand its 'War on Terror' to Pakistan, ratchet up the threats to Iran (probably via Israel) and refuse to participate in global warming talks.
Unfortunately, we should probably expect all of the above.