“Iran: The Trap of Financial Warfare”
“Iran: The Trap of Financial Warfare”
by Hera Research
by Hera Research
“One of the key reasons why the U.S. has yet to experience a sovereign debt crisis is that the world reserve currency status of the U.S. dollar supports demand for the U.S. dollar and for U.S. federal government debt. However, the U.S. dollar is in the process of gradually losing its world reserve currency status. Global trade is fragmenting into increasingly autonomous trading blocks defined by currencies and trade relations, such as the BRIC nations (Brazil, Russia, India and China), together with South Africa.
Demand from emerging economies, particularly China, is placing steady upward pressure on the price of crude oil. Higher oil prices resulting from a combination of a weaker U.S. dollar and increased global demand threaten to push the U.S. economy back into recession. Setting aside flat to declining supplies of sweet light crude oil (Peak Oil), the fact that the price of gold has risen roughly 500% in a single decade suggests much higher oil prices in the future.
Iran, which is the world’s third largest oil exporter and a major supplier of oil to China, lies outside of U.S. control. Iran refuses to sell oil for U.S. dollars, partly as a consequence of the overthrow of the democratically elected government of Iran in 1953, orchestrated by the U.S. Central Intelligence Agency, and partly as a consequence of current U.S. policies in the Middle East.
In March of 2012, the U.S. unilaterally removed Iran from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, effectively cutting it off from world commerce. However, wielding the U.S. dollar’s world reserve currency status as a blunt instrument could be counterproductive in the current international climate. If the U.S. dollar were to lose its world reserve currency status over a short period of time, a U.S. sovereign debt crisis would be certain and a catastrophic collapse of the U.S. dollar, i.e., hyperinflation, would be possible.
Having taken a decision to act unilaterally against Iran, the U.S. may be forced to resort to more extreme measures if the world reserve currency status of the U.S. dollar begins to break down. Of course, the U.S. does not control the oil trade solely through financial means. With Israel as a close ally, Iraq and Afghanistan occupied by U.S. forces, close ties with Turkey, Saudi Arabia, Kuwait, Qatar and other Middle Eastern countries, Iran is surrounded by more than 40 U.S. military installations.
A successful invasion of Iran would eliminate the largest non U.S. dollar oil exporter, delaying the breakdown of the U.S. dollar’s status as the world reserve currency. Although a war with Iran would cause a spike in oil prices, U.S. control of Iran’s oil would increase the supply of oil available for purchase in U.S. dollars, which would bring the U.S. dollar price of oil down and enhance the ability of the U.S. to manage the price of oil to meet the needs of the U.S. economy. Controlling a major supplier of crude oil to China and India would give the U.S. additional leverage to support the U.S. dollar and U.S. debt, as well as a means of influencing the policies and economic growth of the two largest nations. The option of invasion, however, may be time limited. If Iran were to eventually obtain nuclear weapons, the risks involved in a U.S. invasion would escalate.
As an alternative to invasion, a limited U.S. military action might involve surgical strikes on Iranian nuclear research and power facilities, as well as on Iranian military forces that pose a threat to the U.S. military. Destroying Iranian nuclear facilities and suppressing potential counterstrikes also suggests neutralizing Iran’s threat of disrupting the oil trade by closing the Straight of Hormuz. Thus, a limited U.S. military action would involve military operations on a scale not seen since the invasion of Iraq in 2003.
A limited U.S. military action might leave a weakened Iranian regime in place after the conflict and reignite the moderate, pro-democracy Green Movement that was brutally suppressed in 2009. Regime change from within might restore democracy to Iran after twenty six years of U.S.-imposed monarchy and more than three decades of quasi-democratic religious oligarchy. However, regime change is unlikely to result in the sale of Iranian oil in U.S. dollars or to extend the reign of the U.S. dollar as the world reserve currency. A preemptive strike by the U.S. could also strengthen political support for the current Iranian regime.
There seems to be no political will in Washington D.C. to change course from a U.S. military conflict with Iran, despite the fact that a U.S. attack on Iran will increase anti-U.S. sentiment in the region and amplify the Islamic extremist dimension of the U.S.-led War on Terror. The drumbeat to war in the U.S. news media is loud and clear and, if history is any guide, the U.S. will soon, e.g., after the 2012 presidential election, “cry havoc and let slip the dogs of war.”
As an alternative to invasion, a limited U.S. military action might involve surgical strikes on Iranian nuclear research and power facilities, as well as on Iranian military forces that pose a threat to the U.S. military. Destroying Iranian nuclear facilities and suppressing potential counterstrikes also suggests neutralizing Iran’s threat of disrupting the oil trade by closing the Straight of Hormuz. Thus, a limited U.S. military action would involve military operations on a scale not seen since the invasion of Iraq in 2003.
A limited U.S. military action might leave a weakened Iranian regime in place after the conflict and reignite the moderate, pro-democracy Green Movement that was brutally suppressed in 2009. Regime change from within might restore democracy to Iran after twenty six years of U.S.-imposed monarchy and more than three decades of quasi-democratic religious oligarchy. However, regime change is unlikely to result in the sale of Iranian oil in U.S. dollars or to extend the reign of the U.S. dollar as the world reserve currency. A preemptive strike by the U.S. could also strengthen political support for the current Iranian regime.
There seems to be no political will in Washington D.C. to change course from a U.S. military conflict with Iran, despite the fact that a U.S. attack on Iran will increase anti-U.S. sentiment in the region and amplify the Islamic extremist dimension of the U.S.-led War on Terror. The drumbeat to war in the U.S. news media is loud and clear and, if history is any guide, the U.S. will soon, e.g., after the 2012 presidential election, “cry havoc and let slip the dogs of war.”
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