By Jurgen Wagner

[This article published in: Friedensjournal Nr 3, May 2006 is translated from the German on the World Wide Web, Jurgen Wagner is director of the Tubingen Information on Militarization Institute (IMO).]

The aggressiveness of US war policy has triggered discussions within the left about the driving forces of this offensiveness. In this context, the thesis is often defended in view of the obvious war preparations against Iran that the “war against terror” is essentially nothing but a crusade to maintain the dollar hegemony. The mass medias try to either ignore or make fun of this theme (e.g. Spiegel, 3/10/2006). What is involved is merely an “implausible legend” of conspiracy theoreticians. While mono-causal explanations should be avoided, there are good reasons for giving more attention to this “legend.”


Two members of George W. Bush’s party, his former Secretary of the Treasury Paul O’Neill and Representative Ron Paul, are chief witnesses for the connection of monetary- and war policy. In an interview, O’Neill gave revealing insights into the mentality of the Bush administration. When he spoke out internally against more tax cuts since they would further enlarge the gigantic US deficit, he was reprimanded by Vice-president Dick Cheney as follows: “You know Paul, Reagan proved deficits aren’t important.” The significance of this sentence cannot be overrated. Common sense says that whoever imports (consumes) more goods than he exports (produces) engenders a balance of trade deficit that cannot be endlessly financed through indebtedness since the creditors will refuse some time or other.

In fact, this happened at the beginning of the 1970s when expenses for the Vietnam War led to a rapidly inflated indebtedness of the United States. As a result, Washington could not maintain exchanging the dollar for gold at a fixed exchange rate ($35 per ounce) guaranteed up to this time. Since then, the dollar has been nothing but a piece of paper, a currency without any backing.

Only two options existed at that time. If a radical revitalization and drastic military disarmament were refused, a possibility had to be found for becoming endlessly indebted so states would need to buy dollar reserves or US treasury notes. Henry Kissinger, the architect of the modern American tribute system, found the following solution. In exchange for the security of US rule – and with massive aggressive threats – Kissinger induced the Saudi royal house to calculate its oil in dollars. The other Opec states joined so the two central trading centers for oil and gas, the International Petroleum Exchange (IPE) in London and the New York NYMEX are both based on the dollar. This mechanism leads to a gigantic demand for dollars and supports the role of the greenback as the leading world currency. “Everyone accepts dollars to buy oil.” (Asia Times, 4/11/2002).

As long as dollars are demanded, the US can become indebted almost at will without having to declare bankruptcy. Any other state with comparable statistics would be forced to declare bankruptcy. In a speech before the House of Representatives (2/15/2006), the republican representative Ron Paul clearly described the functioning of the US tribute system: “Our whole economic system depends on the present recycling system. We borrow $700 billion annually from our generous benefactors who work hard and accept our dollar bills for their products. We borrow all the money we need for the security of the empire (defense budget $450 billion) and more. The military power that we enjoy becomes the support of our currency… Maintaining the dollar-oil relation and securing it as the dominant currency is most important. Any attack on this relation will be powerfully defeated – as has always happened.” Does the currency question play a role regarding the offensive plans against Iran?


For the first time, a serious alternative to the dollar exists in the euro. The run on the US currency has already begun. More and more countries – particularly Russia and China – systematically rearrange their currency reserves. The falling demand for dollars is a logical consequence. Some recent headlines show the greenback has lost considerable value and is under massive pressure: “The Asian Development Bank sounds the alarm over the dollar” (International Herald Tribune, 3/28/2006); “Dollar begins nosedive against other important currencies” (The Sunday Times, 4/30/2006); “Dollar falls after Federal Reserve Chief’s Speech” (The Times, 4/26/2006).

On this background, the Iranian plans to establish an oil bourse (Iranian oil bourse, IOB) on the Kish Island that accepts euros as a means of payment are explosive. The original starting date of March 20 was postponed. However government officials will carry out the project. The oil bourse makes sense from an economic perspective. Teheran does 45% of its trade with the euro zone where a third of its oil flows. Thus the IOB avoids price fluctuation risks and transaction costs by bypassing the dollar. Both China and India are interested in negotiating future oil through the IOB. Potential sellers could be Venezuela and Russia that for a long time considered calculating their oil in euros. French industrial minister Francois Lous already urged a greater role of the euro in the oil business. The euro gains attractiveness for these countries that in one way or another feel the US thumb most clearly. This is not an accident. Several respected US experts like George Perkovich of the Carnegie Endowment for International Peace have no illusions about how the Iranian plans are interpreted. “The IOB is part of a very intelligent and creative Iranian strategy – taking the offensive in every conceivable way and mobilizing other actors against the US.”

The US is scraping the barrel in the currency question. The US Federal Reserve stopped publishing the money supply statistics since March 2006 as the most important indicator for the worldwide dollar supply in circulation. This decision was an awkward attempt to hide the shaky foundations of the US Empire. In this precarious situation, Washington will consider any step that could cause a sudden drop in the dollar as a declaration of war. Whether the IOB can do this is a completely different matter.

The European Union also cannot accept a total crash of the dollar since their economies would also be severely stricken. While a gradual changing of the guard could bring advantages, an essential change of restrictive EZB (European Central Bank) monetary policy is necessary. This change is not in sight at present. More than instituting an Iranian oil bourse is needed to make the dollar fall. Seeing the only reason for the US offensive plans in this bourse would exaggerate its significance. Preventing the IOB and simultaneously giving a sign to other countries that Washington is ready to march into war with any country that seriously tries to shake the dollar hegemony may help explain the extreme aggressiveness of the US toward Iran.