Monday, 30 January 2012

Iran vs the Petrodollar: World War Three?

The US is raising tensions with Iran, possibly as part of the build-up to a war which has been threatened, on and off, for at least a decade. The US has had a unilateral trade embargo against Iran going back to 1995. There are reasons to be alarmed now, however, as the US has called for an international embargo of Iranian oil, to which Iran responded by threatening to close the Straits of Hormuz, through which about 40% of the world's oil supplies pass. Only the EU has responded positively to the US call, though, as China, Russia, India and even key NATO-member, Turkey, have all firmly rejected the US position.

If you live in the West, you could be forgiven for thinking that this is all about Iranian nuclear ambitions. The media narrative is that the West wants to put pressure on Iran to halt its supposed nuclear programme. Every now and then, hysterical claims appear in Western media outlets, that Iran is on the brink of developing nuclear weapons and intends to use them against Israel, Southern Europe or perhaps give them to terrorists. A Telegraph story from 6 years ago (Iran 'could go nuclear within three years') is fairly typical. This is propaganda but it is not all scaremongering, as Iran does have a nuclear enrichment programme, although the informed consensus is that it is still quite a long way from developing a nuclear weapons capability, let alone an actual bomb.

Cartoon from

Iran has been repeatedly threatened by Israel and the US, who both possess nuclear weapons. No doubt Iran would feel a lot more secure if it did have some nuclear capability of its own as a deterrent to its belligerent enemies, but it is still co-operating with IAEA inspectors and it clearly has no current intention to develop a nuclear device, so Western accusations are knowingly premature and exaggerated, as they were against Iraq in 2002.

Still, the hawks would argue that Iran is a rogue state; part of the infamous 'axis of evil' identified by George W Bush, including Iraq and North Korea. Therefore, any attempt to stop the Iranian nuclear programme must be justified, as is any attempt at 'regime change', despite the fact that we scarcely batted an eyelid at North Korea's nuclear programme. Does this argument really stand up to scrutiny? There is no doubt that Iran is one of the most repressive states in the world, in terms of its attitude towards internal dissent. According to the Economist Intelligence Unit's Democracy Index, Iran ranks 159th out of 167 states on its (slightly subjective) scale of democratic freedom (North Korea is bottom). That's pretty bad, but do remember that Saudi Arabia actually ranks two places lower, at 161st. We sell all the arms and torture equipment the Saudis could possibly want, because they are among our staunchest allies in the region. Iran is apparently the enemy of democracy, where as Saudi Arabia isn't. This kind of doublethink illustrates clearly that freedom and democracy have got nothing to do with our policy towards Iran.

History also attests to Western hypocrisy with respect to Iran. You will almost never hear it mentioned in Western mainstream media (including the BBC of course) that Iran used to be a relatively democratic state, until an infamous coup in 1953, instigated by Britain and the US. This is also one of those vital bits of history you will never, ever learn in a British or American school. I'm guessing this is because it must be rather embarrassing for countries which boast of being 'democratic' and 'free' to be caught red-handed overthrowing democratically elected foreign leaders for rather sordid reasons like oil rights. So the reason that Iran is a paranoid autocracy today is because that is how the US and Britain wanted it to be. When it comes to making foreign policy, democracy is a total pain in the arse, frankly.

Britain and the US installed the Shah as Dictator in 1953. His brutal rule was ended by a broad-based revolt of the Iranian people in 1979, but democracy never returned to Iran, as the revolution was taken over by Islamic fundamentalists. Democracy would be too easy for the West to undermine, so Iran became a repressive Islamic republic, its paranoia somewhat justified. Thus, from the viewpoint of history, it is the US and Britain, not Iran who are the  major aggressors in the region, constantly meddling in the internal affairs of other countries in order to secure oil supplies and lucrative contracts for their transnational oil companies. Indeed, since its foundation in 1783, there has scarcely been a single year in which the US has not been at war. Most of these have been wars of aggression beyond US soil.

OK, but surely Iran is a major sponsor of international terrorism, right? You could say that. Iran is a sworn enemy of Israel and does give material support to the highly unsavoury groups, Hezbollah and Hamas, although some might describe them as 'freedom fighters'. As always, the definition of 'terrorist' is subjective: The US provided support to the brutal, right-wing rebel Contras against the democratically elected left-wing government of Nicaragua (ironically by illegally supplying arms to Iran), and numerous similar organisations throughout Latin America. Some might call this 'sponsoring terrorism' and there are dozens of other examples of the US and the UK giving support to terrorist organisations all over the world, except we tend to label them as 'rebels' when they are on our side.

More recently, it appears the West or Israel have been waging a covert war inside Iran, murdering Iranian scientists, the latest with a sophisticated car bomb, and sabotaging nuclear facilities, all without any legal justification. This is surely terrorism, by any definition, but we seem to be OK with it. How many people have been killed by Iranian covert operations in Europe or the US? None, although there are lots of unproven and rather wild allegations of Hezbollah attacks in unlikely corners of the world, like Argentina, although the latter may well turn out to be one of a number of Israeli Mossad false flag operations. Also, how many wars of aggression has Iran started, compared to the US or Britain? I think the last time Iran started a major war may have been around the 6th century AD, although I may be wrong. That's hardly a very aggressive country, although I'll grant that a possible 21st-century Sassanid revival could be a complete game-changer.

So, if it isn't terrorism or Iran's nuclear ambitions that are driving us towards war, what is it? The answer is the same as always, of course: oil. But there's more at stake this time. The future of the dollar as the world's reserve currency is on the line and that is no trifling matter. The main aim of Western powers appears to be the same as in 1953: regime change. Patrick Cockburn in the Independent argues that this is primarily due to Israeli manipulation and provocation, although he also points out that the US has been sponsoring Jundullah Sunni insurgents inside Iran to carry out terror attacks since 2008. There is no doubt that the West, especially the US has always wanted to regain control of Iran's huge oil fields. What worked in 1953 could work again; a covert war to destabilise the country from within, combined with external pressure, to force a coup favourable to Western interests.

I do not think that the US is in any position to mount a successful full-scale invasion and occupation of Iran, despite all the sabre-rattling and even a limited naval operation in the Strait of Hormuz would be highly risky. The US is militarily stretched and domestic sentiment is weary of large-scale ground wars. Russia has also signalled repeatedly that a US attack on Iran risks provoking a much larger conflict. Both Russia and China have considerable interests in Iran and they may well be ready to defend those with more than diplomacy. Iran certainly has the potential to spark World War 3 and even US military hawks are - hopefully - not crazy enough to risk that. Hence the strategy is to provoke internal revolt, as in Libya and Syria.

The extent of Asian opposition to the US-EU-Israeli policy towards Iran is made very clear by the earth-shattering news that India has made a deal to buy Iranian oil using gold instead of dollars, to circumvent US-EU financial sanctions. The Israeli DEBKAfile agency also reports that Russia and China are ready to follow suit. Could this be Israeli misinformation designed to provoke US military action? Possibly, but the news has scarcely been reported at all in the Western media and it certainly rings true to me, since several countries have been making moves towards dumping the dollar in recent years. This would ultimately be catastrophic for the US economy and its hegemonic position in the world.

Ever since 1971, the US has been able to write blank cheques by printing dollars, no longer linked to gold or silver. Initially, this was to pay for the Vietnam War. They got away with this because other countries needed to hoard dollars to pay for oil and any surplus was stored in US Treasury bonds, allowing the US to run endless budget deficits very cheaply. Hence, as long as oil trade increased and was conducted in dollars, the US could print money without causing too much inflation at home. If the dollar stops being the world's reserve currency, all those foreign-held dollars will soon come home to roost, probably resulting in hyperinflation. China is one of the largest holders of US dollars, so if China were to start paying for oil in gold, that would be very bad news indeed for the US. It is perhaps no surprise that the wars against Iraq and Libya followed soon after those countries stopped selling oil in dollars.

As China, Russia, India and Turkey clearly have no intention of joining any sanctions on Iran, it is obvious that they will only serve to hurt Europe, causing the price of oil to rise. European nations already reeling from the effects of the banking crisis, eurozone instability and counter-productive austerity policies seem hell-bent on collective suicide. The last thing they need is an inflationary oil-shock but this is what they are inviting, all for the sake of indulging US and Israeli belligerence.

Western hubris is likely to precipitate a major shift in world power to the East and Iran could well be the catalyst for this, although it may not require an apocalyptic military conflict. If Europe's (including Britain's) leaders had any sense (which they don't), they would grow a collective backbone and take a course independent of the US and Israel, in readiness for a world in which the US no longer calls the shots. Finally, I would observe that US attempts to repeat their 1953 trick of sparking a coup in Iran may ultimately backfire so severely, leading to an economic collapse, that it could result in some kind of popular revolt in the USA. Wouldn't that be poetic justice?