Bomb-Grade Uranium in Iran Came From Pakistan

August 23, 2005 - This news on Iran: the Washington Post is reporting that a group of U.S. government experts and other international scientists have determined that traces of bomb-grade uranium found two years ago in Iran came from contaminated Pakistani equipment and are not evidence of a clandestine nuclear weapons program. One senior official said, "The biggest smoking gun that everyone was waving is now eliminated with these conclusions." The Bush administration had pointed to the material as evidence that Iran was making bomb-grade ingredients.

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Sidebar: Iran in the Crosshairs - Special Report

Iran's danger to America is not its nuclear program but its plan to introduce a euro-based energy exchange.

- By Ryan McGreal - Aug. 22, 2005

Starting in 2006, Iran will start up an "oil bourse", or a stock exchange for trading energy, that will be based on the euro, not the US dollar. While this may seem innocuous, it will be a grave risk to continued American global hegemony.

Petrodollar Hegemony

Today, most oil trading takes place on the New York Mercantile Exchange (NYMEX) and the London-based International Petroleum Exchange (IPE). Since the 1970s, the OPEC countries have all agreed to sell oil for US dollars only. This means every country that wants to buy oil must first acquire enough US dollars to buy what it needs.

Year after year, America imports much more than it exports. It must pay out that difference (its current accounts deficit) in dollars. Last year, the US ran a current accounts deficit of over $600 billion USD; this year, it's expected to increase to $700 billion.

If there were no good reason for other countries to buy all those American dollars, then the dollar would decline in value until the US economy could no longer afford to import goods from abroad. This is what happens when other countries run large current accounts deficits over long periods.

However, the deal with OPEC means other countries have no choice but to buy all those excess American dollars, which props up the value of the dollar and allows the American "import economy" to go on year after year. Effectively, America's main export is US dollars, and it is absolutely imperative to preserve a captive market for those dollars among oil-consuming countries.

The continued viability of the US economy depends on it. Americans can still afford to consume because their economy is suffused with cheap imports; a falling dollar will raise the prices of imported goods. At the same time, Americans enjoy some of the lowest oil prices in the world, largely due to the petrodollar arrangement. This has skewed the American vehicle market toward gas-guzzling but profitable SUVs and light trucks.

Selling Oil for Euros

One of the major unstated reasons the United States invaded Iraq was to stop Saddam Hussein from trading oil for euros, which he had begun in 2000. Hussein actually made more money selling oil for euros, as the euro appreciated 17 percent against the dollar between 2000 and 2003. Other countries in the region, particularly Iran and Syria, began public musing about switching from dollars to euros around the same time.

All three countries were subject to a barrage of threats from the United States government, but only Iraq went through with the switch, and it was summarily invaded. One of the US government's first acts in Iraq was to switch oil sales back to dollars.

Now, Iran plans not just to sell oil for euros, but to create an exchange market for parties to trade oil for euros. The oil bourse will provide a euro-based price standard, the way West Texas Intermediate crude (WTI) and North Sea Brent crude do today. To the extent that the balance of reserve holdings starts to shift from dollars to euros, that's very bad news for America's system of dollar hegemony.

Iran is taking a calculated risk that enough countries have an interest in a petro-euro market to contain American aggression. Many central banks are already quietly shedding their dollar reserves, nervous that America's economic fundamentals ($500 billion federal deficit, $700 billion current accounts deficit, $4.5 billion federal debt, record business and personal debts, zero savings) cannot be sustained for long, and hoping to insulate themselves from what they see as an inevitable recession. The US dollar has declined by a third against the euro since 2000, despite the petrodollar arrangement.

At the same time, Europe is eager to enjoy more of the "virtuous circle" that comes from supplying a major reserve currency: a ready market for its currency and guaranteed reinvestment as euro-holders plant their money in European markets. Vladimir Putin, Russia's president, has also expressed interest in switching from dollars to euros. Russia would benefit from getting paid in a stronger currency, and it would represent a political victory over America after fifteen years of watching its clients and assets in the oil-rich Caspian region co-opted by American expansion.

Nuclear Politics

Iran may, indeed, be attempting to acquire nuclear weapons. However, it also has a "legitimate" interest in developing nuclear power, since its own oil reserves are already post-peak and it aims to continue in its role as an energy exporter. Iran is a signatory in good standing to the Nuclear Non-Proliferation Treaty (NPT) and has openly informed the International Atomic Energy Agency of its intentions as required by the Treaty.

However, Iran's presumed attempt to acquire nuclear weapons is only the politically acceptable excuse for America's threats. The real danger is that Iran will lay down the foundation for a post-hegemonic international energy industry in which America is merely one of many players. If Iran is, in fact, developing nuclear weapons, it is doing so to acquire a deterrent against exactly this kind of American encroachment.

Indeed, recent world events have only enforced the notion that a nation's successful efforts to acquire nuclear weapons confer respect and status, not the opprobrium it deserves. India, a growing economic power that possesses a nuclear arsenal and refuses to sign either the NPT or the Comprehensive Test Ban Treaty (CTBT), has just been rewarded for its efforts by US President Bush, who has agreed to "work to achieve full civil nuclear energy cooperation with India." This is a straightforward violation of the NPT, which forbids signatories from exchanging nuclear materials or support with non-signatories.

If Iran really is trying to acquire nuclear weapons, is it any wonder why? Look at the advantages that having nuclear arsenals have given to US allies India, Pakistan, and Israel, all of which have benefited immensely from a playing field tilted in their favor by their ability to project devastating power. As official hysteria about Iran's intentions escalates in volume and intensity, remember the real force undermining the moral authority of the NPT: the big nuclear 'have' countries that still refuse either to apply the ban consistently or to take any meaningful steps of their own toward "general and complete disarmament" - ostensibly the NPT's ultimate goal.

Ironically, America originally invaded Iraq - a poor, defenseless country - partly to send a message to other oil producing countries not to rock the petrodollar system, but the real message for small countries is that they need to present a credible deterrent threat or risk being ignored and/or invaded.

Further Reading

Ryan lives in Hamilton with his family and works as an analyst, web application developer, writer and journal editor. He is the editor of Raise the Hammer. Ryan also helps to edit Perspectives on Evil and Human Wickedness, writes occasionally for CanadianContent.Net, and maintains a personal website.

http://www3.sympatico.ca/taylormcgreal/