ALL ABOUT PETRODOLLARS

This is a long, rambling diatribe and, yet, a perfect example of its kind. Though it almost defies deconstruction, it is worthy of some attention.

Petrodollar & Iran & Iraq
Jim Willie CB, April 21, 2007 (321energy.com)

WHO
US, MidEast and World financiers trading in US dollars and MidEast oil, especially the US and the Saudis.

WHAT
The PetroDollar, the term that describes US dollars used in the oil trade, has historically been a factor in and an object of international relations. It began as a sort of “checking account” for oil deals, allowing for the exchange of dollars for oil without mediation in Swiss Francs or German Deutchmarks.
pic from Jim Willie CB (click to enlarge)
WHEN
The article briefly describes the modern history of the PetroDollar and its role in US/MidEast relations.

WHERE
World oil and currency markets.

WHY
- The Saudis conduct oil business in US$, recycle their wealth through New York and London banks and use their wealth to secure power and stability in the Gulf region.
- Saddam Hussein’s threat to shift from the dollar to the euro for selling Iraq’s oil is said to have been a factor in the West’s enmity toward him. The present Iranian government has announced it wants to create an oil market and currency of its own and this, too, has been met by Western antipathy. Japan, South Korea and China – caught between a pressing need for Iranian oil and a strong impulse not to cross the US by acceding to Iran’s demands to trade in euros – are struggling with how to play the dilemma.
- There is a hypothesized link between the threat to the PetroDollar and US military presence in the MidEast. If the PetroDollar system shifts, it could compromise the US economy. Many nations are said to be leery of an on-going PetroDollar relationship, given unpopular US policy and its disadvantageous balance-of-payments situation.
- Norway is said to be now selling Brent crude in euros, a threat to the PetroDollar system. This move is perhaps in response to the “shaky” US economy and “housing and mortgage crisis.” Actions of the Chinese and Japanese are said to be worth scrutinizing. Also, the Shanghai Cooperative Group (China, India, Russia, former Soviet Republics, and Iran) may have the leverage to move away from PetroDollars.
pic from Jim Willie CB (click to enlarge)
QUOTES
- “…one could say the oil world provides the pool from which the US$ exchange rate valuation is applied and enforced.
- “The history of the PetroDollar could be described as a syndicate contract between the United States and Saudi Arabia to subsidize the USDollar, to prop up the Western banking system, to enable the Arab royals (sheiks & emirs) to continue to claim their national treasures as their private property.”
- “There are only two important props to the United States Govt and Economy, according to William Engdahl: ownership of the US$ world reserve currency, and command of the US Military.”
- “The stability of the PetroDollar depends heavily on keeping the confidence of the Persian Gulf oil producers. JPMorgan activities emanating from the Bank of Baghdad cannot be dismissed. Effectively, after JPMorgan was chosen to run the Iraqi Central Bank…”
- “When explaining the crude oil price, politics and war account for most variation, not economics bound by supply & demand. It might be
the prospects of Iran War, or the military barrage probe on Beirut in summer 2006
the grand scale of US Military sale of crude oil & diesel in late summer 2006
the Goldman Sachs Commodity Index adjustment of the gasoline weight just three months before the US Midterm Elections
the State of the (dis)Union message related to the Strategic Petroleum Reserve
the total relaxation of pressure on Iran during those same Midterm Elections
the latest pressure on Iran…
…The greatest dynamics for the crude oil price changes emanate from decisions by the White House, the Pentagon, and offices at JPMorgan & Goldman Sachs…”