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http://www.gold-eagle.com/editorials_05/petrov011606.html

The Proposed Iranian Oil Bourse Abstract: the proposed Iranian Oil Bourse will accelerate the fall of the American Empire.

I. Economics of Empires

A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military. One part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes.

Historically, taxing the subject state has been in various forms-usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, imperial taxation has always been direct: the subject state handed over the economic goods directly to the empire.

For the first time in history, in the twentieth century, America was able to tax the world indirectly, through inflation. It did not enforce the direct payment of taxes like all of its predecessor empires did, but distributed instead its own fiat currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars and paying back later each dollar with less economic goods-the difference capturing the U.S. imperial tax. Here is how this happened.

Early in the 20th century, the U.S. economy began to dominate the world economy. The U.S. dollar was tied to gold, so that the value of the dollar neither increased, nor decreased, but remained the same amount of gold. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, had substantially increased the amount of currency in circulation, and thus rendered the backing of U.S. dollars by gold impossible. This led Roosevelt to decouple the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not an empire. The fixed value of the dollar did not allow the Americans to extract economic benefits from other countries by supplying them with dollars convertible to gold.

Economically, the American Empire was born with Bretton Woods in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world's gold. An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold. However, the guns-and-butter policy of the 1960's was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ's Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was tantamount to a tax-the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that U.S. imposed on rest of the world.

When in 1970-1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of "severing the link between the dollar and gold", in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond- the world was taxed and it could not do anything about it.

From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and that reason was oil.

In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world's demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil.

The economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world. If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist. Thus, Imperial survival dictated that oil be sold only for dollars. It also dictated that oil reserves were spread around various sovereign states that weren't strong enough, politically or militarily, to demand payment for oil in something else. If someone demanded a different payment, he had to be convinced, either by political pressure or military means, to change his mind.

The man that actually did demand Euro for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably Euro and Yen, the danger to the dollar was clear and present, and a punitive action was in order. Bush's Shock-and-Awe in Iraq was not about Saddam's nuclear capabilities, about defending human rights, about spreading democracy, or even about seizing oil fields; it was about defending the dollar, ergo the American Empire. It was about setting an example that anyone who demanded payment in currencies other than U.S. Dollars would be likewise punished.

Many have criticized Bush for staging the war in Iraq in order to seize Iraqi oil fields. However, those critics can't explain why Bush would want to seize those fields-he could simply print dollars for nothing and use them to get all the oil in the world that he needs. He must have had some other reason to invade Iraq.

History teaches that an empire should go to war for one of two reasons: (1) to defend itself or (2) benefit from war; if not, as Paul Kennedy illustrates in his magisterial The Rise and Fall of the Great Powers, a military overstretch will drain its economic resources and precipitate its collapse. Economically speaking, in order for an empire to initiate and conduct a war, its benefits must outweigh its military and social costs. Benefits from Iraqi oil fields are hardly worth the long-term, multi-year military cost. Instead, Bush must have gone into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with Euro. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet and declared the mission accomplished-he had successfully defended the U.S. dollar, and thus the American Empire.

II. Iranian Oil Bourse

The Iranian government has finally developed the ultimate "nuclear" weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006. It will be based on a euro-oil-trading mechanism that naturally implies payment for oil in Euro. In economic terms, this represents a much greater threat to the hegemony of the dollar than Saddam's, because it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this euro oil system:

Only the British will find themselves between a rock and a hard place. They have had a strategic partnership with the U.S. forever, but have also had their natural pull from Europe. So far, they have had many reasons to stick with the winner. However, when they see their century-old partner falling, will they firmly stand behind him or will they deliver the coup de grace? Still, we should not forget that currently the two leading oil exchanges are the New York's NYMEX and the London's International Petroleum Exchange (IPE), even though both of them are effectively owned by the Americans. It seems more likely that the British will have to go down with the sinking ship, for otherwise they will be shooting themselves in the foot by hurting their own London IPE interests. It is here noteworthy that for all the rhetoric about the reasons for the surviving British Pound, the British most likely did not adopt the Euro namely because the Americans must have pressured them not to: otherwise the London IPE would have had to switch to Euros, thus mortally wounding the dollar and their strategic partner.

At any rate, no matter what the British decide, should the Iranian Oil Bourse accelerate, the interests that matter-those of Europeans, Chinese, Japanese, Russians, and Arabs-will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the operation's exchange:

Whatever the strategic choice, from a purely economic point of view, should the Iranian Oil Bourse gain momentum, it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar. The collapsing dollar will dramatically accelerate U.S. inflation and will pressure upward U.S. long-term interest rates. At this point, the Fed will find itself between Scylla and Charybdis-between deflation and hyperinflation-it will be forced fast either to take its "classical medicine" by deflating, whereby it raises interest rates, thus inducing a major economic depression, a collapse in real estate, and an implosion in bond, stock, and derivative markets, with a total financial collapse, or alternatively, to take the Weimar way out by inflating, whereby it pegs the long-bond yield, raises the Helicopters and drowns the financial system in liquidity, bailing out numerous LTCMs and hyperinflating the economy.

The Austrian theory of money, credit, and business cycles teaches us that there is no in-between Scylla and Charybdis. Sooner or later, the monetary system must swing one way or the other, forcing the Fed to make its choice. No doubt, Commander-in-Chief Ben Bernanke, a renowned scholar of the Great Depression and an adept Black Hawk pilot, will choose inflation. Helicopter Ben, oblivious to Rothbard's America's Great Depression, has nonetheless mastered the lessons of the Great Depression and the annihilating power of deflations. The Maestro has taught him the panacea of every single financial problem-to inflate, come hell or high water. He has even taught the Japanese his own ingenious unconventional ways to battle the deflationary liquidity trap. Like his mentor, he has dreamed of battling a Kondratieff Winter. To avoid deflation, he will resort to the printing presses; he will recall all helicopters from the 800 overseas U.S. military bases; and, if necessary, he will monetize everything in sight. His ultimate accomplishment will be the hyperinflationary destruction of the American currency and from its ashes will rise the next reserve currency of the world-that barbarous relic called gold.


Recommended Reading
William Clark "The Real Reasons for the Upcoming War in Iraq"
William Clark "The Real Reasons Why Iran is the Next Target"

About the Author
Krassimir Petrov (Krassimir_Petrov@hotmail.com) has received his Ph. D. in economics from the Ohio State University and currently teaches Macroeconomics, International Finance, and Econometrics at the American University in Bulgaria. He is looking for a career in Dubai or the U. A. E.


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http://globalresearch.ca/articles/CLA410A.html


The Real Reasons Why Iran is the Next Target:

The Emerging Euro-denominated International Oil Marker

by William Clark

www.globalresearch.ca      27 October 2004

The URL of this article is: http://globalresearch.ca/articles/CLA410A.html


The Iranians are about to commit an "offense" far greater than Saddam Hussein's conversion to the euro of Iraq's oil exports in the fall of 2000. Numerous articles have revealed Pentagon planning for operations against Iran as early as 2005. While the publicly stated reasons will be over Iran's nuclear ambitions, there are unspoken macroeconomic drivers explaining the Real Reasons regarding the 2nd stage of petrodollar warfare - Iran's upcoming euro-based oil Bourse.

 

In 2005-2006, The Tehran government has a developed a plan to begin competing with New York's NYMEX and London's IPE with respect to international oil trades - using a euro-denominated international oil-trading mechanism. This means that without some form of US intervention, the euro is going to establish a firm foothold in the international oil trade. Given U.S. debt levels and the stated neoconservative project for U.S. global domination, Tehran's objective constitutes an obvious encroachment on U.S. dollar supremacy in the international oil market

"Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes...known instruments for bringing the many under the domination of the few. . . No nation could preserve its freedom in the midst of continual warfare."

- James Madison, Political Observations, 1795

Madison's words of wisdom should be carefully considered by the American people and world community. The rapidly deteriorating situation on the ground in Iraq portends an even direr situation for American soldiers and the People of the world community - should the Bush administration pursue their strategy regarding Iran. Current geopolitical tensions between the United States and Iran extend beyond the publicly stated concerns regarding Iran's nuclear intentions, and likely include a proposed Iranian "petroeuro system" for oil trade. Similar to the Iraq war, upcoming operations against Iran relate to the macroeconomics of the `petrodollar recycling' and the unpublicized but real challenge to U.S. dollar supremacy from the euro as an alternative oil transaction currency.

It is now obvious the invasion of Iraq had less to do with any threat from Saddam's long-gone WMD program and certainly less to do to do with fighting International terrorism than it has to do with gaining control over Iraq's hydrocarbon reserves and in doing so maintaining the U.S. dollar as the monopoly currency for the critical international oil market. Throughout 2004 statements by former administration insiders revealed that the Bush/Cheney administration entered into office with the intention of toppling Saddam Hussein. Indeed, the neoconservative strategy of installing a pro-U.S. government in Baghdad along with multiple U.S. military bases was partly designed to thwart further momentum within OPEC towards a "petroeuro." However, subsequent events show this strategy to be fundamentally flawed, with Iran moving forward towards a petroeuro system for international oil trades, while Russia discusses this option.

Candidly stated, 'Operation Iraqi Freedom' was a war designed to install a pro-U.S. puppet in Iraq, establish multiple U.S military bases before the onset of Peak Oil, and to reconvert Iraq back to petrodollars while hoping to thwart further OPEC momentum towards the euro as an alternative oil transaction currency. [1] In 2003 the global community witnessed a combination of petrodollar warfare and oil depletion warfare. The majority of the world's governments – especially the E.U., Russia and China - were not amused – and neither are the U.S. soldiers who are currently stationed in Iraq.

Indeed, the author's original pre-war hypothesis was validated shortly after the war in a Financial Times article dated June 5th, 2003, which confirmed Iraqi oil sales returning to the international markets were once again denominated in US dollars, not euros. Not surprisingly, this detail was never mentioned in the five US major media conglomerates who appear to censor this type of information, but confirmation of this vital fact provides insight into one of the crucial - yet overlooked - rationales for 2003 the Iraq war.

"The tender, for which bids are due by June 10, switches the transaction back to dollars -- the international currency of oil sales - despite the greenback's recent fall in value. Saddam Hussein in 2000 insisted Iraq's oil be sold for euros, a political move, but one that improved Iraq's recent earnings thanks to the rise in the value of the euro against the dollar." [2]

Unfortunately, it has become clear that yet another manufactured war, or some type of ill-advised covert operation is inevitable under President George W. Bush, should he win the 2004 Presidential Election. Numerous news reports over the past several months have revealed that the neoconservatives are quietly - but actively - planning for the second petrodollar war, this time against Iran.

"Deep in the Pentagon, admirals and generals are updating plans for possible U.S. military action in Syria and Iran. The Defense Department unit responsible for military planning for the two troublesome countries is "busier than ever," an administration official says. Some Bush advisers characterize the work as merely an effort to revise routine plans the Pentagon maintains for all contingencies in light of the Iraq war. More skittish bureaucrats say the updates are accompanied by a revived campaign by administration conservatives and neocons for more hard-line U.S. policies toward the countries"…"Even hard-liners acknowledge that given the U.S. military commitment in Iraq, a U.S. attack on either country would be an unlikely last resort; covert action of some kind is the favored route for Washington hard-liners who want regime change in Damascus and Tehran."

"…administration hawks are pinning their hopes on regime change in Tehran - by covert means, preferably, but by force of arms if necessary. Papers on the idea have circulated inside the administration, mostly labeled "draft" or "working draft" to evade congressional subpoena powers and the Freedom of Information Act. Informed sources say the memos echo the administration's abortive Iraq strategy: oust the existing regime, swiftly install a pro-U.S. government in its place (extracting the new regime's promise to renounce any nuclear ambitions) and get out. This daredevil scheme horrifies U.S. military leaders, and there's no evidence that it has won any backers at the cabinet level." [3]

To date, one of the more difficult technical obstacles concerning a euro-based oil transaction trading system is the lack of a euro-denominated oil pricing standard, or oil 'marker' as it is referred to in the industry. The three current oil markers are U.S. dollar denominated, which include the West Texas Intermediate crude (WTI), Norway Brent crude, and the UAE Dubai crude. However, since the spring of 2003, Iran has required payments in the euro currency for its European and Asian/ACU exports - although the oil pricing for trades are still denominated in the dollar. [4]

Therefore, a potentially significant news development was reported in June 2004 announcing Iran's intentions to create of an Iranian oil Bourse. (The word "bourse" refers to a stock exchange for securities trading, and is derived from the French stock exchange in Paris, the Federation Internationale des Bourses de Valeurs.) This announcement portended competition would arise between the Iranian oil bourse and London's International Petroleum Exchange (IPE), as well as the New York Mercantile Exchange (NYMEX). It should be noted that both the IPE and NYMEX are owned by U.S. corporations.

The macroeconomic implications of a successful Iranian Bourse are noteworthy. Considering that Iran has switched to the euro for its oil payments from E.U. and ACU customers, it would be logical to assume the proposed Iranian Bourse will usher in a fourth crude oil marker – denominated in the euro currency. Such a development would remove the main technical obstacle for a broad-based petroeuro system for international oil trades. From a purely economic and monetary perspective, a petroeuro system is a logical development given that the European Union imports more oil from OPEC producers than does the U.S., and the E.U. accounts for 45% of imports into the Middle East (2002 data).

Acknowledging that many of the oil contracts for Iran and Saudi Arabia are linked to the United Kingdom's Brent crude marker, the Iranian bourse could create a significant shift in the flow of international commerce into the Middle East. If Iran's bourse becomes a successful alternative for oil trades, it would challenge the hegemony currently enjoyed by the financial centers in both London (IPE) and New York (NYMEX), a factor not overlooked in the following article:

"Iran is to launch an oil trading market for Middle East and OPEC producers that could threaten the supremacy of London's International Petroleum Exchange."

"…He [Mr. Asemipour] played down the dangers that the new exchange could eventually pose for the IPE or Nymex, saying he hoped they might be able to cooperate in some way."

"…Some industry experts have warned the Iranians and other OPEC producers that western exchanges are controlled by big financial and oil corporations, which have a vested interest in market volatility.

The IPE, bought in 2001 by a consortium that includes BP, Goldman Sachs and Morgan Stanley, was unwilling to discuss the Iranian move yesterday. "We would not have any comment to make on it at this stage," said an IPE spokeswoman. "[5]

It is unclear at the time of writing, if this project will be successful, or could it prompt overt or covert U.S. interventions - thereby signaling the second phase of petrodollar warfare in the Middle East. News articles in June 2004 revealed the discredited neoconservative sycophant Ahmed Chalabi may have revealed his knowledge to Iran regarding U.S. military planning for operations against that nation.

"The reason for the US breakup with Ahmed Chalabi, the Shiite Iraqi politician, could be his leak of Pentagon plans to invade Iran before Christmas 2005, but the American government has not changed its objective, and the attack could happen earlier if president George W. Bush is re-elected, or later if John Kerry is sworn in."

"….Diplomats said Chalabi was alerted to the Pentagon plans and in the process of trying to learn more to tell the Iranians, he invited suspicions of US officials, who subsequently got the Iraqi police to raid the compound of his Iraqi National Congress on 20 May 2004, leading to a final break up of relations."

"While the US is uncertain how much of the attack plans were leaked to Iran, it could change some of the invasion tactics, but the broad parameters would be kept intact." [6]

Regardless of the potential U.S. response to an Iranian petroeuro system, the emergence of an oil exchange market in the Middle East is not entirely surprising given the domestic peaking and decline of oil exports in the U.S. and U.K, in comparison to the remaining oil reserves in Iran, Iraq and Saudi Arabia. According to Mohammad Javad Asemipour, an advisor to Iran's oil ministry and the individual responsible for this project, this new oil exchange is scheduled to begin oil trading in March 2005.

"Asemipour said the platform should be trading crude, natural gas and petrochemicals by the start of the new Iranian year, which falls on March 21, 2005.

He said other members of the Organization of Petroleum Exporting Countries - Iran is the producer group's second-largest producer behind Saudi Arabia - as well as oil producers from the Caspian region would eventually participate in the exchange." [7]

(Note: the most recent Iranian news report from October 5, 2004 stated: "Iran's oil bourse will start trading by early 2006" which suggests a delay from the original March 21, 2005 target date). [8] Additionally, according to the following report, Saudi investors may be interested in participating in the Iranian oil exchange market, further illustrating why petrodollar hegemony is becoming unsustainable.

"Chris Cook, who previously worked for the IPE and now offers consultancy services to markets through Partnerships Consulting LLP in London, commented: "Post-9/11, there has also been an interest in the project from the Saudis, who weren't interested in participating before."

"Others familiar with Iran's economy said since 9/11, Saudi Arabian investors are opting to invest in Iran rather than traditional western markets as the kingdom's relations with the U.S. have weakened Iran's oil ministry has made no secret of its eagerness to attract much needed foreign investment in its energy sector and broaden its choice of oil buyers."

"…Along with several other members of OPEC, Iranian oil officials believe crude trading on the New York Mercantile Exchange and the IPE is controlled by the oil majors and big financial companies, who benefit from market volatility."[9]

One of the Federal Reserve's nightmares may begin to unfold in 2005 or 2006, when it appears international buyers will have a choice of buying a barrel of oil for $50 dollars on the NYMEX and IPE - or purchase a barrel of oil for €37 - €40 euros via the Iranian Bourse. This assumes the euro maintains its current 20-25% appreciated value relative to the dollar - and assumes that some sort of "intervention" is not undertaken against Iran. The upcoming bourse will introduce petrodollar versus petroeuro currency hedging, and fundamentally new dynamics to the biggest market in the world - global oil and gas trades

During an important speech in April 2002, Mr. Javad Yarjani, an OPEC executive, described three pivotal events that would facilitate an OPEC transition to euros. [10] He stated this would be based on (1) if and when Norway's Brent crude is re-dominated in euros, (2) if and when the U.K. adopts the euro, and (3) whether or not the euro gains parity valuation relative to the dollar, and the EU's proposed expansion plans were successful. (Note: Both of the later two criteria have transpired: the euro's valuation has been above the dollar since late 2002, and the euro-based E.U. enlarged in May 2004 from 12 to 22 countries). In the meantime, the United Kingdom remains uncomfortably juxtaposed between the financial interests of the U.S. banking nexus (New York/Washington) and the E.U. financial centers (Paris/Frankfurt).

The implementation of the proposed Iranian oil Bourse (exchange) in 2005/2006 – if successful in utilizing the euro as its oil transaction currency standard – essentially negates the necessity of the previous two criteria as described by Mr. Yarjani regarding the solidification of a "petroeuro" system for international oil trades. [10] It should also be noted that during 2003-2004 Russia and China have both increased their central bank holdings of the euro currency, which appears to be a coordinated move to facilitate the anticipated ascendance of the euro as a second World Reserve currency. [11] [12] In the meantime, the United Kingdom is uncomfortable juxtaposed between the financial interests of the U.S. (New York/Washington) banking nexus and that of the E.U. financial center (Paris/Frankfurt).

The immediate question for Americans? Will the neoconservatives attempt to intervene covertly and/or overtly in Iran during 2005 in an effort to prevent the formation of a euro-denominated crude oil pricing mechanism? Commentators in India are quite correct in their assessment that a U.S. intervention in Iran is likely to prove disastrous for the United States, making matters much worse regarding international terrorism, not to the mention potential effects on the U.S. economy.

"The giving up on the terror war while Iran invasion plans are drawn up makes no sense, especially since the previous invasion and current occupation of Iraq has further fuelled Al-Qaeda terrorism after 9/11."

"…It is obvious that sucked into Iraq, the US has limited military manpower left to combat the Al-Qaeda elsewhere in the Middle East and South Central Asia,"…"and NATO is so seriously cross with America that it hesitates to provides troops in Iraq, and no other country is willing to bail out America outside its immediate allies like Britain, Italy, Australia and Japan."

"….If it [U.S.] intervenes again, it is absolutely certain it will not be able to improve the situation – Iraq shows America has not the depth or patience to create a new civil society – and will only make matters worse."

"There is a better way, as the constructive engagement of Libya's Colonel Muammar Gaddafi has shown…."Iran is obviously a more complex case than Libya, because power resides in the clergy, and Iran has not been entirely transparent about its nuclear programme, but the sensible way is to take it gently, and nudge it to moderation. Regime change will only worsen global Islamist terror, and in any case, Saudi Arabia is a fitter case for democratic intervention, if at all." [13]

It is abundantly clear that a 2nd Bush term will bring a confrontation and possible war with Iran during 2005. Colin Powell as the Secretary of the State, has moderated neoconservative military designs regarding Iran, but Powell has stated that he will be leaving at the end of Bush's first term. Of course if John Kerry wins in November, he might pursue a similar military strategy. However, it is my opinion that Kerry is more likely to pursue multilateral negotiations regarding the Iranian issues.

Clearly, there are numerous risks regarding neoconservative strategy towards Iran. First, unlike Iraq, Iran has a robust military capability. Secondly, a repeat of any "Shock and Awe" tactics is not advisable given that Iran has installed sophisticated anti-ship missiles on the Island of Abu Musa, and therefore controls the critical Strait of Hormuz. [14] In the case of a U.S. attack, a shut down of the Strait of Hormuz – where all of the Persian Gulf bound oil tankers must pass – could easily trigger a market panic with oil prices skyrocketing to $100 per barrel or more. World oil production is now flat out, and a major interruption would escalate oil prices to a level that would set off a global Depression. Why are the neoconservatives willing to takes such risks? Simply stated - their goal is U.S. global domination.

A successful Iranian bourse would solidify the petroeuro as an alternative oil transaction currency, and thereby end the petrodollar's hegemonic status as the monopoly oil currency. Therefore, a graduated approach is needed to avoid precipitous U.S. economic dislocations. Multilateral compromise with the EU and OPEC regarding oil currency is certainly preferable to an 'Operation Iranian Freedom,' or perhaps an attempted CIA-sponsored repeat of the 1953 Iranian coup – operation "Ajax" part II. [15] Indeed, there are very good reasons for U.S. military leaders to be "horrified" at the thought of a second Bush term in which Cheney and the neoconservatives would be unrestrained in their tragic pursuit of U.S. global domination.

"NEWSWEEK has learned that the CIA and DIA have war-gamed the likely consequences of a U.S. pre-emptive strike on Iran's nuclear facilities. No one liked the outcome. As an Air Force source tells it, "The war games were unsuccessful at preventing the conflict from escalating." [16]

Despite the impressive power of the U.S. military and the ability of our intelligence agencies to facilitate "interventions," it would be perilous and possibly ruinous for the U.S to intervene in Iran given the dire situation in Iraq. The Monterey Institute of International Studies provided an extensive analysis of the possible consequences of a preemptive attack on Iran's nuclear facilities and warned of the following:

"Considering the extensive financial and national policy investment Iran has committed to its nuclear projects, it is almost certain that an attack by Israel or the United States would result in immediate retaliation. A likely scenario includes an immediate Iranian missile counterattack on Israel and U.S. bases in the Gulf, followed by a very serious effort to destabilize Iraq and foment all-out confrontation between the United States and Iraq's Shi'i majority. Iran could also opt to destabilize Saudi Arabia and other Gulf states with a significant Shi'i population, and induce Lebanese Hizbullah to launch a series of rocket attacks on Northern Israel."

"…An attack on Iranian nuclear facilities…could have various adverse effects on U.S. interests in the Middle East and the world. Most important, in the absence of evidence of an Iranian illegal nuclear program, an attack on Iran's nuclear facilities by the U.S. or Israel would be likely to strengthen Iran's international stature and reduce the threat of international sanctions against Iran. Such an event is more likely to embolden and expand Iran's nuclear aspirations and capabilities in the long term"…"one thing is for certain, it would not be just another Osirak. " [17]

Synopsis

Regardless of whatever choice the U.S. electorate makes in the upcoming Presidential Election a military expedition may still go ahead.

This essay was written out of my own patriotic duty in an effort to inform Americans of the challenges that lie ahead. On November 25, 2004, the issues involving Iran's nuclear program will be addressed by the International Atomic Energy Agency (IAEA), and possibly referred to the U.N. Security Council if the results are unsatisfactory. Regardless of the IAEA findings, it appears increasingly likely the U.S. will use the specter of nuclear weapon proliferation as a pretext for an intervention, similar to the fears invoked in the previous WMD campaign regarding Iraq.

Pentagon sources confirm the Bush administration could undertake a desperate military strategy to thwart Iran's nuclear ambitions while simultaneously attempting to prevent the Iranian oil Bourse from initiating a euro-based system for oil trades. The later would require forced "regime change" and the U.S. occupation of Iran. Obviously this would require a military draft. Objectively speaking, the post-war debacle in Iraq has clearly shown that such Imperial policies will be a catastrophic failure. Alternatively, perhaps a more enlightened U.S. administration could undertake multilateral negotiations with the EU and OPEC regarding a dual oil-currency system, in conjunction with global monetary reform. Either way, U.S. policy makers will soon face two difficult choices: monetary compromise or continued petrodollar warfare.

"I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts."

- Abraham Lincoln

"Whenever the people are well-informed, they can be trusted with their own government. Whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights."

- Thomas Jefferson

 


References:

[1] "Revisited - The Real Reasons for the Upcoming War with Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth," January 2003 (updated January 2004) http://www.ratical.org/ratville/CAH/RRiraqWar.html

[2] Hoyos, Carol & Morrison, Kevin, "Iraq returns to the international oil market," Financial Times, June 5, 2003 http://www.thedossier.ukonline.co.uk/Web%20Pages/FINANCIAL%20TIMES_Iraq%20returns%20to%20international%20oil%20market.htm

[3] "War-Gaming the Mullahs: The U.S. weighs the price of a pre-emptive strike," Newsweek, September 27 issue, 2004. http://www.msnbc.msn.com/id/6039135/site/newsweek/

[4] Shivkumar, C., "Iran offers oil to Asian union on easier terms," The Hindu Business Line (June 16, 2003). http://www.thehindubusinessline.com/bline/2003/06/17/stories/2003061702380500.htm

[5] Macalister, Terry, "Iran takes on west's control of oil trading," The [UK] Guardian, June 16, 2004 http://www.guardian.co.uk/business/story/0,3604,1239644,00.html

[6] "US to invade Iran before 2005 Christmas," News Insight: Public Affairs Magazine, June 9, 2004 http://www.newsinsight.net/nati2.asp?recno=2789

[7] "Iran Eyes Deal on Oil Bourse; IPE Chairman Visits Tehran," Rigzone.com (July 8, 2004) http://www.rigzone.com/news/article.asp?a_id=14588

[8] "Iran's oil bourse expects to start by early 2006," Reuters, October 5, 2004 http://www.iranoilgas.com

[9] "Iran Eyes Deal on Oil Bourse, IPE Chairman Visits Tehran," ibid.

[10] "The Choice of Currency for the Denomination of the Oil Bill," Speech given by Javad Yarjani, Head of OPEC's Petroleum Market Analysis Dept, on The International Role of the Euro (Invited by the Spanish Minister of Economic Affairs during Spain's Presidency of the EU) (April 14, 2002, Oviedo, Spain)
http://www.opec.org/NewsInfo/Speeches/sp2002/spAraqueSpainApr14.htm

[11] Russia shifts to euro as foreign currency reserves soar," AFP, June 9, 2003
http://www.cdi.org/russia/johnson/7214-3.cfm

[12] "China to diversify foreign exchange reserves," China Business Weekly, May 8, 2004 http://www.chinadaily.com.cn/english/doc/2004-05/08/content_328744.htm

[13] "Terror & regime change: Any US invasion of Iran will have terrible consequences," News Insight: Public Affairs Magazine, June 11, 2004 http://www.indiareacts.com/archivedebates/nat2.asp?recno=908&ctg=World

[14] Analysis of Abu Musa Island, www.globalsecurity.org http://www.globalsecurity.org/wmd/world/iran/abu-musa.htm

[15] J.W. Smith, "Destabilizing a Newly-Free Iran," The Institute for Economic Democracy, 2003 http://www.ied.info/books/why/control.html

[16] "War-Gaming the Mullahs: The U.S. weighs the price of a pre-emptive strike," ibid.

[17] Salama, Sammy and Ruster, Karen,"A Preemptive Attack on Iran's Nuclear Facilities: Possible Consequences," Monterry Institute of International Studies, August 12, 2004 (updated September 9, 2004) http://cns.miis.edu/pubs/week/040812.htm

[18] Philips, Peter, "Censored 2004," Project Censored, Seven Stories Press, (2003) http://www.projectcensored.org/

Story #19: U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq http://www.projectcensored.org/publications/2004/19.html

 

William Clark is the author of an award-winning essay published online in early 2003 entitled: 'The Real Reasons for the Upcoming War with Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth.'

 http://www.ratical.org/ratville/CAH/RRiraqWar.html , also published by Global Research at http://www.globalresearch.ca/articles/CLA302A.html This essay received a 2003 'Project Censored' award, and was published in the book, Censored 2004) [18] This pre-war essay hypothesized that Saddam sealed his fate when he announced in September 2000 that Iraq was no longer going to accept dollars for oil being sold under the UN's oil-for-food program, and switch to the euro as Iraq's oil export transaction currency.


Note: Below is a description of this author's upcoming book: (Available spring 2005.)

Petrodollar Warfare
Oil, Iraq and the Future of the Dollar

William Clark

The invasion of Iraq may well be remembered as the first oil currency war. Far from being a response to 9-11 terrorism or Iraq's alleged weapons of mass destruction, Petrodollar Warfare argues that the invasion was precipitated by two converging phenomena: the imminent peak in global oil production, and the ascendance of the euro currency.

Energy analysts agree that world oil supplies are about to peak, after which there will be a steady decline in supplies of oil. Iraq, possessing the world's second largest oil reserves, was therefore already a target of U.S. geostrategic interests. Together with the fact that Iraq had switched its oil transaction currency to euros -- rather than U.S. dollars -- the Bush administration's unreported aim was to prevent further OPEC momentum in favor of the euro as an alternative oil transaction currency standard.

Meticulously researched, Petrodollar Warfare examines U.S. dollar hegemony and the unsustainable macroeconomics of 'petrodollar recycling,' pointing out that the issues underlying the Iraq war also apply to geopolitical tensions between the U.S. and other countries including the European Union (E.U.), Iran, Venezuela, and Russia. The author warns that without changing course, the American Experiment will end the way all empires end - with military over-extension and subsequent economic decline. He recommends the multilateral pursuit of both energy and monetary reforms within a United Nations framework to create a more balanced global energy and monetary system thereby reducing the possibility of future oil-depletion and oil currency-related warfare.

A sober call for an end to aggressive U.S. unilateralism, Petrodollar Warfare is a unique contribution to the debate about the future global political economy.


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http://english.aljazeera.net/NR/exeres/497EDC03-ACD0-45A3-AC68-F51519B74916.htm

The governor of Iran's central bank has confirmed that the country has started to transfer assets held in foreign accounts.

Ebrahim Sheibani told the ISNA students' news agency on Friday: "We transfer foreign reserves to wherever we see as expedient. On this issue, we have started transferring. We are doing that."

ISNA specifically asked whether the money was being moved to Asian accounts but Sheibani's answer sidestepped the issue.

Sheibani told reporters earlier this week that Iran stood ready to repatriate the money it held abroad should this prove necessary.

Iran, which could face UN economic sanctions over its atomic programme, has bitter memories of its US assets being frozen shortly after the 1979 Islamic revolution.

Shift to Asia

ISNA's question appeared to be based on an article in the London-based Asharq al-Awsat Arabic newspaper that said Iran's Supreme National Security Council had ordered foreign holdings to be shifted to Asia.

Iran is the fourth biggest oil exporter in the world and the second largest in OPEC. Eighty percent of its export earnings come from oil, the price of which has soared over the past two years.

"If you're talking in terms of a safe haven proposal, that's where Switzerland is very strong, stronger than Singapore or other places. We are a country that is non-judgmental"

Steve Bernard,
Geneva Financial Centre, Zurich

Economists estimate Iran will have earned more than $40 billion in oil revenues by the end of the year to March 2006. Of this, $16 billion goes straight to budgeted government spending.

The rest goes to the Central Bank of Iran which keeps an unknown amount of holdings in foreign accounts.

The Naftiran Intertrade Company (NICO), the powerful trade and financing arm of the National Iranian Oil Company, is based in Switzerland.

Swiss reaction

Meanwhile a leading financial industry representative in Zurich on Friday said Swiss banks would welcome asset transfers by Iran.

 

"If you're talking in terms of a safe haven proposal, that's where Switzerland is very strong, stronger than Singapore or other places. We are a country that is non-judgmental," said Steve Bernard, director of the Geneva Financial Centre, a lobby in Switzerland's second-largest banking city after Zurich.

 

Switzerland is home to more offshore wealth than any other country, and is a traditional haven for investors who seek the safety of Swiss political neutrality and legal guarantees of banking privacy.

 

"Because of its non-discriminatory practices, Switzerland has always been an attractive place and would remain an attractive proposal for Iranian authorities looking to shift some of their assets or to diversify the geographical distribution of some of their assets," Bernard said.



http://www.atimes.com/atimes/China/GL21Ad01.html


China lays down gauntlet in energy war
By F William Engdahl

On December 15, the state-owned China National Petroleum Corp (CNPC) inaugurated an oil pipeline running from Kazakhstan to northwest China. The pipeline will undercut the geopolitical significance of the Washington-backed Baku-Tbilisi-Ceyhan (BTC)oil pipeline which opened this past summer amid big fanfare and support from Washington.

The geopolitical chess game for the control of the energy flows of Central Asia and overall of Eurasia from the Atlantic to the China



Sea is sharply evident in the latest developments.

Making the Kazakh-China oil pipeline link even more politically interesting, from the standpoint of an emerging Eurasian move towards some form of greater energy independence from Washington, is the fact that China is reportedly considering asking Russian companies to help it fill the pipeline with oil, until Kazakh supply is sufficient.



Initially, half the oil pumped through the new 200,000 barrel-a-day pipeline will come from Russia because of insufficient output from nearby Kazakh fields, Kazakhstan's Vice Energy Minister Musabek Isayev said on November 30 in Beijing. That means closer China-Kazakhstan-Russia energy cooperation - the nightmare scenario of Washington.

Simply put, the United States stands to lose major leverage over the entire strategic Eurasian region with the latest developments. The Kazakh developments also have more than a little to do with the fact that the Washington war drums are beating loudly against Iran.

The new China pipeline runs 962 kilometers (598 miles) and will take China a third of the way to Kashagan in the Caspian Sea, one of the world's largest accessible oil reserves. Kashagan is the largest new oil discovery in decades and exceeds the size of the North Sea. This is a major reason Washington has such a strong interest in supporting democratic regime change in the Central Asia region of late.

In the next 10 years, Kazakhstan plans to almost triple oil production, prompting the landlocked nation to seek new export routes because the country wants to avoid pipelines through Russia and excessive Russian dependence. China is now among Kazakhstan's major target markets.

Best public estimates are that Kazakhstan has 35 billion barrels of discovered oil reserves, twice the amount in the North Sea, and may hold about three times more, according to a Kazakh government report released on November 18 in London. German oil engineers have privately reported that recent drilling by Italy's AGIP, the current oil consortium leader for Kashagan, a huge field offshore Kazakhstan southwest of Tengiz, has confirmed enormous oil deposits there.

The government of President Nursultan Nazarbayev plans to produce 3.6 million barrels a day of oil from all fields in Kazakhstan, onshore and off, by 2015. For 2005, they expect to average about 1.3 million barrels a day, making Kazakhstan far larger than Azerbaijan, and second in oil production of the former Soviet states only to Russia.

The December 15 opening of the new Kazakh-China pipeline was a major event for Beijing. Zhang Guobao, vice chairman of the National Development and Reform Commission, China's top economic planning agency, attended the opening. CNPC has invested more than $2.6 billion in Kazakhstan since 1997.

Beijing takes the geopolitical prize
In October, Beijing scored a second major geopolitical coup when China completed a $4.18 billion takeover of PetroKazakhstan Inc. It was, in a sense, revenge on Washington for the blocking of the China acquisition of Unocal. US oil majors had made major efforts to lock up Kazakhstan oil after discovery of major oil offshore in the Kashagan field. They failed. ExxonMobil was charged with bribery of Kazakh officials to win a presence in the Kazakh oil business, and a senior Mobil executive was later jailed on US tax evasion in New York tied to the Kazakh bribery payments.

Nazarbayev enjoys good relations with Russia's President Vladimir Putin. He was general secretary of the Communist Party when Kazakhstan was part of the USSR, and is regarded as a sly fox in terms of dealing with Moscow, while also keeping a clear distance from Moscow.

In October, Russia's Lukoil failed in its bid to buy up the Kazakh state oil company, PetroKazakhstan, in a privatization. Nazarbayev indicated a major geopolitical shift in strategy, compared with a decade or more ago, when it appeared that Washington was to be the major foreign ally of Nazarbayev. At that time Secretary of State Condoleezza Rice's company, Chevron, became the lead oil contractor and operator in the Kazakh Tengiz oil field. That was just after the breakup of the Soviet Union and the US oil presence in Kazakhstan was a major US political priority supported by the Bill Clinton administration.

The Chevron Tengizchevoil consortium formed the Caspian Pipeline Consortium (CPC) in 1993 amid great fanfare. After years of haggling with the Kazakh government, Chevron finally constructed a pipeline from Tengiz on the Caspian's northeastern shore to the Russian port of Novorossiysk on the Black Sea. Following years of pressure, most members of the CPC group, including Chevron and Oman Oil Co, decided to not pursue future expansions of the CPC line.

Now, a decade later and with the scope of Kazakh oil deposits dwarfing any in the region, with its recent confirmed drillings in the Kashagan field, Nazarbayev has scored a political balance of power coup by turning to Beijing.

In October, Nazarbayev announced that CNPC had won the bid to buy PetroKazakhstan. What will be important to watch, now that Nazarbayev won re-election on December 4, further extending his 14-year reign, is to what extent Washington begins to play up "human rights abuses" by Nazarbayev.

A fledgling "Orange" revolution a la Ukraine has sprung up behind opposition candidate Zharmakhan Tuyakbai and his party, For a Just Kazakhstan. He came in second with 6.6% of the vote and cried fraud, but Washington's and the US media response were muted this time. Rice, in a major trip to shore up sagging US influence in Central Asia on October 10-13, held a private meeting with Tuyakbai. He is clearly being groomed for a possible future role, but clearly not yet.

Washington suffers strategic setback
A major setback for Washington's Eurasian encirclement strategy vis-a-vis China and Russia came several months ago when Uzbekistan's autocratic president Islam Karimov told Washington it could no longer use the Karshi-Khanabad military air base in southeast Uzbekistan, a major piece in Washington's Eurasian chess board play, put into place after September 11, 2001.

Since strong US protest over the government's bloody suppression of protests against a state trial of alleged Islamic fundamentalists in Andijan last May, Karimov's relations with Washington have deteriorated. Karimov's decision to move so aggressively was no doubt influenced by the successful March "Tulip" revolution which toppled Askar Akayev in neighboring Kyrgystan and set the stage for the July election of opposition and US-backed candidate Kurmanbek Bakiev.

On July 29, Karimov announced he was evicting the US entirely from the airbase with a January 2006 exit date. In October, the US Senate, as retaliation, voted not to pay $23 million in base user fees to Uzbekistan for past use. Moscow and Beijing have both moved into the vacuum. A look at the map will indicate why. Uzbekistan is strategic for control or to prevent control by foreign powers such as Washington, of Central Asia and pipeline routes linking Russia, China and Kazakhstan. In October 2004, Moscow secured a long-term military base agreement to station troops in Dushanbe, the capital of nearby Tajikistan, a move by Russia to limit the spread of Washington-backed "color revolutions" in the region.

That appeared to redraw the Eurasian geostrategic map in Moscow's favor, with the recent US loss of Uzbekistan. Uzbekistan is now effectively Russia's main ally in Central Asia.

Washington's position in Eurasia and its future relations with Kazakhstan suddenly assumed high priority. Clearly, the Bush administration decided the time was not ripe to try a full-blown "Orange" revolution in Kazakhstan this month, at least not until Washington's position in the region was stronger. That was a clear purpose of the October Rice visit.

But now with the strong geopolitical turn of Nazarbayev toward playing Beijing to offset potential Washington domination in the region, the situation has begun to change dramatically. A year ago, China attempted to buy out a 16% share in the Kashagan consortium from British Gas, which was willing to sell. That sale was blocked by US consortium member ExxonMobil, the company subsequently charged with bribery and convicted. Now China has opened an oil flow out of Kazakhstan to the East, not the West.

This has major strategic implications for the future of the Washington-backed BTC oil pipeline. That pipeline was built by the Caspian Oil Consortium headed by British Petroleum, and was backed by both Clinton and George W Bush, despite the fact that it was the most costly and least viable oil route out of the Caspian.

Former US national security advisor Zbigniew Brzezinski had been the chief Washington lobbyist advocating the BTC route to circumvent Russia. Its construction was undertaken on the assumption that it would carry not only Baku oil, but also a major share of Kazakh oil from Tengiz and offshore Kashagan oil fields. Oops!

A larger China energy strategy
The December China-Kazakhstan pipeline opening is one part of a massive Chinese plan to secure as much Kazakh oil riches as possible.

The Chinese plan to connect several pieces of infrastructure - part Soviet-built, part Chinese-built - then reverse the flow of some of them and forge a new export corridor stretching from Kazakhstan's oil-rich Caspian basin, including Kashagan, through a series of western and central-Kazakh oil zones, and ultimately into China. With completion of this major project, China will for the first time have secured a source of imported energy not vulnerable to US aircraft carrier battle groups, as is the case with present oil deliveries from the Persian Gulf and Sudan.

Before opening the new pipeline, China imported only 25,000 bpd from Kazakhstan. Once the link between Kenkiyak and Kumkol is finished, connecting existing infrastructure near the Caspian with the portion inaugurated on December 15, the project will pump 1 million bpd. That would be about 15% of China's crude oil needs.

China then plans to tap into production from dozens of Kazakh sites it has acquired during the past several years. This is oil that currently goes west, or north through Russia.

Beijing still prefers the color 'red'
Beijing has also studied the Washington-backed series of regime changes across Central Asia and the "color revolutions" from Georgia to Ukraine and most recently Kyrgystan, and has evidently decided to "nip in the bud" any similar non-governmental organization efforts within China, or in areas strategic to long-term China energy security.

Kyrgystan's "Tulip" revolution last July sounded alarm bells in Beijing. Possible Chinese pipeline links to Kazakhstan, Turkmenistan, Iran and or Russia would clearly be threatened by a ring of new pro-North Atlantic Treaty Organization neighbors and states between western China and its potential oil sources. Their alarm led to warmer ties between Uzbekistan's Karimov and Beijing in recent months, as well as an invitation from Moscow-tied Belarus President Yuri Lukashenko.

The Washington journal Foreign Policy ran a short item in its October edition by an apparent Chinese dissident. The article, titled, "China's Color-Coded Crackdown", is worth quoting:
In China's halls of power, the fall of post-Soviet authoritarian regimes has raised the uncomfortable specter of a Chinese popular uprising. According to the Hong Kong-based Open magazine, a report by Chinese President Hu Jintao, titled "Fighting the People's War Without Gunsmoke", is guiding the Chinese Communist Party's "counterrevolution" offensive. The report, disseminated inside the party, outlines a series of measures aimed at nipping a potential Chinese "color revolution" in the bud.
Some Chinese apparently call it the Battle of the Two Georges - George Bush and global financier George Soros. The Foreign Policy piece continues:
Perhaps the most telling sign of China's concern has been its crackdown on non-governmental organizations (NGOs). Beijing believes that international organizations, especially advocacy NGOs, have acted as Washington's "black hands" behind the recent regime changes in Central Asia. A recent issue of a biweekly journal run by the Communist Party Propaganda Department referred to Washington's "$1 billion annual budget for global democratization" and identified NGOs such as the International Republican Institute, the National Endowment for Democracy (NED), the US Institute of Peace and the Open Society Institute as organizations that "brainwash" local people and train political oppositions.

In late August, ahead of a visit by the UN high commissioner for human rights, Chinese police raided the office of the Empowerment and Rights Institute, a human rights group supported by the NED. A new regulation offering more freedom to NGOs was initially expected later this year. No longer. The Ministry of Civil Affairs has now stopped processing registration applications, effectively freezing many groups' operations. Instead, the only government offices taking an interest in NGOs are the national security agency [China's secret police] and public security forces.

Both have launched investigations into local NGOs. Some senior Chinese managers working for international NGOs have been called in for "private talks" with authorities, though no related arrests or detentions have been reported. Some NGO offices have had plainclothes security officers show up in an effort to clandestinely ferret out information on foreign staff and organizations. Environmental groups have been singled out for a massive government survey, most likely because they have angered powerful agencies by successfully initiating public debates on controversial issues, such as genetically modified foods and huge dam projects, and because only around 10% of green groups are currently registered with the state.

Meanwhile, Beijing has commissioned researchers from several provincial academies of social science to study the activities of NGOs in China. NGO publications such as directories experienced unexpectedly strong sales in recent months, as they no doubt became convenient study tools. Likewise, experts have been dispatched to Central Asia to study how those color revolutions first sprung roots. In a May 19 Politburo meeting, senior administrators from the Chinese Academy of Social Sciences, where foreign research funds are usually well received, were reminded of the "acute and complicated struggle in the ideological realm in the new millennium". In other words, be careful about the political implications of your research.

According to sources in Beijing, final decisions on the government's approach to NGOs will be made in a November meeting of the State Council, China's highest executive body. As long as the clouds of color revolution are hovering over Central Asia - some, for example, expect storms in Belarus - the Chinese government will stay on high alert ... Beijing's moves against the country's NGO community remain largely unnoticed outside China. If the international community wants an open and democratic China, it should pay more attention to the survival and growth of Chinese liberal institutions. Otherwise, the country will be destined to remain the same shade of red.
Beijing-Tehran-Moscow
At the end of 2004, Beijing signed a $70 billion energy agreement with Tehran, China's largest Organization of Petroleum Exporting Countries energy deal to date. China's state Sinopec agreed to buy 250 million tons of LNG over 30 years from Iran, as well as to develop the giant Yadavaran field. That agreement covered the comprehensive development by Sinopec of the giant Yadavaran gas field, construction of a related petrochemical and gas industry including pipelines.

As part of the huge Iran-China economic cooperation agreement, China's state-run military construction company, NORINCO, will expand the Tehran Metro underground.

A second phase in the Iran-China strategic energy cooperation will involve constructing a pipeline in Iran to take oil some 386 kilometers to the Caspian Sea, there to link up with the planned pipeline from China into Kazakhstan.

On signing the deal, Iran's Petroleum Minister announced that Tehran would like to see China replace Japan as Iran's largest oil importer. As well, Iran has what are estimated to be the world's second largest reserves of natural gas after Russia. Iran is a place of enormous strategic importance to China, to Japan, to Russia, to the European Union, and for all these reasons, to Washington as well.

Iran supplies about 14% of China's oil. Along with Russia, China has been involved since the late 1990s in supplying nuclear technology to Tehran. In 1997, Beijing, under Washington pressure, nominally agreed to stop nuclear-related shipments to Iran, but the flows are believed continuing as the Iran relation is strategic and critical to China's energy security.

China, a veto member of the UN Security Council, has repeatedly called for the issue of Iranian nuclear development to be dealt with by the International Atomic Energy Agency (IAEA). The IAEA's chief, Nobel Peace Prize awardee, Mohamed ElBaradei, has earned the enmity of Washington war hawks for his open declarations of lack of evidence in both Iraq and now of Iranian atomic bomb capability.

Given the nature of the Bush administration's rush to war in Iraq in 2003, where China had a major stake in oil development, and the subsequent US blocking of other Chinese attempts at securing energy independence, including Unocal, it is not surprising that Beijing is taking extraordinary measures to secure its long-term oil and gas supply.

Energy is the Achilles' heel of China's economic growth. Beijing knows that only too well. So does Washington. A decision by Washington to take military action against Iran now would pull a far larger cast of actors into the fray than Iraq.

F William Engdahl is author of the book, A Century of War: Anglo-American Oil Politics and the New World Order from Pluto Press Ltd. He can be contacted via his website, http://www.engdahl.oilgeopolitics.net

(Copyright 2005 F l)