While the whole world is fixated on the well-publicized details of Iran’s nuclear programme, we may well forget to discuss the more plausible reasons as to why a military conflict with Iran might be desirable for some. A useful starting point might be the common denominator of the two last major Western interventions in the Middle East-North Africa region, namely Iraq and Libya. The politics of the global oil trade tie these two together.

But first, how real is the Iranian threat? Analysts often stress that 20% uranium enrichment is a critical step towards building a nuclear weapon. A crucial step is, however, not logical proof that a country is actually building a nuclear weapon. Some might then respond by citing hostile Iranian rhetoric, claiming that Iran wants “to wipe Israel off the map.” However, this oft-quoted statement by Ahmadinejad was merely a paraphrasing of a previous one by Ayatollah Khomeini, who declared that “the regime occupying Jerusalem”, following in the footsteps of those of the Shah and the Soviet Union, will “[vanish from] the page of time.” It is not difficult to see why such a quote could be misinterpreted, or even manipulated.

But “Iran has violated the Nuclear Non-Proliferation Treaty (NPT),” says US Secretary of State Hillary Clinton, in an attempt to single out Iran for criticism. Israel, of course, has not signed the NPT, and once offered to sell nuclear warheads to the South African apartheid regime. So what, then, distinguishes Iran from Israel? Hillary again: “Israel has been defending itself for the past 60 years, and has made numerous overtures to try to have a peaceful resolution.” It would be interesting to find out Palestinian views on this particular statement.

Setting the doubtful nuclear threat aside for a moment, it might be useful to consider if more is at stake in this brewing conflict. In this regard, the petrodollar warfare theory has a lot of explanatory potential.

The basics of the theory go as follows. Since 1945, the US dollar has been the de facto international reserve currency for global oil transactions. In 1971 President Nixon took the dollar off the gold standard, which gave the US—through the Treasury Department, which enjoys a monopoly of control over the US money supply—immense monetary power . On the other side of the global oil arena, the Organization of Petroleum Exporting Countries (OPEC) largely decides which currency is used for OPEC oil purchases. Two secret agreements between the US and Saudi Arabia ensured Saudi support in OPEC for the pricing of all oil in dollars. As a consequence, US petrodollars became the de facto currency for global oil transactions, leaving all producers with their profit in dollars. These dollars are then recycled through OPEC back into the US through Treasury Bills or other dollar-dominated assets. This in turn creates capital-accounts surplus for the US economy which finances the US trade deficit.

Saddam Hussein defied that system, and he probably paid the price for it. In 1995, the UN’s Resolution 986 established the Oil-for-Food Program (OFF), which allowed Iraq to sell oil in exchange for goods to alleviate the humanitarian needs of ordinary Iraqi citizens suffering under economic sanctions imposed by the Clinton administration. [6] Not too happy perhaps with the petrodollar regime, Saddam changed the Iraqi oil transaction currency to the euro on October 30th 2000, a decision ultimately approved by the UN. At the time this move cost Iraq $270 million, but it paid off in the long run; the US dollar depreciated steadily against the Euro, making Saddam a fortune in the process. The 2003 invasion of Iraq, of course, put an end to his regime, and with it, his subversive petropolitical gamble. Sanctions on Iraq were stopped once the war began, and, according to a widely-cited Financial Times article of June 5th 2003, Iraqi oil transactions was once again denominated in US dollars.

Libya’s case was slightly different. France, not the US, took the political initiative to intervene, this time allegedly for humanitarian reasons. Like Saddam, Gaddafi attempted to defy the dollar and euro by introducing the Gold Dinar, a new currency backed by gold to be used by Arab and African countries for oil transactions. What needs to be pointed out is that the Libyan state exercised total control over its oil, and the 100% state-owned Central Bank of Libya (CBL) had full bargaining power against other countries as all business transactions had to go through CBL. According to IMF, the CBL had 144 tons of gold reserves. Had African states actually decided to use Gold Dinar as new oil transaction currency, France would have had a lot to lose, of economic influence over its various former African colonies.  To add to the case, just prior to the intervention, Obama froze $30 billion of CBL funds to which the US had access. These $30 billion, according to an African observer, had been earmarked as Libya’s contribution to the African federation project pursued by Gaddafi.  Most peculiarly of all, within weeks of the beginning of the popular uprising, , the rebel groups—at this point still entrenched in a fierce battle against Gaddafi’s forces—formed the Central Bank of Benghazi as the authority over Libyan monetary policy. The result of the French-sponsored intervention in Libya? France today controls 35% of Libyan oil.

Now back to the case of Iran. As early as November 2007, Ahmadinejad called for a “credible and good currency to take over US dollar’s role and to serve oil trades” during the third summit of OPEC. By December 2007, Iran had stopped selling its oil in US dollars. And in February 2008, the country established the Iranian Oil Bourse (IOB) on Kish Island. The establishment of the IOB allowed exchanges of oil, petrochemicals, and gas between industrialized and developing countries in a basket of currencies other than US dollar. Prior to this, the majority of oil was exchanged in the New York Mercantile Exchange and the London International Petroleum Exchange, both of which are run by American companies.

This is quite significant, given that Iran is the fourth or fifth largest crude oil exporter in the world. To date, Iran has already accepted oil sales in Chinese yuan , while India will use foreign currencies to buy Iranian oil until early July, when oil exchanges will be done in the Indian rupee. Although some have indicated fears that Iran might not find new buyers in the near future , Chinese and Indian resource thirst will probably be sufficient to maintain demand. Iran has already stopped selling oil to British and French firms, and when fresh US and EU sanctions come into effect in July, the real fear is that Saudi exports will not be able to keep up with the demand, which would drive up oil prices. Italian, Spanish and Greek companies have managed to extend their oil deals with Iran until July, but who knows what effect rising oil prices will have on these crisis-wracked countries?

Finally, the Chief Executive of Halliburton’s Energy Service Group said that he hopes “Iraq will be the first domino, and that Libya and Iran will follow” because he does not like “being kept out of markets.” [5] A video on Youtube also shows General Wesley Clark talking about how the Secretary of Defense planned to “attack and destroy the governments in seven countries in five years… start with Iraq, and then we’re going to move to Syria, Lebanon, Libya, Somalia, Sudan and Iran.” 

Discourse domination has always been the most powerful tool to frame the setting for a potential conflict. Coming after the justifications heard to legitimize previous and potential interventions—weapons of mass destruction, crimes against humanity, and nuclear weapons—the case for the petrodollar theory just seems more plausible. In the words of Herman Goering during the Nuremburg trials, “it is always a simple matter to drag people along to [war]… all you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger.”

Now why do we need a preemptive strike on Iran again?