By Ramin Davoodi

It’s becoming increasingly obvious that there is a looming crisis brewing over Iran. The true “whys” and “whats” of the issue, however, are clouded to the American public due to our modern press and to the nature of the underlying stakes involved.

What people read is that there is a growing threat of a nuclear Iran that will threaten the safety of the West. Yet, that’s essentially all that is said or written on the issue. However, to critically thinking people who turn to the internet and to foreign press for their news, the brewing crisis most likely has to do with intricate issues involving our incessant dependencies, not just on oil for our transportation and industrial needs, but more importantly for the means by which our modern economic system operates in the US, UK and much of the rest of the industrialized western world (strong hint: It’s not a truly “free market”).

You see, control over global oil trading and pricing standards essentially underwrites the sanctity of the US dollar as a fiat (i.e. government mandated) currency for trade and investments. Were anything to threaten that delicate arrangement between control over oil pricing in particular, and our economic system in general, then there would be tectonic shifts in global finance to the detriment of the banks and energy companies that essentially dictate the means and mores of modern US-dominated geopolitics, trade and wealth creation around the world. I use the term “detriment” because of the conspicuously Himalayan-sized US trade and fiscal deficits that are not being reconciled by our government with the nations of the world that lend their savings to the US. Meanwhile, these nations are simultaneously being forced to buy and sell oil using our weakening dollar. Something’s gotta give.

Those that sense this issue is either a bit too simplistic, archaic or even far-fetched should consider that the only two oil trading systems in the world right now - the International Petroleum Exchange (IPE) in London and the New York Mercantile Exchange (NYMEX) - are owned by large global banks based in either the US or UK (Goldman Sachs, et al.). It should come as no coincidence that the ownership of the oil exchanges that set the West Texas Intermediate (in the US) and the North Sea Brent Crude (in the UK) oil markers - two markers which, in turn, determine the price of oil per barrel globally - is in the hands of Wall Street’s largest investment banks.

What does all of this have to do with Iran? In 2004, Iran decided to do what Iraq did before it -  start the process of eventually selling its oil and natural gas in euros instead of the globally mandated US dollar. Yet, Iran is “one-upping” Iraq by starting its own energy exchange, labeled the Iran Oil Bourse, which would rival the aforementioned exchanges in London and New York.

[It’s interesting to note here that, in a particularly instructive scene in the movie “Syriana”, the Saudi Prince Nasir played by Alexander Liddig retorts to Matt Damon’s character “Bryan” that, indeed, Nasir wishes to set up his own national oil exchange, along with other progressive steps necessary to improve the infrastructure of his nation. Prince Nasir’s fate in the film is also understandable, in light of such ambitious yet noble yearnings.]

This oil bourse is set to float in Tehran in March 2006. Although scoffed at as wildly implausible by market analysts in the US and UK, the bourse has also been seen as potentially very lucrative for investors and nations’ central banks that wish to diversify their currency holdings and energy trading reserves away from the US dollar. Upon prudent observation, and on par, the input of the latter crew outweigh the scoffings of the former (just do a Google search using the words “oil”, “Iran”, “bourse” and for extra kicks, “NYMEX”). Were nations such as China, Russia, India, Germany, Venezuela, Brazil and even Saudi Arabia to consider participating in trades on this bourse in Iran, it may start a “dollar flight” effect that the US Federal Reserve, the Bank of England, and said select investment banks would have trouble ceasing or reversing under already agreed upon trading schemes that were set in the mid-1970s (see the new book, “Petrodollar Warfare” by William Clark for the well researched history).

Basically, our global economic system is so overleveraged, profligate and tightly wound up, that something as seemingly obscure as an energy exchange starting in Tehran can potentially unravel the whole, intricate Monetarist Ponzi Scheme (regrets to Milton Friedman, but “the gig is up”, so to speak.). And apparently, rather than approach the issue through much-needed negotiations with other industrialized nations so as to provide a fiscal soft landing for the dollar’s debts while allowing for development in certain poorer countries, our government is apparently choosing to go to war instead. Again. Not just any war, mind you, but with a nation of near-70 million nationalistic people who we’ve alienated for over a generation already. A people who claim, at least in public, to want to perform the change away from oil-as-prime-energy dependence that alternative energy gurus push so heavily in the West.

Some articles that announce, speculate and outright fret about the likelihoods of such a scenario are provided below:

http://www.energybulletin.net/12463.html

http://www.newstatesman.com/Economy/200602130008

http://www.energybulletin.net/7707.html

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

”Still”, people claim, “that doesn’t change the fact that Iran is seeking nuclear weapons.” One certainly shouldn’t trust the Iranian government’s word on why they seek to procure nuclear technology, yet a rationalist and realist would sense that, if a major oil exporting nation wishes to launch an oil bourse that could be deemed as threatening to the US/UK-backed energy status quo, then that nation would also seek to adequately arm itself against inevitable attempts at regime change.

“Yes, but the mullahs want to wipe Israel off the map”. In light of the already preexisting nuclear power inherent in Israel, Pakistan, Russia, India and obviously the US (which surrounds Iran with military bases), it doesn’t make all that much sense that Iran would want nukes just so that it can conduct a first strike against another nation. Iran’s mullahs may be hardliners, but they’re not suicidal, considering the riches Iran sits on. That would contradict the logic of deterrence, just as our government’s building up of further tactical nuclear weapons, and recent shipping of hundreds of such “bunker busters” to Israel, contradicts the logic of anti-proliferation that Iran and others are apparently supposed to abide by. Please.

Lately, former UN weapons inspector Scott Ritter and other pundits have claimed that a likely scenario will go like this: The US or Israel will attack Iran’s nuclear targets, Iran will retaliate by: 1) attacking Israel, and/or 2) trying to take out key oil production areas in the Gulf, and/or 3) Iranians will blitz across the Iraqi border. Upon such retaliation, the US will then drop a nuclear weapon on Iran to halt any further aggression; as such an act did against Japan 61 years ago.

http://www.freenewmexican.com/news/39053.html

If this is the extent, more or less, of Washington’s war gaming, we’re in trouble, because it assumes that Russia and China, two juggernauts that are heavily invested in Iran’s energy and security sectors, will not respond viscerally to prevent Iran’s oil and gas from being taken from them by the US, UK and Israel. China could also use a growing quagmire with Iran as an alleyway chance to finally “annex” Taiwan once and for all (Russia and China were conducting joint military exercises last year very close to Taiwan). Other nations, sensing a growing nuclear catastrophe, could dump the US dollar altogether as the Federal Reserve and Treasury print currency by the metric tons out of thin air to feed the frenzy (which may already be in the works, as the Fed will cease revealing the M3 aggregate money figure in, of all months, March 2006.). Oil would surpass $200/barrel in the US, gold would break $1000/troy ounce and martial law would be declared in multiple nations.

All because our government refuses to renegotiate the terms under which energy commodities are priced and traded around the world, despite the clear urgency for monetary and fiscal reform.

One has to ask oneself, in an apt yet still eerie paraphrase of Bud Fox’s poignant question posed to Gordon Gekko in the movie “Wall Street”:

How many wars will be enough?

About the author:
Ramin Davoodi is an independent writer with ten years of foreign private equities and risk management experience.