Iran first OPEC member to make indigenous gas turbine

PressTV

Iran's deputy oil minister says the country has become the first member state of the Organization of Petroleum Exporting Countries (OPEC) to manufacture indigenous gas turbines.

Mohammad-Reza Moqaddam said Monday that gas turbines are among high-tech equipment whose technology is monopolized by a handful of European and American companies.

“The [Iranian] Oil Ministry has finalized the strategic document for production and manufacture of [Iran's] national and indigenous gas turbine,” he added.

The official said manufacturing the first national gas turbine follows two years of extensive research and studies by the Oil Ministry.

“A contract has been signed with Oil Turbo-Compressor Company to make a 100-percent indigenous [gas] turbine,” he said.

Moqaddam added that according to the current schedule, the first national Iranian gas turbine will be officially unveiled in 2015. 

Venezuela tops world oil reserves

Miami Herald
Jim Wyss

Venezuela surpassed Saudi Arabia in oil reserves, OPEC reported. But analysts say the quality of those reserves is an issue.

BOGOTA -- Venezuela’s proven oil reserves have surpassed Saudi Arabia’s for the first time, making it the most oil-rich nation in the world, according to the Organization of Petroleum Exporting Countries.
In its 2010-2011 Annual Statistical Bulletin, OPEC said Venezuela’s proven oil reserves spiked 40 percent in 2010 to reach 297 billion barrels. Saudi Arabia, the long-time leader in the category, had 265 billion barrels of proven reserves, according to the online report, which will be published in November.

During his 12 years in office, President Hugo Chávez has used the nation’s oil wealth and the state run PDVSA oil company to finance his “21st Century Socialism” and bankroll projects in allied countries such as Cuba, Haiti, Bolivia and Nicaragua.

The new reserves are being fueled by finds in the existing fields of Barcelona, Maracaibo and Barinas, as well as off-shore projects and in the Orinoco, Venezuela’s Ministry of Communication and Information said in a release Tuesday.

But the figures are also a matter of debate. About one-third of Venezuela’s reserves are extra heavy crude, which is difficult to extract and only economically feasible to recover when the long-term price of oil is above about $70 a barrel, said Jorge Piñon, a research fellow at Florida International University and the former President of Amoco Latin America.

The cash-strapped PDVSA may have trouble raising the funds to tap that oil, he said.

“You can be sitting on the largest reserves in the world but if you do not have capital and technology to recover them…they are worthless,” he said.

Despite Venezuela’s oil wealth, its economy is struggling. Venezuela was the only OPEC nation to see its economy shrink between 2009 and 2010. And it’s seeing annual inflation of 24 percent — the hemisphere’s highest.

The oil sector itself is also facing problems. Venezuela’s oil production has fallen steadily over the last five years, and dipped 0.8 percent from 2009 to 2010 to 2.85 million barrels per day, according to OPEC. That comes while neighboring Colombia and Brazil saw crude production rise 17 percent and 5.3 percent respectively.

The Global Debt Crisis: How We Got In It, and How to Get Out

Global Research
By Ellen Brown

Countries everywhere are facing debt crises today, precipitated by the credit collapse of 2008.  Public services are being slashed and public assets are being sold off, in a futile attempt to balance budgets that can’t be balanced because the money supply itself has shrunk.  Governments usually get the blame for excessive spending, but governments did not initiate the crisis.  The collapse was in the banking system, and in the credit that it is responsible for creating and sustaining.

Contrary to popular belief, most of our money today is not created by governments.  It is created by private banks as loans. The private system of money creation has grown so powerful over the centuries that it has come to dominate governments globally.  The system, however, contains the seeds of its own destruction.  The source of its power is also a fatal design flaw.

The flaw is that banks advance “bank credit” that must be paid back with interest, while having no obligation to spend the interest they collect so that borrowers can earn it again and again, as they must in order to retire the debt.  Instead, this money is invested in various casinos beyond the borrowers’ reach. This leads to a continual systemic need for more new bank credit money, more debt with more interest attached, to prevent widespread defaults and deflationary collapse.

Today this problem is particularly evident in the EU.  The Euro is a fixed currency system that does not allow for expansion to meet the demands of the private lending casino.  The result is that EU member nations collectively are being crippled by debt.

There are more sustainable ways to run a banking and credit system, as will be shown.

How Banks Create Money

The process by which banks create money was explained by the Chicago Federal Reserve in a booklet called “Modern Money Mechanics.”  It states:

“The actual process of money creation takes place primarily in banks.” [p3]

“[Banks] do not really pay out loans from the money they receive as deposits.  If they did this, no additional money would be created.  What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’ transaction accounts.  Loans (assets) and deposits (liabilities) both rise [by the same amount].” [p6]  

“With a uniform 10 percent reserve requirement, a $1 increase in reserves would support $10 of additional transaction accounts.”  [p49]

A $100 deposit supports a $90 loan, which becomes a $90 deposit in another bank, which supports an $81 loan, etc.

That’s the conventional model, but banks actually create the loans FIRST.  (Picture how a credit card works.)  Banks need deposits to clear their outgoing checks, but they find the deposits later.  Banks create money as loans, which become checks, which go into other banks.  Then, if needed to clear the checks, they borrow the money back from the other banks.  In effect, they borrow back the money they just created, pocketing the spread between the interest rates as their profit.  The rate at which banks can borrow from each other in the U.S. today (the Fed funds rate) is an extremely low 0.2%.

How the System Evolved

The current system of privately-issued money is traced in “Modern Money Mechanics” to the 17th century goldsmiths.  People who left gold with the goldsmiths for safekeeping would be issued paper receipts for it called “banknotes.”  Other people who wanted to borrow money were also happy to accept paper banknotes in place of gold, since the notes were safer and more convenient to carry around.  The sleight of hand came in when the goldsmiths discovered that people would come for their gold only about 10% of the time.  That meant that up to ten times as many notes could be printed and lent as the goldsmiths had gold.  Ninety percent of the notes were basically counterfeited.

This system was called “fractional reserve” banking and was institutionalized when the Bank of England was founded in 1694. The bank was allowed to lend its own banknotes to the government, forming the national money supply. Only the interest on the loans had to be paid. The debt was rolled over indefinitely.

That is still true today. The U.S. federal debt is never paid off but just continues to grow, forming the basis of the U.S. money supply.  

The Public Banking Alternative

There are other ways to create a banking system, ways that would eliminate its ponzi-scheme elements and make the system sustainable.  One solution is to make the loans interest-free; but for Western economies today, that transition could be difficult.

Another alternative is for banks to be publicly-owned.  If the people collectively own the bank, the interest and profits go back to the government and the people, who benefit from decreased taxes, increased public services, and cheaper public infrastructure.  Cutting out interest has been shown to reduce the cost of public projects by 30-50%.

In the United States, this system of publicly-owned banks goes back to the American colonists.  The best of the colonial models was in Benjamin Franklin’s colony of Pennsylvania, where the government operated a “land bank.”  Money was printed and lent into the community.  It recycled back to the government and could be lent and relent.  The system was mathematically sound because the interest and profits were returned to the government, which then spent the money back into the economy in place of taxes.  Private banks, by contrast, generally lend their profits back into the economy, or invest in private money-making ventures in which more is always expected back than was originally invested.

During the period that the Pennsylvania system was in place, the colonists paid no taxes except excise taxes, prices did not inflate, and there was no government debt

How Private Banknotes Became the National U.S. Currency

The Pennsylvania system was sustainable, but some early American colonial governments just printed and spent, inflating the money supply and devaluing the currency.  The British merchants complained, prompting King George II to forbid the colonists to issue their own money.  Taxes had to be paid to England in gold.  That meant going into debt to the English bankers.  The result was a massive depression.  The colonists finally rebelled and went back to issuing their own money, precipitating the American Revolution.

In an international first, the colonists funded a war against a major power with mere paper receipts, and won.  But the British counterattacked by waging a currency war.  They massively counterfeited the colonists’ paper money, at a time when this was easy to do.  By the end of the war, the paper scrip was virtually worthless.  After it lost its value, the colonists were so disillusioned with paper money that they left the power to issue it out of the U.S. Constitution.

Meanwhile, Alexander Hamilton, the first U.S. Treasury Secretary, was faced with huge war debts, and he had no money to pay them.  He therefore resorted to the ruse used in England known as fractional reserve banking.  In 1791, Hamilton set up the First U.S. Bank, a largely private bank that would print banknotes “backed” by gold and lend them to the government.

The ruse worked: the paper banknotes expanded the money supply, the debts were paid, and the economy thrived.  But it was the beginning of a system of government funded by debt to private bankers, who lent banknotes only nominally backed by gold.

During the American Civil War, President Lincoln avoided a crippling war debt by returning to the system of government-issued money of the American colonists.  He issued U.S. Notes from the Treasury called “Greenbacks” rather than borrowing at usurious interest rates.  But Lincoln was assassinated, and Greenback issuance was halted.

In 1913, the privately-owned Federal Reserve was authorized to issue its own Federal Reserve Notes as the national currency. These notes were then lent to the government, eliminating the government’s own power to issue money (except for coins).  The Federal Reserve was set up to prevent bank runs, but twenty years later we had the Great Depression, the greatest bank run in history.  Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, wrote in 1934:

“We are completely dependent on the commercial Banks.  Someone has to borrow every dollar we have in circulation, cash or credit.  If the Banks create ample synthetic money we are prosperous; if not, we starve.”

For the bankers, however, it was a good system.  It put them in control.

Setting the Global Debt Trap

Prof. Carroll Quigley was an insider groomed by the international bankers.  He wrote in Tragedy and Hope in 1966:

“The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. 

“The apex of the system was to be the Bank for International Settlements [BIS] in Basle, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations.  Each central bank... sought to dominate its government by its ability to control Treasury loans..."  

The debt trap was set in stages.  In 1971, the dollar went off the gold standard internationally. Currencies were unpegged from gold and allowed to “float” in currency markets, competing with other currencies, making them vulnerable to speculation and manipulation.

In 1973, a secret agreement was entered into in which the OPEC countries would sell oil only in dollars, and the price of oil would be dramatically increased.  By 1974, oil prices had increased by 400% from 1971 levels.  Countries lacking oil had to borrow dollars from U.S. banks.

In 1981, the Fed funds rate was raised to 20%.  At 20% compound interest, debt doubles in under four years.  As a result, most of the world became crippled by debt.  By 2001, developing nations had repaid the principal originally owed on their debts six times over; but their total debt had quadrupled because of interest payments.

When debtor nations could not pay the banks, the International Monetary Fund stepped in with loans -- with strings attached. The debtors had to agree to “austerity measures,” including:

·         cutting social services

·         privatizing banks and public utilities

·         opening markets to foreign investors

·         letting currencies “float.”

Today, austerity measures are being imposed not just in developing countries but in the European Union and on U.S. States.

The BIS: Apex of the Private Central Banking Pyramid

What Professor Quigley foretold about the Bank for International Settlements (BIS) has also come to pass.  The BIS now has 55 member nations and heads the global financial pyramid.

The power of the BIS was seen in 1988, when it raised the capital requirement of its member banks from 6% to 8% in an accord called Basel I.  The result was to cripple the Japanese banks, which until then were the world’s largest creditors. Japan entered a recession from which it has not yet recovered.

U.S. banks managed to escape by dodging the capital requirement.  They did this by moving loans off their books, bundling them up as “securities,” and selling them to investors.  

To persuade the investors to buy them, these mortgage-backed securities were protected against default with “derivatives,” which were basically just bets.  The “protection seller” collected a premium for agreeing to pay in the event of default.  The “protection buyer” bought the premium. Owning the asset was not required.  Like gamblers at a horse race, derivative players could bet without owning a horse.

Derivatives became a very popular form of gambling.  The result was the mother of all bubbles, exceeding $500 trillion by the end of 2007.

Because of securitization and derivatives, credit mushroomed.  Virtually anyone who walked in the door could get a loan.

The tipping point came in August 2007, with the collapse of two hedge funds.  When the derivatives scheme was exposed, the market for derivative-protected securities suddenly dried up.  But the U.S. stock market did not collapse until November 2007, when new accounting rules were imposed.  The rules grew out of the Basel II Accords initiated by the BIS in 2004.  “Mark to market” accounting required banks to value their assets according to market demand that day.  Many U.S. banks, like those in Japan in the 1990s, suddenly had insufficient capital to make new loans. The result was a credit crisis from which the U.S. has not yet recovered.

The BIS has now become global regulator, just as Quigley foresaw.  In April 2009, the G20 nations agreed to be regulated by a Financial Stability Board based in the BIS, and to comply with “standards and codes” set by the Board.  The codes are only guidelines, but countries that fail to comply risk downgrades in their credit ratings, something so costly that the guidelines have effectively become laws.

An article on the BIS website states that central banks in the Central Bank Governance Network should have as their single or primary objective “to preserve price stability.”  That means governments should not devalue the national currency by inflating the money supply; and that means not “printing money” or borrowing credit created by their own central banks.  Like the American colonies after King George took away their power to issue their own money, governments must fund their deficits by borrowing from private banks.  The bankers’ global control over currency issuance has become virtually complete.


The effects of this policy are particularly evident in the European Union, where EU rules allow deficits of only 3% of government budgets and prevent member countries from either issuing their own money or borrowing credit advanced by their own central banks.  Member nations must borrow instead from the European Central Bank, private international banks, or the IMF.  The result has been forced austerity measures, as seen in Greece and Ireland.  The system is so unsustainable that commentators are predicting that the EU may break up.  

The Way Out: Return the Money Power to Public Contro
To escape the debt trap of the global bankers, the power to create the national money supply needs to be restored to national governments.  Alternatives include:

     ·         Legal tender issued directly by national treasuries and spent on national budgets.

·         Publicly-owned central banks empowered to advance the nation’s credit and lend it to the government interest-free.

·         Nationalization of bankrupt banks considered “too big to fail” (after expunging or writing down bad debts on inflated bubble assets).  These banks could then issue credit to the public and serve the public’s banking needs, with the profits recycling back to the government, defraying the tax burden on the people.

·         Publicly-owned local banks (state, provincial, or municipal).

Publicly-owned banks have been successfully established and operated in many countries, including Australia, New Zealand, Canada, Germany, Switzerland, India, China, Japan, Korea, and Malaysia. 

In the United States there is currently only one state-owned bank, the Bank of North Dakota.  The model, however, has proven to be highly successful.  North Dakota is the only U.S. state to have escaped the credit crisis unscathed.  In 2009, while other states floundered, North Dakota had its largest budget surplus ever.  In 2008, the Bank of North Dakota (BND) had a return on equity of 25%.  North Dakota has the lowest unemployment rate in the country and the lowest default rate on loans.  It also has the most local banks per capita.

North Dakota has had its own bank since 1919, when  farmers were losing their farms to the Wall Street bankers.  They organized, won an election, and passed legislation.  The state is required by law to deposit all its revenues in the BND.  Like with the sustainable model of the bank of colonial Pennsylvania, interest and profits are returned to the government and to the local economy.

A growing movement is afoot in the United States to copy this public banking model in other states.  Fourteen U.S. state legislatures have now initiated bills for state-owned banks.

The model could also be replicated in other countries.  In Ireland, for example, where the major banks are insolvent and are already nationalized or soon will be, the government could deposit its revenues in its own publicly-owned banks, add sufficient capital to meet capital requirements, and leverage these funds to create interest-free credit for its own local needs.  That is exactly what Alexander Hamilton did when faced with government debts that were impossible to repay: he put the government’s existing funds in a bank, then borrowed the money back several times over, employing the accepted “fractional reserve” model.

Japan’s solution is also a variant of what Alexander Hamilton proposed two centuries earlier.  Japan retains its status as the third largest economy in the world although it has a debt to GDP ratio of 226%.  Japan has “monetized” the national debt, turning it into the national money supply.  The government-owned Bank of Japan holds Japanese government debt equal to 100% of the nation’s GDP; and because the government owns the bank, this loan is interest-free and can be rolled over indefinitely.  An interest-free loan rolled over indefinitely is the equivalent of issuing money.

Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org.  In Web of Debt, her latest of eleven books, she shows how the power to create money has been usurped from the people, and how we can get it back.  Her websites are http://webofdebt.com and http://ellenbrown.com.

Exclusive 2-camera presentation
by Ellen Brown. In this lecture,
Brown explains in detail how
economies can overcome the likes of
the IMF, World Bank and the
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Includes Qn'A session.
Approx. 90 minutes.
$20.00

OPEC Meeting in Shambles as Iran and Venezuela Push Their Agendas

Forbes

Not a happy camper:
Ali Naimi, Saudi oil minister

Saudi Arabia’s more-or-less stable hand guiding OPEC was yanked from the tiller at the oil producers’ meeting today in Vienna.

For the first time in two decades, OPEC’s stated mission of “ensuring the stabilization of oil markets,” has been replaced by a politicized agenda and the desire by some states (primarily Iran and Venezuela) to increase revenues now, regardless of long-term consequences. The schism comes at a bad time for the still-fragile (and still-oil-addicted) global economy.

The standoff in Vienna that left oil production levels unchanged translates into higher oil prices — Iran’s and Venezuela’s poke-in-the-eye of the U.S. and Saudi Arabia.

Outsiders were surprised by events at what the Saudi Oil minister Ali Naimi proclaimed “one of the worst meetings we have ever had.” But, even OPEC itself seemed to be caught off guard. On June 3rd, the organization issued stinging rebuke that placed responsibility for market volatility squarely on the shoulders of oil speculators.

While, of course, the financial sector has an important role to play in the trading of oil, the matter has got completely out of hand in recent years…”

They have a point, of course. But, clearly, the biggest factor behind volatility now is a division within OPEC, with no evidence that the split will heal any time soon.
Here’s the International Energy Agency’s official reaction to today’s meeting:

We have noted with disappointment that OPEC members today were unable to agree on the need to make more oil available to the market. Of course what really matters is actual supply, which should move in line with seasonally rising demand, and we urge key producers to respond accordingly. Ongoing supply disruptions, as well as the fragile state of global economy, call for a prompt increase in supply on a competitive basis that will allow refiners to boost throughputs and meet rising seasonal demand. Otherwise, a further tightening in the market and potential increases in prices risk undermining economic recovery, which is in the interests neither of producers or consumers. The IEA stands ready to work with its member governments and others to help ensure that markets are well supplied.

Analysis: OPEC could pour oil on troubled politics

Smoke rises from a shoe warehouse after it was
hit by Grad rockets near Misrata's western front line,
some 25 kilometers (15.5miles) from the
city centre June 6, 2011.

 (Reuters) - War in Libya, Qatari support for its rebel army and rivalries between Saudi Arabia and Iran need not scupper OPEC's attempts to forge a new oil output deal in Vienna.

The 50 year-old group has held together through two Gulf wars involving its members and the protracted, bitter Iran-Iraq conflict that claimed the lives of hundreds of thousands. OPEC oil ministers still sat around the same table.

On Wednesday the 12 members of the Organization of the Petroleum Exporting Countries will draw on a tradition of finding common interest in staving off an oil price collapse or cooling an overheated market that can destroy demand for its multi-billion dollar exports.

While Arab world turmoil has complicated the quest for an output deal and could limit the scope of any agreement, analysts say it has also made it important for OPEC to muster a show of unity.

"Regional political issues are much further up the agenda for many countries than an OPEC meeting, but look at the solutions to those issues and they all boil back to the oil price," said Lawrence Eagles of J P Morgan.

With prices around $115 a barrel for Brent, he said there could be an output increase to help meet an expected rise in demand and tightening of supply in the second half of this year, but the question was "how much?."

On their arrival in Vienna, several ministers said very little, which in itself could be significant.
The representative of Iran, holder of the rotating OPEC presidency and the group's second largest producer after Saudi Arabia, made a low-profile entrance through a hotel basement.

He resisted the opportunity for anti-Western rhetoric, telling awaiting reporters through an interpreter that OPEC would make a decision after its meeting had reached a consensus.

The risk rivalries would spill over into the Vienna OPEC meeting mounted when Iran's President Mahmoud Ahmadinejad sacked his oil minister and seized control of his ministry.

But Ahmedinejad later appointed his close political ally Mohammad Aliabadi as caretaker oil minister after parliament and Iran's constitutional watchdog said the president had no right to head the ministry.
Aliabadi, whose last job was head of Iran's Olympic Committee, has scant experience of oil.

Half the other ministers and country representatives who will be sitting with him around the negotiating table in Vienna are also new to the job, including Omran Abukraa, Libya's OPEC delegation head following the defection of top oil official Shokri Ghanem last week.

No-one was expected to represent the Libyan rebels, removing one possible source of tension, although Abukraa could find himself at odds with Qatar, which has helped the rebels to market oil.

SAUDI SUPREMACY

In the context of so many new OPEC faces, Saudi Arabian Oil Minister Ali al-Naimi's status as the elder statesman is more established than ever.

"There is only one vote that counts in OPEC and it is Saudi Arabia's," said Sadad al-Husseini, an oil analyst and former top official at oil giant Saudi Aramco.

Whatever OPEC agrees on Wednesday, it remains the case that Saudi Arabia, the guardian of most of the world's spare output capacity, can continue its policy of adjusting supply to meet demand, moderating prices and ensuring future customers for its vast oil reserves.

Already, Saudi Arabia plans to raise its production sharply this month. [ID:nLDE7560QM] That leaves it up to other producers to decide whether to give tacit support by agreeing to an increase from the group as a whole, which would be the first formal rise since 2007 and the first policy change since December 2008 when OPEC decided on a record supply cut.

The easiest option would be to make official leakage of well over one million barrels per day above the targets agreed in 2008 as the oil price crashed below $40 a barrel.

With prices well above $100, even Shi'ite Iran, which has long supported much higher prices than Sunni Saudi Arabia, might be willing to overlook political differences and agree a production change that is only a confirmation of the status quo.

But a formal output increase that officially adds new oil supplies would be a much grander gesture for both politics and oil markets.

Peter Dale Scott: The Libyan War, American Power and the Decline of the Petrodollar System

Peter Dale Scott
Global Research

The present NATO campaign against Gaddafi in Libya has given rise to great confusion, both among those waging this ineffective campaign, and among those observing it. Many whose opinions I normally respect see this as a necessary war against a villain – though some choose to see Gaddafi as the villain, and others point to Obama.

My own take on this war, on the other hand, is that it is both ill-conceived and dangerous  -- a threat to the interests of Libyans, Americans, the Middle East and conceivably the entire world. Beneath the professed concern about the safety of Libyan civilians lies a deeper concern that is barely acknowledged: the West’s defense of the present global petrodollar economy, now in decline..

The confusion in Washington, matched by the absence of discussion of an overriding strategic motive for American involvement, is symptomatic of the fact that the American century is ending, and ending in a way that is both predictable in the long run, and simultaneously erratic and out of control in its details.

Confusion in Washington and in NATO

With respect to Libya’s upheaval itself, opinions in Washington range from that of John McCain, who has allegedly called on NATO to provide “every apparent means of assistance, minus ground troops,” in overthrowing Gaddafi,1 to Republican Congressman Mike Rogers, who has expressed deep concern about even passing out arms to a group of fighters we do not know well.2

We have seen the same confusion throughout the Middle East. In Egypt a coalition of non-governmental elements helped prepare for the nonviolent revolution in that country, while former US Ambassador Frank Wisner, Jr., flew to Egypt to persuade Mubarak to cling to power. Meanwhile in countries that used to be of major interest to the US, like Jordan and Yemen, it is hard to discern any coherent American policy at all.

In NATO too there is confusion that occasionally threatens to break into open discord. Of the 28 NATO members, only 14 are involved at all in the Libyan campaign, and only six are involved in the air war. Of these only three countries –the U.S., Britain, and France, are offering tactical air support to the rebels on the ground. When many NATO countries froze the bank accounts of Gaddafi and his immediate supporters, the US, in an unpublicized and dubious move, froze the entire $30 billion of Libyan government funds to which it has access. (Of this, more later.) Germany, the most powerful NATO nation after America, abstained on the UN Security Council resolution; and its foreign minister, Guido Westerwelle, has since said, “We will not see a military solution, but a political solution.”3

Such chaos would have been unthinkable in the high period of US dominance. Obama appears paralyzed by the gap between his declared objective – the removal of Gaddafi from power – and the means available to him, given the nation’s costly involvement in two wars, and his domestic priorities.

To understand America’s and NATO’s confusion over Libya, one must look at other phenomena:

   • Standard & Poor’s warning of an imminent downgrade of the U.S. credit rating

   • the unprecedented rise in the price of gold to over $1500 an ounce

   • the gridlock in American politics over federal and state deficits and what to do about them

In the midst of the Libyan challenge to what remains of American hegemony, and in part as a direct consequence of America’s confused strategy in Libya, the price of oil has hit $112 a barrel. This price increase threatens to slow or even reverse America’s faltering economic recovery, and demonstrates one of the many ways in which the Libyan war is not serving American national interests.

Confusion about Libya has been evident in Washington from the outset, particularly since Secretary of State Clinton advocated a no-fly policy, President Obama said he wanted it as an option, and Secretary of Defense Gates warned against it.4 The result has been a series of interim measures, during which Obama has justified a limited U.S. response by pointing to America’s demanding commitments in Iraq and Afghanistan.

Yet with a stalemate prevailing in Libya itself, a series of further gradual escalations are being contemplated, from the provision of arms, funds, and advisers to the rebels, to the introduction of mercenaries or even foreign troops. The American scenario begins to look more and morelike Vietnam, where the war also began modestly with the introduction of covert operators followed by military advisers.

I have to confess that on March 17 I myself was of two minds about UN Security Council 1973, which ostensibly established a no-fly zone in Libya for the protection of civilians. But since then it has become apparent that the threat to rebels from Gaddafi’s troops and rhetoric was in fact far less than was perceived at the time. To quote Prof. Alan J. Kuperman,

   . . . President Barack Obama grossly exaggerated the humanitarian threat to justify military action in Libya. The president claimed that intervention was necessary to prevent a “bloodbath’’ in Benghazi, Libya’s second-largest city and last rebel stronghold. But Human Rights Watch has released data on Misurata, the next-biggest city in Libya and scene of protracted fighting, revealing that Moammar Khadafy is not deliberately massacring civilians but rather narrowly targeting the armed rebels who fight against his government. Misurata’s population is roughly 400,000. In nearly two months of war, only 257 people — including combatants — have died there. Of the 949 wounded, only 22 — less than 3 percent — are women... Nor did Khadafy ever threaten civilian massacre in Benghazi, as Obama alleged. The “no mercy’’ warning, of March 17, targeted rebels only, as reported by The New York Times, which noted that Libya’s leader promised amnesty for those “who throw their weapons away.’’ Khadafy even offered the rebels an escape route and open border to Egypt, to avoid a fight “to the bitter end.’’5

The record of ongoing US military interventions in Iraq and Afghanistan suggests that we should expect a heavy human toll if the current stalemate in Libya either continues or escalates further.

The Role in this War of Oil and Financial Interests

In American War Machine, I wrote how

   By a seemingly inevitable dialectic,... prosperity in some major states fostered expansion, and expansion in dominant states created increasing income disparity.6 In this process the dominant state itself was changed, as its public services were progressively impoverished, in order to strengthen security arrangements benefiting a few while oppressing many.7

   Thus, for many years the foreign affairs of England in Asia came to be conducted in large part by the East India Company... Similarly, the American company Aramco, representing a consortium of the oil majors Esso, Mobil, Socal, and Texaco, conducted its own foreign policy in Arabia, with private connections to the CIA and FBI.8...

   In this way Britain and America inherited policies that, when adopted by the metropolitan states, became inimical to public order and safety.9

In the final stages of hegemonic power, one sees more and more naked intervention for narrow interests, abandoning earlier efforts towards creating stable international institutions. Consider the role of the conspiratorial Jameson Raid into the South African Boer Republic in late 1895, a raid, devised to further the economic interests of Cecil Rhodes, which helped to induce Britain’s Second Boer War.10 Or consider the Anglo-French conspiracy with Israel in 1956, in an absurd vain attempt to retain control of the Suez Canal.

Then consider the lobbying efforts of the oil majors as factors in the U.S. war in Vietnam (1961), Afghanistan (2001), and Iraq (2003).11 Although the role of oil companies in America’s Libyan involvement remains obscure, it is a virtual certainty that Cheney’s Energy Task Force Meetings discussed not just Iraq’s but Libya’s under-explored oil reserves, estimated to be around 41 billion barrels, or about a third of Iraq’s.12

Afterwards some in Washington expected a swift victory in Iraq would be followed by similar US attacks on Libya and Iran. General Wesley Clark told Amy Goodman on Democracy Now four years ago that soon after 9/11 a general in the Pentagon informed him that several countries would be attacked by the U.S. military. The list included Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran.13 In May of 2003 John Gibson, chief executive of Halliburton's Energy Service Group, told International Oil Daily in an interview, “"We hope Iraq will be the first domino and that Libya and Iran will follow. We don't like being kept out of markets because it gives our competitors an unfair advantage,"14

It is also a matter of public record that the UN no-fly resolution 1973 of March 17 followed shortly on Gaddafi’s public threat of March 2 to throw western oil companies out of Libya, and his invitation on March 14 to Chinese, Russian, and Indian firms to produce Libyan oil in their place.15 Significantly China, Russia, and India (joined by their BRICS ally Brazil), all abstained on UN Resolution 1973.

The issue of oil is closely intertwined with that of the dollar, because the dollar’s status as the world’s reserve currency depends largely on OPEC’s decision to denominate the dollar as the currency for OPEC oil purchases. Today’s petrodollar economy dates back to two secret agreements with the Saudisin the 1970s for the recycling of petrodollars back into the US economy. The first of these deals assured a special and on-going Saudi stake in the health of the US dollar; the second secured continuing Saudi support for the pricing of all OPEC oil in dollars. These two deals assured that the US economy would not be impoverished by OPEC oil price hikes. Since then the heaviest burden has been borne instead by the economies of less developed countries, who need to purchase dollars for their oil supplies.16

As  Ellen Brown has pointed out, first Iraq and then Libya decided to challenge the petrodollar system and stop selling all their oil for dollars, shortly before each country was attacked.

   Kenneth Schortgen Jr., writing  on Examiner.com, noted that "[s]ix months before the US moved into Iraq to take down Saddam Hussein, the oil nation had made the move to accept Euros instead of dollars for oil, and this became a threat to the global dominance of the dollar as the reserve currency, and its dominion as the petrodollar.."

   According to a Russian article titled "Bombing of Lybia - Punishment for Qaddafi for His Attempt to Refuse US Dollar," Qaddafi made a similarly bold move: he initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Qaddafi suggested establishing a united African continent, with its 200 million people using this single currency...  The initiative was viewed negatively by the USA and the European Union, with French president Nicolas Sarkozy calling Libya a threat to the financial security of mankind; but Qaddafi continued his push for the creation of a united Africa.

And that brings us back to the puzzle of the Libyan central bank. In an article posted on the Market Oracle, Eric Encina observed:

            One seldom mentioned fact by western politicians and media pundits: the Central Bank of Libya is 100% State Owned. . . Currently, the Libyan government creates its own money, the Libyan Dinar, through the facilities of its own central bank. Few can argue that Libya is a sovereign nation with its own great resources, able to sustain its own economic destiny. One major problem for globalist banking cartels is that in order to do business with Libya, they must go through the Libyan Central Bank and its national currency, a place where they have absolutely zero dominion or power-broking ability. Hence, taking down the Central Bank of Libya (CBL) may not appear in the speeches of Obama, Cameron and Sarkozy but this is certainly at the top of the globalist agenda for absorbing Libya into its hive of compliant nations.17

   Libya not only has oil. According to the IMF, its central bank has nearly 144 tons of gold in its vaults. With that sort of asset base, who needs the BIS [Bank of International Settlements], the IMF and their rules.18

Gaddafi’s recent proposal to introduce a gold dinar for Africa revives the notion of an Islamic gold dinar floated in 2003 by Malaysian Prime Minister Mahathir Mohamad, as well as by some Islamist movements.19 The notion, which contravenes IMF rules and is designed to bypass them, has had trouble getting started. But today the countries stocking more and more gold rather than dollars include not just Libya and Iran, but also China, Russia, and India.20

The Stake of France in Terminating Gaddafi’s African Initiatives

The initiative for the air attacks appears to have come initially from France, with early support from Britain. If Qaddafi were to succeed in creating an African Union backed by Libya’s currency and gold reserves, France, still the predominant economic power in most of its former Central African colonies, would be the chief loser. Indeed, a report from Dennis Kucinich in America has corroborated the claim of Franco Bechis in Italy, transmitted by VoltaireNet in France, that “plans to spark the Benghazi rebellion were initiated by French intelligence services in November 2010.”21

If the idea to attack Libya originated with France, Obama moved swiftly to support French plans to frustrate Gaddafi’s African initiative with his unilateral declaration of a national emergency in order to freeze all of the Bank of Libya’s $30 billion of funds to which America had access. (This was misleadingly reported in the U.S. press as a freeze of the funds of “Colonel Qaddafi, his children and family, and senior members of the Libyan government.”22 But in fact the second section of Obama’s decree explicitly targeted “All property and interests... of the Government of Libya, its agencies, instrumentalities, and controlled entities, and the Central Bank of Libya.”23) While the U.S. has actively used financial weapons in recent years, the $30-billion seizure, “the largest amount ever to be frozen by a U.S. sanctions order,” had one precedent, the arguably illegal and certainly conspiratorial seizure of Iranian assets in 1979 on behalf of the threatened Chase Manhattan Bank.24

The consequences of the $30-billion freeze for Africa, as well as for Libya, have been spelled out by an African observer:

   The US$30 billion frozen by Mr Obama belong to the Libyan Central Bank and had been earmarked as the Libyan contribution to three key projects which would add the finishing touches to the African federation – the African Investment Bank in Syrte, Libya, the establishment in 2011 of the African Monetary Fund to be based in Yaounde with a US$42 billion capital fund and the Abuja-based African Central Bank in Nigeria which when it starts printing African money will ring the death knell for the CFA franc through which Paris has been able to maintain its hold on some African countries for the last fifty years. It is easy to understand the French wrath against Gaddafi.25

This same observer spells out her reasons for believing that Gaddafi’s plans for Africa have been more benign than the West’s:

   It began in 1992, when 45 African nations established RASCOM (Regional African Satellite Communication Organization) so that Africa would have its own satellite and slash communication costs in the continent. This was a time when phone calls to and from Africa were the most expensive in the world because of the annual US$500 million fee pocketed by Europe for the use of its satellites like Intelsat for phone conversations, including those within the same country.

   An African satellite only cost a onetime payment of US$400 million and the continent no longer had to pay a US$500 million annual lease. Which banker wouldn’t finance such a project? But the problem remained – how can slaves, seeking to free themselves from their master’s exploitation ask the master’s help to achieve that freedom? Not surprisingly, the World Bank, the International Monetary Fund, the USA, Europe only made vague promises for 14 years. Gaddafi put an end to these futile pleas to the western ‘benefactors’ with their exorbitant interest rates. The Libyan guide put US$300 million on the table; the African Development Bank added US$50 million more and the West African Development Bank a further US$27 million – and that’s how Africa got its first communications satellite on 26 December 2007.26

I am not in a position to corroborate all of her claims. But, for these and other reasons, I am persuaded that western actions in Libya have been designed to frustrate Gaddafi’s plans for an authentically post-colonial Africa, not just his threatened actions against the rebels in Benghazi.

Conclusion

I conclude from all this confusion and misrepresentation that America is losing its ability to enforce and maintain peace, either by itself or with its nominal allies. I would submit that, if only to stabilize and reduce oil prices, it is in America’s best interest now to join with Ban Ki-Moon and the Pope in pressing for an immediate cease-fire in Libya. Negotiating a cease-fire will certainly present problems, but the probable alternative to ending this conflict is the nightmare of watching it inexorably escalate.America has  been there before with tragic consequences. We do not want to see similar casualties incurred for the sake of anunjust petrodollar system whose days may be numbered anyway.

At stake is not just America’s relation to Libya, but to China. The whole of Africa is an area where the west and the BRIC countries will both be investing. A resource-hungry China alone is expected to invest on a scale of $50 billion a year by 2015, a figure (funded by America’s trade deficit with China) which the West cannot match.27 Whether east and west can coexist peacefully in Africa in the future will depend on the west’s learning to accept a gradual diminution of its influence there, without resorting to deceitful stratagems (reminiscent of the Anglo-French Suez stratagem of 1956) in order to maintain it.

Previous transitions of global dominance have been marked by wars, by revolutions, or by both together. The final emergence through two World Wars of American hegemony over British hegemony was a transition between two powers that were essentially allied, and culturally close. The whole world has an immense stake in ensuring that the difficult transition to a post-US hegemonic order will be achieved as peacefully as possible.

Peter Dale Scott, a former Canadian diplomat and English Professor at the University of California, Berkeley, is the author of Drugs Oil and War, The Road to 9/11, The War Conspiracy: JFK, 9/11, and the Deep Politics of War. His most recent book is American War Machine: Deep Politics, the CIA Global Drug Connection and the Road to Afghanistan. He is currently Research Associate of the Centre for Research on Globalization (CRG). This article is published in partnership with the Asia Pacific Journal. 

His website, which contains a wealth of his writings, is here.

Notes

1 “McCain calls for stronger NATO campaign,” monstersandcritics.com, April 22, 2011, link.

2 Ed Hornick, “Arming Libyan Rebels: Should U.S. Do It?” CNN, March 31, 2011.

3 “Countries Agree to Try to Transfer Some of Qaddafi’s Assets to Libyan Rebels,” New York Times, April 13, 2011, link.

4 “President Obama Wants Options as Pentagon Issues Warnings About Libyan No-Fly Zone,” ABC News, March 3, 2011, link. Earlier, on February 25, Gates warned that the U.S. should avoid future land wars like those it has fought in Iraq and Afghanistan, but should not forget the difficult lessons it has learned from those conflicts.

"In my opinion, any future Defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should 'have his head examined,' as General MacArthur so delicately put it," Gates said in a speech to cadets at West Point” (Los Angeles Times, February 25, 2011, link).

5 Alan J. Kuperman, “False Pretense for War in Libya?” Boston Globe, April 14, 2011.

6 America’s income disparity, as measured by its Gini coefficient, is now among the highest in the world, along with Brazil, Mexico, and China. See Phillips, Wealth and Democracy, 38, 103; Greg Palast, Armed Madhouse (New York: Dutton, 2006), 159.

7 This is the subject of my book The Road to 9/11, 4–9.

8 Anthony Cave Brown, Oil, God, and Gold (Boston: Houghton Mifflin, 1999), 213.

9 Peter Dale Scott, American War Machine: Deep Politics, the CIA Global Drug Connection, and the Road to Afghanistan (Berkeley: University of California Press, 2010), 32. One could cite also the experience of the French Third Republic and the Banque de l’Indochine or the Netherlands and the Dutch East India Company.

10 Elizabeth Longford, Jameson’s Raid: The Prelude to the Boer War (London: Weidenfeld and Nicolson, 1982); The Jameson Raid: a centennial retrospective (Houghton, South Africa: Brenthurst Press, 1996).

11 Wikileak documents from October and November 2002 reveal that Washington was making deals with oil companies prior to the Iraq invasion, and that the British government lobbied on behalf of BP’s being included in the deals (Paul Bignell, “Secret memos expose link between oil firms and invasion of Iraq,” Independent (London), April 19, 2011).

12 Reuters, March 23, 2011.

13 Saman Mohammadi, “The Humanitarian Empire May Strike Syria Next, Followed By Lebanon And Iran,” OpEdNews.com, March 31, 2011.

14 "Halliburton Eager for Work Across the Mideast," International Oil Daily, May 7, 2003.

15 “Gaddafi offers Libyan oil production to India, Russia, China,” Agence France-Presse, March 14, 2011, link.

16 Peter Dale Scott, “Bush’s Deep Reasons for War on Iraq: Oil, Petrodollars, and the OPEC Euro Question”; Peter Dale Scott, Drugs, Oil, and War (Lanham, MD: Rowman & Littlefield, 2003), 41-42: “From these developments emerged the twin phenomena, underlying 9/11, of triumphalist US unilateralism on the one hand, and global third-world indebtedness on the other. The secret deals increased US-Saudi interdependence at the expense of the international comity which had been the base for US prosperity since World War II.” Cf. Peter Dale Scott, The Road to 9/11 (Berkeley: University of California Press, 2007), 37.

17 "Globalists Target 100% State Owned Central Bank of Libya."   Link.

18 Ellen Brown, “Libya: All About Oil, or All About Banking,” Reader Supported News, April 15, 2011.

19 Peter Dale Scott, “Bush’s Deep Reasons for War on Iraq: Oil, Petrodollars, and the OPEC Euro Question”; citing “Islamic Gold Dinar Will Minimize Dependency on US Dollar,” Malaysian Times, April 19, 2003.

20 “Gold key to financing Gaddafi struggle,” Financial Times, March 21, 2011, link.

21 Franco Bechis, “French plans to topple Gaddafi on track since last November,” VoltaireNet, March 25, 2011. Cf. Rep. Dennis J. Kucinich, “November 2010 War Games: ‘Southern Mistral’ Air Attack against Dictatorship in a Fictitious Country called ‘Southland,’" Global Research, April 15, 2011, link; Frankfurter Allgemeine Zeitung, March 19, 2011.

22 New York Times, February 27, 2011.

23 Executive Order of February 25, 2011, citing International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1701 et seq.) (NEA), and section 301 of title 3, United States Code, seizes all Libyan Govt assets, February 25, 2011, link. The authority granted to the President by the International Emergency Economic Powers Act “may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared for purposes of this chapter and may not be exercised for any other purpose” (50 U.S.C. 1701).

24 “Billions Of Libyan Assets Frozen,” Tropic Post, March 8, 2011, link (“largest amount”); Peter Dale Scott, The Road to 9/11: Wealth, Empire, and the Future of America (Berkeley and Los Angeles: University of California Press, 2007), 80-89 (Iranian assets).

25 “Letter from an African Woman, Not Libyan, On Qaddafi Contribution to Continent-wide African Progress , Oggetto: ASSOCIAZIONE CASA AFRICA LA LIBIA DI GHEDDAFI HA OFFERTO A TUTTA L'AFRICA LA PRIMA RIVOLUZIONE DEI TEMPI MODERNI,” Vermont Commons, April 21, 2011, link. Cf. Manlio Dinucci, “Financial Heist of the Century: Confiscating Libya's Sovereign Wealth Funds (SWF),” Global Research, April 24, 2011, link.

26 Ibid. Cf. “The Inauguration of the African Satellite Control Center,” Libya Times, September 28, 2009, link; Jean-Paul Pougala, “The lies behind the West's war on Libya,” Pambazuka.org, April 14, 2011.

27 Leslie Hook, “China’s future in Africa, after Libya,” blogs.ft.com, March 4, 2011 ($50 billion). The U.S trade deficit with China in 2010 was $273 billion.


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