PETRODOLLAR WARFARE BY W.R. CLARK IS A MAJOR EXPOSE OF U.S. FOREIGN POLICY DIRECTED TOWARD PROTECTING THE DOLLAR AS THE WORLD'S RESERVE CURRENCY. 

The phrase petrodollar warfare refers to a controversial hypothesis that a hidden, driving force of United States foreign policy over recent decades has been the status of the United States dollar as the world's dominant reserve currency and as the currency in which oil is priced. The term was coined by William R. Clark, who has written a book with the same title.

Supporters of this hypothesis believe that the value of the U.S. dollar is determined by the fact that many key commodities (particularly oil and natural gas) are denominated in dollars. Supporters believe that if the denomination changes to another currency, such as the euro, many countries would sell dollars and cause the banks to shift their reserves because they would no longer need dollars to buy oil and gas. This would weaken the dollar relative to the euro (see supply and demand). The core of the hypothesis is that U.S. administrations are greatly motivated by fear of the consequences of a weaker dollar, particularly higher oil prices. This motivation is seen as underlying and explaining many aspects of U.S. foreign policy, including the ongoing Iraq War.

The phrase oil currency wars is sometimes used with the same meaning.

This view is controversial. At least one U.S. Representative, Republican Ron Paul of Texas, has made very strong statements advancing similar views, using the phrase “dollar hegemony” to describe U.S. policy and proposing related reforms.[1] Many editorialists and bloggers have supported the theory. But the petrodollar warfare hypothesis has also been described as a conspiracy theory. Opponents dispute virtually every economic claim underpinning the hypothesis, including the the theory's emphasis on the dollar denomination of commodities and the physical location of the major oil exchanges, the claim that the U.S. finances its current-account deficit by printing dollars, and so on. Opponents also sometimes point out that the Bush administration has repeatedly called for China to stop propping up the dollar by holding very large dollar reserves, a stance seemingly at odds with the administration's supposed overriding interest in maintaining a strong dollar.

Whether a falling dollar would actually hurt the American economy is disputed. A weaker dollar would lead to increased U.S. exports and decreased imports, which would decrease the U.S. trade deficit and benefit American manufacturers. On the other hand, imports would become more expensive for the U.S. across the board. Of particular concern is America's dependence on foreign oil. Economists generally agree that higher oil prices pose a risk of inflation, recession, or both.

Background

Since 1971, when the U.S. dollar ceased to be redeemable in gold, its value has not been explicitly linked to any commodity.

In 2000, Iraq converted all its oil transactions under the Oil for Food program to euros. When U.S. invaded Iraq in 2003, it returned oil sales from the euro to the U.S. dollar.

Iran planned to open an oil bourse denominated in euros. It was planned to open on March 20 2006, but the opening was postponed without future date set. Proponents of this theory fear that it will give added reason for the U.S. to topple the Iranian regime and close the bourse or revert its transaction currency to dollars.

Project Censored Award 2004

The topic of oil currency warfare under the title U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq won Project Censored award in 2004. The essay was written by the author of the book Petrodollar Warfare, William Clark.

M3 data reporting discontinued

From March 23, 2006 the United States Federal Reserve (the "Fed") stopped reporting the M3 money supply data of the U.S. dollar. The Fed offers this brief note:

Discontinuance of M3

On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release.

Measures of large-denomination time deposits will continue to be published by the Board in the Flow of Funds Accounts (Z.1 release) on a quarterly basis and in the H.8 release on a weekly basis (for commercial banks).

M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits.

The M3 money supply has been reported since 1959. Since M3 data was the main figure informing about the amount of dollars that the Fed issued to markets, discontinuance of M3 data reporting created significant amount of controversy amongst financial elites.

Representative Ron Paul (R-TX) has introduced HR 4892 IH to mandate the Federal Reserve to continue to publish M3 on a weekly basis.

Full Press Issue: Source http://www.federalreserve.gov/Releases/h6/discm3.htm

See also

• Petrodollar
• Iranian oil bourse
• Petroeuro
• Petroruble
• Petrodollar recycling
• Hubbert peak theory
• Oil reserves
• Campaign to boycott the dollar

Further reading

• Clark, William R.: Petrodollar Warfare : Oil, Iraq and the Future of the Dollar, New Society Publishers, 2005, ISBN 0-86571-514-9
• Peter, Phillips (2003). The Top 25 Censored Stories: U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq. New York: Seven Stories Press. 
• Engdahl, F. William, A New American Century? Iraq and the hidden euro-dollar wars, Current Concerns, No 4, June 2003
• Engdahl, F. William: A Century of War: Anglo-American oil politics and the New World Order, Pluto Press, 2004, ISBN 0-7453-2309 X

Links

Background

• How much longer can the dollar reign supreme? by Linda Heard. The Guardian (Australia), July 6, 2006. This article discusses exchange rates and the dollar's slowly declining role as the dominant reserve currency.
• Don't worry about the euro by Paul Krugman. April 27, 1998. Krugman claims concerns about the dollar's reserve currency status are overblown. This column pre-dates the current debate by several years.
• Norwegian Bourse Director wants oil bourse - priced in euros by Laila Bakken and Petter Halvorsen, NRK.no, December 27, 2005
• Brinkmanship of Energy Geopolitics by Mathew Maavak, Panoptic World, March 3, 2006

Pro views

• The Attack on the U.S. Dollar and Energy Needs by Alan Caruba. March 19, 2006. An editorial.
• The Rise of the Petroeuro by Dan Adleman. The Republic of East Vancouver, July 20, 2006.
• Petrodollar Warfare by Ryan McGreal, "Raise the Hammer", January 27, 2006. A review of William Clark's book.
• Talk in congress: The End of Dollar Hegemony by Congressman Ron Paul, February 15, 2006
• Petrodollar Warfare Interview (audio) with William R. Clark and Jim Puplava of the Financial Sense Newshour.
• Petrodollar Warfare: Dollars, Euros and the Upcoming Iranian Oil Bourse by William R. Clark. Media Monitors Network, August 5, 2005.
• Petrodollar or Petroeuro? A new source of global conflict by Cóilín Nunan, Feasta Review no. 2
• Battle Plans for Iran by Mike Whitney, OpEdNews, January 31, 2006.
• US Paper Money and Iran's Oil Bourse an abstract of a speech by Congressman Ron Paul, February 17, 2006.
• Where will oil trade: New York? London? Tehran? by NeonTetra. Sandcastle in the tide Blog, February 27, 2006.
• Petrodollars and Nuclear Weapons Proliferation: Understanding the Planned Assault on Iran, Centre for Research on Globalization, February 10, 2006.
• The Real Reasons for the Upcoming War With Iraq: A Macroeconomic and Geostrategic Analysis of the Unspoken Truth, Essay by William R. Clark, January 2004.
• U.S. Dollar vs. the Euro: Another Reason for the Invasion of Iraq by Project Censored.
• Iran’s Oil Exchange threatens the Greenback by Mike Whitney, OpEdNews, January 23, 2006.
• The Proposed Iranian Oil Bourse by Krassimir Petrov. Informationclearinghouse.info, January 19, 2006.
• Oil, Geopolitics, and the Coming War with Iran by Michael T. Klare. Tom Dispatch, April 11, 2005.
• History of Oil video by Robert Newman.
• The beginning of the end for petrodollar