The euro and "Behind the Invasion of Iraq"

Jacob Levich jlevich at
Fri Feb 7 19:13:55 MST 2003

At 12:22 PM 2/7/2003 -0600, BobReuschlein wrote:
>When I first saw the "euro" theory of war I was sceptical, but it makes a
>lot of sense in this article.

Very perceptive article, Bob. The threat to dollar hegemony from the euro 
is quite real -- it's a significant part of the fairly complex set of 
motives behind the war, and it only sounds bogus when it's put forward as a 
_sole_ explanation of the US aggression.

The whole package is best explained I think in Behind the Invasion of 
Iraq,  a brand-new book-length study by the Indian think tank Research Unit 
for Political Economy. It's available on the Web at, and I would urge everyone to read it. It puts 
everything in startling perspective and, since it's so well documented, 
it's an excellent resource for activists on everything from Iraq history to 
the current US drive to, in effect, re-colonize the Middle East.

I'm pasting an excerpt from the section on the euro below.


Implications of the euro
In the 1970s, there was no alternative to the dollar. On January 1, 1999, 
an alternative arose in the form of the euro, the new currency of the 
European Union (EU). Of course, investors did not immediately flock to the 
euro. The euro stuttered at birth, falling 30 per cent against the dollar 
by the end of 2000. In the last year, however, it has picked up sharply, 
and in recent months has remained at parity with the dollar (ie about one 
euro per dollar).

The euro has become attractive for three reasons.

First, since the EU is a large imperialist economy, about the same size as 
the US, it is an attractive and stable investment for foreign investors.

Secondly, since foreign investors’ holdings are overwhelmingly in dollars, 
they wish to diversify and thus reduce the risk of losses in case of a 
dollar decline: they are increasingly nervous at the size of the US debt 
mountain and the failure of the US government to tackle this problem.

Thirdly, certain countries smarting under American military domination 
sense that the rule of the dollar is now vulnerable, and see the switch to 
the euro as a way to hit back.

Thus even in November 2000, when the euro was 30 per cent down against the 
dollar, Iraq demanded UN approval to be paid in euros in the UN 
oil-for-food programme. This despite the fact that the currency markets at 
the time did not see a rebound for the euro and despite the fact that Iraq 
would make the switch at considerable immediate cost, losing 10 cents a 
barrel to compensate buyers for their currency conversion costs. Iraq also 
asked that the $10 billion in its frozen bank account in New York be 
converted to euros. The UN, a plaything of the US, resisted the change 
until Iraq threatened to suspend its oil exports. (“Iraq: Baghdad Moves to 
the Euro”, Radio Free Europe, 1/11/00; “Iraq uses the euro in its trade 
deals,” Arabic, 7/9/01)

Iran, which the US has now labelled, along with Iraq and North Korea, as 
part of an “axis of evil”, is also contemplating switching to the euro. The 
Iran National Oil Company welcomed the launch of the euro in 1998 itself, 
saying that “This money will free us from the rule of the dollar”, and we 
“will adopt it”. The national oil company and other major Iranian companies 
have made it clear to both their European and Latin American oil partners 
that they would “prefer the euro”. While Iran continued using the dollar 
thereafter, there are indications it could follow Iraq’s example. The 
Iranian government budget for the year to March 2002 was tabulated in 
dollars, but in December 2001 an oil ministry official said that “could 
change in the future”. Iran News (29/12/01) called for a switch to the euro 
for both oil and non-oil trade: “The euro could become our currency of 
choice” if it made gains on the dollar. Since then the euro has climbed 14 
per cent against the dollar. (“Iran sees euro as way to ‘free’ itself from 
the US dollar”, Agence France Presse, 31/12/01)

Some in Saudi Arabia have called for switching to the euro as “a more 
effective punishment [than an oil embargo] for the United States, Israel’s 
principal source of financial and political support”. (“Protest by 
switching oil trade from dollar to euro”, Oil and Gas International, 15/4/02)

At the Russia-European Union summit in May 2001,
“EU leaders... made an audacious bid to lure Russia away from its reliance 
on the greenback [the dollar], calling on Moscow to start accepting euros 
instead of dollars for its exports, dangling the attractive carrot of a 
boom in investment and trade.
“In a report commissioned by Russia’s Central Bank in July 1999, the 
Russian Academy of Science said: ‘The introduction of the euro directly 
bears on the strategic interests of Russia and alters the conditions for 
its integration into the world economy. In the final analysis, the 
consequences are to the benefit of our country.’ Olga Butorina from the 
Academy of Science said whereas EU states accounted for 33 percent of trade 
turnover in 1998 compared with 8 percent for the United States, 80 percent 
of foreign trade contracts—mainly for oil, gas and other commodities—were 
concluded in dollars.... ‘[Switching to the euro] would increase 
dramatically the demand for euros in the world,’ she said. ‘For sure, it 
would be an important strategic shift and the euro would start to compete 
with the dollar in international trade markets.’” (Asia Times, 19/5/01)

Another likely candidate for switching to the euro is Venezuela, whose 
leader Hugo Chavez the US has been attempting to oust over the last year, 
without success (at the time of going to press). It is not only the oil 
economies that would make the switch (for example, North Korea too recently 
said it would convert its foreign exchange reserves to the euro); but the 
shift of the major oil exporters to accepting payment in euros would indeed 
have a major, potentially devastating, impact on the dollar.
The more countries that switch to the euro, the more attractive would be 
the euro.

PLEASE clip all extraneous text before replying to a message.

More information about the Marxism mailing list