Brother, Can You Spare The Dollar?

If you feel like reading some dense political/economic ponderings, this is an interesting, provocative article about a less-discussed motive for invading Iraq. The argument goes like this: The U.S. dollar is the international currency for trading oil. Every country in the world must use U.S. dollars to buy oil. The U.S. has what is known as “fiat money”, backed by a law saying it’s legal tender instead of gold or silver. Therefore, according to the article, the U.S. is on very shaky ground, and with debt in the trillions, it needs the international oil market to sustain its economy.

Enter the U.N. Oil-For-Food Program. In 2000 Iraq stopped accepting the U.S. dollar for oil, purely for political reasons, and through the Oil-For-Food Program converted all its U.S. dollars to euros. The article argues that this was a primary motive for invading Iraq. Two months after the war, the Oil-For-Food program was ended, the country’s accounts switched back to dollars, and Iraq oil was sold for greenbacks once again.

While much of the article is obviously debatable, it draws some interesting parallels with the current situation in Iran. Iran recently announced it will form its own international oil exchange in March of 2006. The currency? Euros.