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  • Posted June 28th, 2015
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    What I learnt about US Middle East policy and the international oil market in a kebab shop in Tooting

    What I learnt about US Middle East policy and the international oil market in a kebab shop in Tooting

    I learnt something about US foreign policy (or more accurately, corporate foreign policy – this has nothing to do with the American people) in a kebab shop in Tooting – or rather, I didn’t so much learn about the foreign policy as how events that are largely unknown to most British people are common currency for Muslims.

    Skirting swiftly around the reason I was in a kebab shop in the first place (oh, OK – chips, salad and chilli sauce in pita bread – supporting a local small business, if you must know), this is how it panned out. I was standing at the counter – there were two Pakistani men behind the counter, and three Pakistani men on my side. There was a news programme on a large TV, and  I was the only one who didn’t understand what was being said, because it was in Urdu.

    My attention drifted, but was caught again when I heard English being spoken. An American was being interviewed, with Urdu subitles. Here’s a summary of what he said:

    “I was sent to Saudi Arabia in the early 1970s as part of a delegation to ‘do a deal’ with the House of Saud. The deal was this: make sure that you keep supplying oil to the US, and that you never, ever sell oil in anything but dollars, and we’ll make sure your oilfields are kept safe (i.e. we don’t blow them up).”

    Now that got my interest. It was a classic protection racket deal, by the sound of it. I looked around me. All eyes were still on the screen. He said a lot more than this. For example, he said that another part of the deal was: all the money that you receive for your oil must be used to buy goods produced in the US, or to invest in US bonds. And in return, again, the corporate-controlled US military will resist the urge to blow your oilfields up. The Saudis agreed, and that was that – they had a deal. He was then sent to all other OPEC countries, with the same protection offer, and everyone agreed. Well they would, wouldn’t they?

    The whole thing took a couple of minutes, and when I looked around, everyone was looking at me, with a sort of ‘well, what did you think of that?’ sort of expression (if you can imagine that). I asked if they all knew this already, and they said they did. I asked if this sort of thing was common on Urdu-language TV and they said it was. I said that I’d read about it, although not in any detail, and it wasn’t very common on mainstream British TV and they said they knew that as well. I left and walked down the street, eating my chips in amazement.

    Why does the US need oil producers to only sell oil in dollars? Well, that’s an easy one. As long as the dollar is the international oil currency, everyone needs dollars to buy oil, so demand (and therefore the dollar’s value) remains high, which means that the US can easily hoover up all the world’s resources with a high-value dollar that everyone wants. This keeps your average American in a comfortable, bread-and-circuses lifestyle, with no thoughts of rocking the boat. Very important in the Land of the Free.

    So has anyone broken ranks and offered oil in any other currency than the dollar? Only two – Saddam Hussein and Muammar Gaddafi – and I don’t need to tell you what happened to them. The big kerfuffle with Iran recently has been because they too have been talking about accepting euros or yuan for oil. They’ve gone further than that actually – they’re building a bricks and mortar oil bourse (exchange), to sell oil for a range of currencies. I remember reading something about it in the International Energy Bulletin years ago, which seems to have disappeared, but was reproduced here in Resilience (it occurs to me that the Energy Bulletin may have changed its name). They’re only trading petroleum derivatives, rather than oil at the moment. If pushed, I’d say that they won’t start trading oil until they have the protection of nuclear weapons – that being the reason that the US are so against that particular development. You can’t bomb a country with nuclear weapons after all, as Kim Jong-un knows.

    I didn’t hear the name of the American in the film, but I’ve looked into it and I’m pretty sure it’s this guy. Here’s something about him by the great Greg Palast. And here’s a video of him saying similar things, although it wasn’t the one in the kebab shop.

    This is all just so that you know about the real machinations of the corporate world behind the Disney-esque advertising. It’s not fair if the Muslim community know these things, but other people don’t. Actually, I carried out a poll of around 20 friends, including a couple of Muslims – all of them quite switched-on – and no-one had a clue about it. I’d have expected something like this to have been in the papers and on Newsnight, but I must have missed that (cue for someone to send me a link to show that this story actually has been covered by Newsnight, but I doubt it).

    August, 2017

    I’ve just been reminded about this article, and the fact that it comes across as a little flippant, so I’d just like to add a few things:

    Of course, this is John Perkins, author of Confessions of an Economic Hit Man – the second edition came out in 2016.

    What he wrote in the first edition has never been successfully refuted. Have a look at this ‘veracity memo’ put out by his publisher, Steve Piersanti. He has lots of support from respectable and influential people for what he’s saying – basically that oil-producing countries only use dollars to trade oil, and that’s down to what amounts to a classic protection racket, although the details of which will obviously be murky due to the secrecy of the negotiations.

    Those attempting to refute his claims are exactly who you’d expect to – the NSA, the US State Dept, and his main critic is Sebastian Mallaby of the Council on Foreign Relations, a powerful corporate think-tank, which exists to ‘promote globalization, free trade, reducing financial regulations on transnational corporations, and economic consolidation into regional blocs such as NAFTA’ – so no surprise there.

    As China and others grow in strength, America is going to struggle to keep the dollar as global reserve currency. This combined with the oil running out anyway, and the wobbliness of the global financial sector means that in all probability, the US is in trouble. The problem is, they have the weaponry to destroy the world, and they’ve always shown a willingness to invade. Very dangerous, and it needs new ways of looking at things. And the original article was written before we had Trump with a cabinet filled with Goldman Sachs people.


    The views expressed in our blog are those of the author and not necessarily lowimpact.org's


    5 Comments

    • Chris June 28th, 2015

      I’ve just learned my new thing for today aka ‘ you learn something new every day’ I knew there was a ‘ conspiracy’ and you have just spelt it out.

      Thank you.

      • Dave Darby - replied

        June 28th, 2015

        Hi Chris. Not sure I’d use the word conspiracy. Why spend all your spare time arguing about how buildings fall – even if there might be some truth in what you’re saying – when there is enough happening blatantly to warrant change? All you need to know really is that the biggest kid in the playground will get his own way unless and until the other kids organise to stop it happening. Whether particular stories are true or not doesn’t change that.

    • Peter Richardson June 29th, 2015

      This is very interesting, and horrifying if true, but I’d like to read/see more evidence about this. It would be great if people could use these comments to point to any evidence (for or against) this report. If the story is common knowledge in the muslim world then surely it has been picked up and investigated by The Guardian or similar at some point?? Or are there any UK academics who specialise in the history of oil trading? Just because someone says it on TV doesn’t mean it’s true… and doesn’t mean it’s not true. More details please, someone!

    • Dave Darby June 29th, 2015

      Well, the fact that he was in a position to have such insider information is not contentious and not disputed by anyone. But the negotiations he was involved with were secret, so we shouldn’t expect to find a well-organised paper trail. So then we’re left with whether his accounts are backed up by credible others – and it appears that they are. Here’s a statement from his publisher – http://www.economichitman.com/pix/veracitymemo.pdf – who obviously put in a lot of work to check the veracity of the content of a book they were publishing. This includes confirmation that his reports are basically true by the man who hired him, and enough support from other respectable sources to give credence to what he’s saying.

      I’ve often wondered why Islamic regimes, even those apparently hostile to US interests, still adhere to the rule of never selling oil in any currency but dollars. And I’ve always wondered why Iraq was invaded and Saddam killed – they knew that he didn’t have weapons of mass destruction, because Hans Blix was saying so clearly (and North Korea, Israel and Pakistan, for example, obviously did have WMD, but that didn’t seem to matter); they knew that Bin Laden was not in Iraq, and that Saddam was more vigilant against Al Qaeda then they were themselves; the thought that they care about his democratic credentials is laughable; which leaves what? It only now makes sense in the light of the things Perkins said, and the claim that Iraq was invaded because Saddam’s loyalties changed, probably because of US support for Israel, and he wanted to garner support in the Arab world, and he was prepared to sell oil in euros or yuan – something I remember reading in the International Energy Bulletin back in the day.

      Here’s a review of his book in the Graun – http://www.theguardian.com/books/2006/jan/28/biography.politics – which obviously proves nothing. Mere mortals such as us are going to find it very difficult to get access to the truth – and if everything he says is true, I wonder why he’s still alive. But what we do know is that there are no checks on the power of the corporate sector. The organisations imposing such checks would need to be international of course – it’s not possible in one country. And they just don’t exist. The only global institutions with real teeth are so infiltrated by the corporate sector that it’s not overkill to say that in effect they are corporate-owned. So I would absolutely expect things like this to float to the surface every now and then. I’m surprised there hasn’t been more. If power can be brought to bear to strengthen the position of its possessors, history shows that it always is. I’m not surprised by anything Perkins says – in fact I assume that it’s only the tip of an iceberg.

      His main critic is Sebastian Mallaby of the Council on Foreign Relations, a massively influential corporate think-tank, which exists to ‘promote globalization, free trade, reducing financial regulations on transnational corporations, and economic consolidation into regional blocs such as NAFTA or the European Union, and develops policy recommendations that reflect these goals’. But he would be, wouldn’t he?

    • screenbeetle June 29th, 2015

      Hmm.
      I only did A level economics but I suggest this is a rather misleading simplification of the oil trade. It doesn’t seem to take into account the basic economics and history of international trade. The evidence above is simply way too flaky to support its conclusions.

      To get a better angle I would read up on the Bretton Woods agreement for starters. It’s also worth knowing a bit on the USA’s role in post WW2 reconstruction. And then just some general economics – and the role of things like a reserve currency – would put things into perspective.

      The US undoubtedly pushes its own corporate interests in a multiplicity of ways. But in respect to oil it doesn’t just come down making a few deals and threats to get everyone using dollars. The fact is that the Dollar is the world’s reserve currency, and has been since the end of the second world war. Countries like Saudi Arabia have vast amounts of spare cash and need to hold and invest somehow. They will no doubt have have a few Euros, some Yuans maybe, and a few vaults of gold in that mix. But I would speculate that the most sensible currency to use would be the most widely used and stable – aka the reserve currency – aka the Dollar.

      • Dave Darby - replied

        June 29th, 2015

        But you’re not bringing anything to the table. Why do you think it’s flaky? He was undoubtedly at those negotiations – that’s not in question. The person who hired him says that what he says is true, as do his publishers and many others. Point me to something that shows what he’s saying is flaky. And point to what it is about Bretton Woods, the Marshall Plan, or anything else that undermines him. Plus he doesn’t say anything about the Saudis holding gold or other currencies, just that they were told not to sell oil for them, which they haven’t, and neither has anyone else, except Saddam and Gaddafi, who were killed. The very first thing that was done in both of those countries after regime change was to change the policy of selling oil for euros. Your argument about the dollar being the global reserve currency is circular – the US is the dominant power, who insist on its use for buying oil. Do you think it’s a coincidence that regime change was implemented precisely when they began to sell oil in other currencies, and that surrounding Iran with US bases and threatening to attack them has prevented the completion of the Iranian oil bourse?

        Another reason the strength of the dollar is a circular argument is that even though the US has a massive trade deficit and carries more debt than the rest of the world put together (I’m guessing), which means that the value of the dollar should be plummeting – its main trading partners (China is the obvious example) know that their economies depend entirely on US markets, so it’s in their interest to hold dollars, invest in US bonds etc, because if the dollar falls relative to their currencies they won’t be able to sell them anything. This seems like a really risky strategy for the US long-term though, especially with emerging markets elsewhere. If other countries start to refuse to play that game, their economy is in real danger of collapse. But while they still have a stronger military than the rest of the world combined, they can drop a few hints, backed up by examples of ‘regime change’ elsewhere to keep everyone in line. This is standard power-broking, and Perkins’ accounts are entirely consistent with this.

        His publisher also listed books by well-respected authors that support his claims – for example, Sleeping with the Devil: How Washington Sold Our Soul for Saudi Crude, by Robert Baer; Inside the Mirage: America’s Fragile Partnership with Saudi Arabia, by Thomas Lippman; The Blood Bankers: Tales from the Underground Global Economy, by James S. Henry; The Global Debt Crisis: America’s Growing Involvement, by John H. Makin; Overexposed: U.S. Banks Confront the Third World Debt Crisis, by Raul Madrid; Development Debacle: The World Bank in the Philippines, by Walden Bello, D. Kinley, and E. Elinson; Global Dreams: Imperial Corporations and the New World Order, by Richard J. Barnet and John Cavanagh; American Dynasty: Aristocracy, Fortune, and the Politics of Deceit in the House of Bush, by Kevin Phillips; Globalization and Its Discontents, by Joseph Stiglitz; One World, Ready or Not: The Manic Logic of Global Capitalism, by William Greider; When Corporations Rule the World, by David Korten; and The Case Against the Global Economy, edited by Jerry Mander and Edward Goldsmith. Do you think they’re all flaky as well?

        You suggest that things like this can’t happen, and yet they’ve happened with every empire in history. Why would the corporate empire behave any differently? Do you also not believe that the US (and when I say the US, of course I don’t mean American people, I mean US corporate interests) were involved in overthrowing Allende in Chile, Aristide in Haiti, Mossadegh in Iran, the Sandinistas in Nicaragua (and of course the Ujamaa system in Tanzania), and supporting compliant dictators on every continent, that involved the torture and murder of millions of innocent people? None of this is particularly controversial – and if you understand what happened in those cases, why would your inclination be to disbelieve Perkins in this case? If what he’s saying is flaky, I’d be interested in knowing why, but you have to come up with something stronger, otherwise you just sound like the guy from the Council on Foreign Relations.

    • Paul Jennings June 29th, 2015

      The gorilla in the kitchen here, the missing piece to the puzzle, is the fact that of course empires provide reserve currencies, and the dollar is the most recent in a long line, but that works for the empire as long as its productive capacity supports the strength of its currency. The value of a currency under normal market conditions should reflect the desirability of exports from the “empire” in question, if everybody wants goods from the “empire” then the currency remains strong and can be used as a viable reserve currency because it represents things that people want. Once a disparity appears between the reserve role of a currency and the productive capacity of its home economy its reserve status comes under increasing pressure. People don’t want American goods, in fact the USA doesn’t make anything any more; people want Chinese goods. The Americans however want to go on importing on a vast scale. The USA supports the dollar at a long way above what might be called its true market value and one of the ways it does that is by ensuring that oil is traded in dollars (although this situation has been threatened in the recent past as noted above, and is going to be history in the near future because of China, Russia and some of their important allies.); what lies behind the strength of the dollar in the final analysis is American arms combined with the willingness of China amongst others to extend a limitless line of credit to the USA. It is an untenable situation which marks the end of US dominance of world affairs………. and cornered empires are the most dangerous of all.

      It is worth reiterating then that this all comes down to productive capacity. The decline of the US as an industrial power is an echo of the decline of GB as an industrial power; British arms couldn’t save Sterling as the world’s reserve currency, but then Britain did not have an armoury that could destroy the world several times over.

      • Dave Darby - replied

        June 29th, 2015

        We need a like button

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