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U.S. Sanctions On Iran Could Escalate Into Nuclear Warfare: Fear of Dollar Losing Dominance Fuels U.S. Sabre-Rattling

By Asad Ismi

As I write this article (in mid-January), Iran and the United States appear headed towards a war that could escalate into World War III, perhaps even with an exchange of nuclear weapons.

The U.S. has accused Iran of developing such weapons and gives this as a reason for imposing economic sanctions on its central bank that amount to an embargo on the country’s oil exports, an act of economic war. The sanctions penalize any country that pays Iran’s central bank for its oil.

The European Union (EU) has also agreed to stop importing Iranian oil, though it has not decided when exactly the embargo will take effect. The EU is Iran’s second biggest oil buyer and imports close to 450,000 barrels of oil a day from there. As a result, Iran’s currency had lost half its value by mid-January and its fragile economy was under extreme pressure.

Iran threatened to close the Strait of Hormuz in retaliation for the Western embargo on its oil exports and stated that “the free flow of oil must be for all or for none.” The U.S. has threatened Iran with military action if it blocks the Strait of Hormuz through which about 40% of all seaborne oil passes, making it “the world’s most important oil chokepoint.”

Major General Zhang Zhaozhong, a General with China’s National Defence University, has made it clear that “China will not hesitate to protect Iran, even with a third world war.” China has “vehemently reaffirmed” its alliance with Iran. China is Iran’s biggest oil customer and gets about 11% of its oil from there. Both China and Russia intend to veto any U.N. authorization of a military attack on Iran.

There is already an extensive covert U.S.-Israeli campaign aimed at destabilizing Iran and provoking it into war. This has included covert assassinations and kidnappings of Iranian scientists, cross-border attacks from Pakistan in Sistan-Balochistan province, Israeli sabotage of Iran’s infrastructure with viruses, invasion of its territory by U.S. spy drones, and endless Israeli threats of an imminent massive attack. The U.S. recently sent thousands of troops to Israel to take part in joint military exercises aimed at Iran, and has also sold $60 billion worth of weapons to Saudi Arabia, Iran’s main rival.

Far from being intimidated by this aggression, Iran’s navy launched a massive 10-day long naval exercise on December 24, covering the area from the east of the Strait of Hormuz in the Persian Gulf to the Gulf of Aden. Iran also recently successfully tested its own cruise missiles in the Strait of Hormuz, explaining that the naval manoeuvres were defensive and inviting the participation of the area’s other countries.

The dangerous U.S. economic warfare and sabre-rattling has little to do with Iran developing a nuclear weapon. According to two National Intelligence Estimates (NIE), dated 2007 and 2010, compiled by the U.S. intelligence establishment, Iran is not attempting to develop a nuclear bomb. NIEs are written jointly by 16 U.S. intelligence agencies. The November 2007 NIE on Iran’s nuclear program declared that, “in the fall of 2003, Tehran halted its nuclear weapons program.” Leon Panetta, the U.S. Secretary of Defence, himself stated in a recent New York Times article, “Are they [Iran] trying to develop a nuclear weapon? No.”

It is understandable that Iran feels it has a right to arm itself with nuclear weapons in order to defend itself against the U.S. which has an arsenal of 10,000 nuclear warheads and killed close to 1.5 million people in Iraq, Iran’s neighbour. Washington certainly would not have been able to do that if Iraq had been armed with nuclear weapons, and it would not have been able to invade Libya and Afghanistan either, and kill thousands of people there. Since the U.S. has nuclear weapons, every other country in the world can claim to be justified in acquiring them, too, if only for self-defence.

Rather than concern about Iran developing nuclear weapons, the U.S. moves against Iran are part of its Middle East counterrevolution, aimed at containing the successful popular uprisings in Egypt and Tunisia and overthrowing the regimes that are not Western puppets, such as Syria and Iran. The U.S. has already done this in Libya, which, though increasingly pro-Western, was not considered sufficiently pliable and submissive by Washington (see my article on Libya in the May 2011 Monitor).

In Syria, the U.S. and France are supporting Islamic fundamentalist forces that are militarily attacking the regime of Bashar al-Assad. Iran is a close ally of Syria, and so is next on Washington’s hit list.

Now that the U.S. has technically withdrawn from Iraq, one of its fears is the development of a strong Iran-Iraq-Syria-Egypt-Lebanon-Palestine alliance that could greatly diminish U.S. influence in the Middle East. Iraq is now ruled by a government friendly to Iran. Elections in Egypt look set to put Islamists in power who are hostile to Israel. Such a powerful bloc of countries working together outside Western control would be a disaster for the U.S., whose dominance over the Middle East would be finished. The best time to make war on your perceived enemies is before they have united against you; it is much easier to attack them separately than when they are together.

After the successful revolutions in Egypt and Tunisia, the U.S. sees the Middle East slipping out of its grasp and seems willing to go to war (again) to prevent that setback.

Washington’s belligerence towards Iran is also aimed at the latter’s close allies, China and Russia, as well as at India, and the efforts of these countries to create an alternative trading system that does not use the U.S. dollar. As David Malone, author of The Debt Generation and director of a BBC documentary on the financial crisis, explains: “I think the stand-off with Iran in the Straits of Hormuz over sanctions is as much to do with the moves to replace the dollar as anything else. The stand-off is as much with China and its allies as it is specifically with Iran. The U.S. is testing China’s nerve and the solidity of its network of bilateral currency settlement agreements. We are seeing military power deployed to counter economic power. I think the U.S. will lose. Depending on the nature of its loss, we could see a precipitate decline in the standing of the dollar as global reserve currency.”

By China’s “network of bilateral currency settlement agreements,” Malone means “the growing network of bilateral agreements in major trade deals gradually replacing the dollar as a settlement currency. Being a ‘Settlement’ currency is not quite the same as being a ‘Reserve’ currency like the dollar, but it is a major step in that direction. It is, in fact, a very large step. Which currency large international trades are done in matters. It is a fact that, in 2000, Iraq signed an agreement to sell its oil, all its oil, in Euros. Iran was contemplating doing the same at around the same time. The Iraq decision involved the large French bank PNB-Paribas. France was not one of those who supported the war, and Washington led a hate campaign vilifying the French. The worry was that a switch from dollar to Euro settlement might gain momentum. Any major move away from dollar settlement would cripple the U.S.”

Malone points out that there is now a considerable list of countries and trades no longer using the dollar for settlement of trade. Almost none of Iran’s oil will now be traded in dollars, as it has bilateral agreements with Russia and China to use other currencies for their trading. Japan and China have agreed to promote direct trading of their respective currencies, the yen and yuan, without using dollars. China and Russia have been directly trading in their own currencies for more than a year. In January 2011, India talked to Iran about ending use of the dollar so it could buy Iranian oil despite U.S. sanctions. India also recently signed a settlement agreement with China to use the Yuan.

Given its current economic weakness, the U.S. empire only has the option of wielding its military power to retain its dominant global position. This is especially true in the economically crucial oil-rich Middle East. If oil is not traded in dollars, then soon nothing else will be, and the end of the dollar’s dominance as the world’s reserve currency will threaten the economic collapse of the U.S. In this sense, when the U.S. plans to attack Iran, it is fighting for its continued existence as an empire. There is something very desperate in its belligerence against Iran.

The Iranian regime is a brutal theocratic dictatorship that has killed more than 14,000 leftists, suppressed women, and denied its people basic human rights. The government is run by mullahs (defined as someone who has read the Koran) and only Islamists can run in their farcical elections. The Iranian Revolution, which in 1979 overthrew Mohammed Raza Shah Pahlavi, a U.S. puppet, involved an alliance of leftists, liberals, and Islamists. The revolution was subsequently hijacked by the Islamists, who were able to consolidate power mainly because Iran was militarily attacked by Iraq in 1980, starting an eight-year-long war. Iranians felt compelled to unite in the face of external aggression. In this sense, U.S. hostility towards Iran actually helps the brutal theocratic regime to hold on to power by encouraging Iranians to support it for patriotic reasons.

But however unsavoury the Iranian government is, this does not justify its overthrow by the U.S. (which has committed far greater crimes) and its replacement by a Washington-controlled puppet. Only the Iranian people have the right to change their regime, as the people of Egypt and Tunisia have done.


Published in The Canadian Centre for Policy Alternatives Monitor, February 2012

Asad Ismi is the CCPA Monitor’s international affairs correspondent. He has written extensively on U.S. imperialism and the the Middle East.