London’s ‘The Independent’ of 6 October has focused attention on the coming fall of US hegemony beginning with the pressure on US dollar, following the not so secret meetings between Arab states, China, Russia, Japan and France to stop use of the US currency for oil trading. Its intrepid correspondent Robert Fisk points to a incoming epochal financial paradigm with the Gulf Arabs along with China, Russia, Japan and France moving to a basket of currencies including the Japanese yen and Chinese Yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar. “The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold.”
China has a hoard of US $ 3 trillion (China’s GDP is 3 trillion and India’s one trillion, USA’s around 13 trillion and fast going down) while Abu Dhabi, Saudi Arabia, Kuwait and Qatar together hold an estimated $2.1 trillion in dollar reserves. There is no mention of Indian rupee yet in the basket of currencies. After 26/11 no one talks of India as a power to reckon with, having become a US poodle and a victim of US policies and whims on China, Pakistan, Kashmir or even Afghanistan, in the process angering Iran, a regional power. Washington has been forced to negotiate with directly and indifferent relations with Moscow, which is unlikely ever to be India’s strategic enemy. This is a result of India’s ham handed and bankrupt foreign, defense and security policies.
“Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.”, as confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong .No wonder there is sudden rise in gold prices.
While the transition from dollar markets is planned within nine years but once the momentum gathers, the change can be fast and traumatic.
Remember its military equivalent; US citizens hanging on to the last helicopter fleeing the embassy in Saigon or the flight of Shah of Iran with the 1979 onrushing Khomeini led Shia revolution in Iran. US gendarme in the region, Reza Shah Pehelvi was armed to the teeth with an omnipresent hated spy Savak trained in torture by CIA , the old masters. But his regime collapsed like a house of cards.
I recall another example. In 1994, while posted at Ankara and concurrently accredited to Azerbaijan, I went to make first courtesy call when in Baku on the Head of the Mission of the Russian federation. His Excellency received me in a two room suite at the Intourist hotel -equivalent of a two star hotel. This is what had befallen the Ambassador Extraordinary and Minister Plenipotentiary (a highly misleading designation for most of the ambassador now a days) yester years mighty Union of Socialist Soviet Republics with Azerbaijan till recently its satrapy.
At the same time Azeri President Haidar Aliev, a former senior member of Soviet Politburo, had allotted a huge building to the US ambassador and a good sized one to the British. The Israeli Ambassador was getting a big embassy extended and renovated, ostensibly to keep a watch on Iran from the North, while most missions were accommodated in nondescript hotels like the Intourist.
Washington which spends $ 600 billion on defense, almost as much as the rest of the world put together, aka to protect its hegemony and control of world resources is aware of the meetings and would fight tooth and nail “this international cabal“ which includes even loyal allies Japan and the Gulf Arabs.
This could lead to also an economic war between the US and China over Middle East oil and gas, to begin with, further aggravating the regions ongoing tensions and conflicts into a big battle for supremacy. China relies very heavily on oil from the region and would need even more for its still galloping economy. China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq - blocked by the US until this year - and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (much to west’s chagrin and hence stories of genocide but not in Iraq even after death of 1.3 million since the invasion and ongoing occupation) and has been negotiating for oil concessions with Libya.
China has invested hundreds of millions of dollars in Baluchistan’s port of Gawadar, next door to the oil wells of the Gulf, from where it wants to lay oil and gas pipelines to Xinjiang. It is believed that West would like to detach Baluchistan and control north-west non-Pushtun Afghanistan, when Pushtunistan, already taking shape ,comes into being .India should encourage this development to counter China’s hegemonic designs to surround India from all sides.
Iran announced last month that its foreign currency reserves would be held in Euros rather than dollars. Of course, what happened to Iraq when it tried to sell its oil in Euros rather than dollars? A few months after Saddam Hussein announced his decision, the US and UK invaded Iraq.
So this brings into the picture Tehran, which has been under US led Western aggressive pressure since 2003 on the false claims about its legitimate nuclear programme, almost like Washington’s similar false allegations before its illegal invasion of Iraq for its oil, as its subsequent action showed including public admission that the war was for its oil by US deputy defense secretary Paul Wolfowitz and Federal Reserve Chairman, Alan Greenspan (The Yanks have the vanity ! or the hubris of telling the truth). Therefore, since the last few years many sensible western writers have been warning of a US and/or Israeli bombing of Iran. The oil prices will skyrocket, China, Japan and others including India will suffer. US has enough reserves for some time and believes it can use force to get oil.
It is easy to start a war but difficult to predict its outcome as US should know by now from its ‘Operation Iraqi Freedom’, a racist appellation. It is caught in a quagmire and it will be interesting how it would rescue its troops and heavy equipment from there, as Iraqi Shias, and Shias elsewhere like Hezbollah, in oil producing region of Saudi Arabia. Kuwait etc including India will be very annoyed and have a tradition of martyrdom. Like Pyongyang which has made clear of an attack on US troops in South Korea and Japan, if North Korea is interfered with, Tehran has made it known that attack from anywhere will lead to the stopping of the flow of Gulf oil and attack on all US bases and installations of its Gulf allies.
While the allies have been forced to buy arms worth hundreds of billions of dollars from US and the West, they are unlikely to be used very much. Few were used when Iraqi troops entered Kuwait in 1990. An American diplomat, rather mischievously told me, the Kuwaiti elite used their latest communication equipment, the cell phones, to contact each other, got into their Cadillacs and Mercedes and crossed over into Saudi territory.
In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, pleaded with Beijing to let the Yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro. The decline of American economic power has been also admitted by the World Bank president Robert Zoellick. "One of the legacies of this crisis (current) may be recognition of changed economic power relations," he said in Istanbul before the IMF and World Bank.
Apart from China's extraordinary new financial power - there is historic anger among oil-producing and oil-consuming nations at Washington’s manipulations of international financial system to maintain its hegemony.
Brazil has also shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East. Chinese exports to the region are now considerable which include a huge range of products from cars to weapon systems, food, clothes, even dolls.
“Ever since the Bretton Woods agreements – the accords after the Second World War, which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.”
“The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the Rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar." Chinese financial sources believe President Barack Obama is too busy fixing the US economy and other internal problems.
"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."
However a word of caution.
In an article titled, “Beginning of the end of the Chinese miracle”, Gordon G Chang wrote in South Asian in May 2009 that after two decades of uninterrupted prosperity, the initial stages of the downturn are exposing the inherent weaknesses of China’s economy, and those fissures will be felt near and far. Chang also wrote “The Coming Collapse of China by, Random House Inc.” in 2001. Reviewing it in 2004 Yamamoto, a Japanese described it as ‘one of the greatest books in this decade’ who was struck by the resemblance between Japan and China. We know Japan has been in deep economic crisis since long. Led by USA, the Western nations, who have rolled back Eastern Ottoman empire from the gates of Vienna, are going to fight tooth and nails. It will be a fight among sharks with world community inside the bull ring and shall suffer too.
I have written many articles on the decline and the coming fall of US hegemony since 11 September, 2002. Some of these are listed below.
The decline of the American Century Sept11, 2002 Atimes:
The US Empire –Beginning of the End Game 24Nov, 2006
The Decline And Coming Fall Of US Hegemony March 30, 2008
-- An editorial titled ' Collapse of U.S. economy ' in Belleville Intelligencer of 27 Feb, 2008 confirms, by now generally accepted ill health of US economy. Harry Koza in the Globe and Mail recently quoted Bernard Connelly, the global strategist at Banque AIG in London, that the likelihood of a Great Depression is growing by the day. Martin Wolf of U.K.'s Financial Times cited Dr. Nouriel Roubini of the New York University's Stern School of Business, who outlines how the losses of the American financial system will grow to more than $1 trillion, an amount equal to all the assets of all American banks.
The next domino to fall will be credit card defaults, and after that... who knows? There are so many exotic funds out there, with trillions of dollars in paper - or rather computer-screen money - all carrying assorted acronyms, and all about to disintegrate into nothingness. Over the next couple of years, scores of banks that have thrived on these devices, based on quickly disappearing equities, will fail.
The most frightening forecast so far comes from the Global Europe Anticipation Bulletin (GEAB), "The end of the third quarter of 2008 (thus late September, a mere seven months from now) will be marked by a new tipping point in the unfolding of the global systemic crisis.
"At that time indeed, the cumulated impact of the various sequences of the crisis will reach its maximum strength and affect decisively the very heart of the systems concerned, on the front line of which (is) the United States, epicenter of the current crisis.
"In the United States, this new tipping point will translate into - get this - a collapse of the real economy, (the) final socio-economic stage of the serial bursting of the housing and financial bubbles and of the pursuance of the U.S. dollar fall. The collapse of U.S. real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down."
"We are not experiencing a "remake" of the 1929 crisis nor a repetition of the 1970s oil crises or 1987 stock market crisis. What we will have, instead, is truly a global momentous threat - a true turning point affecting the entire planet and questioning the very foundations of the international system upon which the world was organized in the last decades."
Western Military-Capitalist Civilization in Disarray September 25, 2008
"Credit easing does not and cannot substitute for earnings, wages or tax revenues." Max Fraad Wolff
"The [US] financial system is out of control and has led the economy into a wildly turbulent sea of heavily leveraged speculation. -- the road ahead is dark and unknown." Steve Fraser author of" Wall Street: America's Dream Palace."
"Before the US economy can truly begin to expand again, the savings rate must rise to pre-bubble levels of 8pc--$2 trillion of household debt must be eliminated", Economist David Rosenberg
Corporate Culture and Greed Sink the American Republic 17 May, 2009
"Over-grown military establishments are under any form of government inauspicious to liberty, and are to be regarded as particularly hostile to republican liberty." --George Washington (1732-1799), First US President.
"It is part of the general pattern of misguided policy that our country is now geared to an arms economy which was bred in an artificially induced psychosis of war hysteria and nurtured upon an incessant propaganda of fear." --General Douglas MacArthur, Speech, May 15, 1951
"[The] conjunction of an immense military establishment and a large arms industry is new in the American experience. . . . In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist." --Dwight D. Eisenhower (1890-1969), 34th US President, Farewell Address, Jan. 17, 1961
Falling Empires and their Currencies Rome, France, England and the USA
Part 2: From England to the United States of America Rolf Nef January 16, 2007
K Gajendra Singh, Indian ambassador (retired), served as ambassador to Turkey and Azerbaijan from August 1992 to April 1996. Prior to that, he served terms as ambassador to Jordan, Romania and Senegal. He is currently chairman of the Foundation for Indo-Turkic Studies. Copy right with the author. Eemail@example.com