Alan Greenspan claims Iraq war was really for oil

[Michael Stuart Kelly]

Alan Greenspan claims Iraq war was really for oil

Graham Paterson

The Sunday Times

September 16, 2007

From the article:

In his long-awaited memoir, to be published tomorrow, Greenspan, a Republican whose 18-year tenure as head of the US Federal Reserve was widely admired, will also deliver a stinging critique of President George W Bush’s economic policies.

However, it is his view on the motive for the 2003 Iraq invasion that is likely to provoke the most controversy. “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil,” he says.

Greenspan, 81, is understood to believe that Saddam Hussein posed a threat to the security of oil supplies in the Middle East.

Britain and America have always insisted the war had nothing to do with oil. Bush said the aim was to disarm Iraq of weapons of mass destruction and end Saddam’s support for terrorism.

Greenspan should know. He was on the inside.

Michael

[tjohnson]

Greenspan should know. He was on the inside.

Michael

Was there ever any doubt??

[Michael Stuart Kelly]

GS,

You should see how nasty some people who don't believe this can get—in the name of reason, of course. Their only way out now is to damn Greenspan as a traitor to Ayn Rand because I do not think they will change their opinion.

Michael

[jordanz]

I don't understand how it is about oil. Can someone explain this position?

[Michael Stuart Kelly]

Here is a further clarification.

Greenspan Says Hussein's Removal Was 'Essential'

By Bob Woodward

Washington Post

September 17, 2007

From the article:

"If Saddam Hussein had been head of Iraq and there was no oil under those sands," Greenspan said, "our response to him would not have been as strong as it was in the first gulf war. And the second gulf war is an extension of the first. My view is that Saddam, looking over his 30-year history, very clearly was giving evidence of moving towards controlling the Straits of Hormuz, where there are 17, 18, 19 million barrels a day" passing through.

Greenspan said disruption of even 3 to 4 million barrels a day could translate into oil prices as high as $120 a barrel -- far above even the recent highs of $80 set last week -- and the loss of anything more would mean "chaos" to the global economy.

Given that, "I'm saying taking Saddam out was essential," he said. But he added that he was not implying that the war was an oil grab.

"No, no, no," he said. Getting rid of Hussein achieved the purpose of "making certain that the existing system [of oil markets] continues to work, frankly, until we find other [energy supplies], which ultimately we will."

Michael

[jordanz]

This argument doesn't make sense to me. If Saddam controls the oil, all he's going to do is sell it into the global oil market.

[Michael Stuart Kelly]

Jordan,

Look up "The Oil Act" along with Iraq on Google. This is not the only thing involved oil-wise (by far), but it is big. Really, really, really big. How about along with oil we add "Oceans of Greed"?

(I am not against profits, but I am against obtaining them by using the US Military in armed conflict.)

Michael

[BaalChatzaf]

This argument doesn't make sense to me. If Saddam controls the oil, all he's going to do is sell it into the global oil market.

At a price.

Ba'al Chatzaf

[tjohnson]

This argument doesn't make sense to me. If Saddam controls the oil, all he's going to do is sell it into the global oil market.

What if he decided NOT to develop and sell the oil under Iraq? The economy of the world depends on (relatively) cheap energy. It will be expensive to develop alternative sources so we put it off because if it is expensive it means a lowering of the standard of living which is a political disaster. But soon it will cost more to keep the oil supply flowing than it will to develop alternative energy sources and other technologies anyway.

[jordanz]

(I am not against profits, but I am against obtaining them by using the US Military in armed conflict.)

Well, even if it was "about oil" that's a very good reason. The economy of the world would be terribly harmed if oil became hard to get.

[jordanz]

What if he decided NOT to develop and sell the oil under Iraq?

That's the part that doesn't make sense. I can't imagine a scenario where Saddam would not develop and sell oil.

[Michael Stuart Kelly]

Well, even if it was "about oil" that's a very good reason. The economy of the world would be terribly harmed if oil became hard to get.

Jordan,

I constantly see an oversimplification with Objectivists on this point that Rand certainly did not make. The market for manufactured goods is more complex than the market for raw materials, which can be produced with slave labor if need be. Even in Atlas Shrugged, Francisco had a hell of a lot harder time destroying his copper mines than others did their industries.

Oil is going to be extracted, whether by dictators, or by laissez-faire capitalists, or by any combination of them, so long as oil brings gobs of money with it. The problem is who is going to receive the gross part that money.

I am not for oversimplifying the Iraq war since I tend to see multiple causes for major events. But there is a very simple formula (as shown by "The Oil Act" and lots of other indicators, which are easy enough to find on the Internet if you look) that certainly was one of the important causes. It goes something like this:

They have it.

We want it.

We beat them over the head with a club and take it.

Of course, in a modern free (or semi-free) democracy based on rights, this will never fly, so one has to doctor it up to look nice. But the essence is that. Some call it plunder or looting.

I am one who is not comfortable with that aspect of this war. Fortunately, there is a far more noble side like wasting a really bad guy, but plunder is the ugly underbelly. We can still finish the job in Iraq and it doesn't have to be that way (or at least not so grossly blatant), but that will take a much different set of policies and insiders governing what the US Military should do.

Even despite this shackle, I think the US Military has been doing one hell of a job on the other part of the mission: getting the terrorists. I wish oil politics would get out of its way so it could do more.

Michael

[Aggrad02]

To better understand why the war was for oil, read articles that talk about Iraq and Iran switching to accepting Euros for oil instead of Dollars.

http://www.thinkandask.com/news/thedollar.html

http://www.energybulletin.net/12463.html

http://www.time.com/time/magazine/article/...,998512,00.html

And from Ron Paul on the House Floor:

http://www.lewrockwell.com/paul/paul303.html

Most importantly, the dollar/oil relationship has to be maintained to keep the dollar as a preeminent currency. Any attack on this relationship will be forcefully challenged – as it already has been.

In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O’Neill, the major topic was how we would get rid of Saddam Hussein – though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O’Neill.

It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.

There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros. Many believe this was the real reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.

In 2001, Venezuela’s ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year there was a coup attempt against Chavez, reportedly with assistance from our CIA.

After these attempts to nudge the Euro toward replacing the dollar as the world’s reserve currency were met with resistance, the sharp fall of the dollar against the Euro was reversed. These events may well have played a significant role in maintaining dollar dominance.

It’s become clear the U.S. administration was sympathetic to those who plotted the overthrow of Chavez, and was embarrassed by its failure. The fact that Chavez was democratically elected had little influence on which side we supported.

Now, a new attempt is being made against the petrodollar system. Iran, another member of the “axis of evil,” has announced her plans to initiate an oil bourse in March of this year. Guess what, the oil sales will be priced Euros, not dollars.

Most Americans forget how our policies have systematically and needlessly antagonized the Iranians over the years. In 1953 the CIA helped overthrow a democratically elected president, Mohammed Mossadeqh, and install the authoritarian Shah, who was friendly to the U.S. The Iranians were still fuming over this when the hostages were seized in 1979. Our alliance with Saddam Hussein in his invasion of Iran in the early 1980s did not help matters, and obviously did not do much for our relationship with Saddam Hussein. The administration announcement in 2001 that Iran was part of the axis of evil didn’t do much to improve the diplomatic relationship between our two countries. Recent threats over nuclear power, while ignoring the fact that they are surrounded by countries with nuclear weapons, doesn’t seem to register with those who continue to provoke Iran. With what most Muslims perceive as our war against Islam, and this recent history, there’s little wonder why Iran might choose to harm America by undermining the dollar. Iran, like Iraq, has zero capability to attack us. But that didn’t stop us from turning Saddam Hussein into a modern day Hitler ready to take over the world. Now Iran, especially since she’s made plans for pricing oil in Euros, has been on the receiving end of a propaganda war not unlike that waged against Iraq before our invasion.

[jordanz]

They have it.

We want it.

We beat them over the head with a club and take it.

Of course, in a modern free (or semi-free) democracy based on rights, this will never fly, so one has to doctor it up to look nice. But the essence is that. Some call it plunder or looting.

But, this is not what is happening. "We" are not taking the oil. Nor is any American Corporation. The oil is staying in the hands of the Iraqis.

plunder is the ugly underbelly.

Where is the evidence for this?

[jordanz]

http://www.thinkandask.com/news/thedollar.html

I'm very dubious of this link. In one of the first paragraphs it states "Now that The United States of America has taken both Iraq and Afghanistan and owns those country's natural resources". This is ludicrous. The US doesn't own any of those country's resources.

The idea that the US would go to war because a country wants to trade in Euros vs the Dollar seems far-fetched to me. I'd need to seem some compelling proof before I accepted this. In my view, as a layman, I can't conceive of the need for this. Who cares if a commodity is traded in Euros, Dollars or Lira? If I sell something for $10 or 15 Pounds I'm asking for the same amount in the abstract. I don't see how it will affect the market value of the currency. The only thing that affects the value of a currency is the interest rates offered for that currency. The Dollar's decline is directly related to the drop in US interest rates.

[jordanz]

At a price.

Ba'al Chatzaf

Your implication is that he can control the price. He can no more control the price than OPEC can. OPEC has been able to control prices over very short periods but not over the long term. Oil is traded on a global, open market. The price is set by supply/demand.

[Aggrad02]

http://www.thinkandask.com/news/thedollar.html

I'm very dubious of this link. In one of the first paragraphs it states "Now that The United States of America has taken both Iraq and Afghanistan and owns those country's natural resources". This is ludicrous. The US doesn't own any of those country's resources.

The idea that the US would go to war because a country wants to trade in Euros vs the Dollar seems far-fetched to me. I'd need to seem some compelling proof before I accepted this. In my view, as a layman, I can't conceive of the need for this. Who cares if a commodity is traded in Euros, Dollars or Lira? If I sell something for $10 or 15 Pounds I'm asking for the same amount in the abstract. I don't see how it will affect the market value of the currency. The only thing that affects the value of a currency is the interest rates offered for that currency. The Dollar's decline is directly related to the drop in US interest rates.

I know most people would be dubious of the first link. That is why I posted the others. The energy bulletin article explains it pretty well, so does Congressman Ron Paul if you read his speech.

Think about it. If Iraq, Iran, Saudi Arabia, Russia or any other country that has mass exports that are bought with dollars were to no longer accept dollars for their exports, what do you think would happen to the value of the dollar? If you had to buy euros before you bought oil, the value of the dollar in terms of the euro would sink. Also when these countries stop taking the dollar, they will also stop saving in the dollar and instead would save in the euro, which would increase the dollars in circulation and further sink the value of the dollar. Also once those countries stop taking the dollar for oil, what currency do you think countries like China will start to save in?

Think about it and follow the money. The dollar declined when interest rates were low because of the increase of the circulating money supply. Any way that you increase the money supply decreases the value of the currency. If foreign nations stopped saving in the dollar and flooded the market, then the dollar would collapse. Also if the dollar had fewer places to be spent, it would also decline in value.

--Dustan

BTW: Here is the full paragraph and the preciding one from the Greenspan book (I have it here in front of me):

What do governments whose economies and citizens have become heavily dependent on imports of oil do when the flow becomes unreliable? The intense attention of the developed world to Middle Eastern political affairs has always been critically tied to oil security. The reaction to, and reversal of, Mossedeq's nationalization of Anglo-Iranian Oil in 1951 and the aborted effort of Britain and France to reverse Nasser's takeover of the key Suez Canal link for oil flows to Europe in 1956 are but two prominent historical examples. And whatever their publicized anger over Saddam Hussein's "weapons of mass destruction", American and British authorities were also concerned about violence in an area that harbors a resource indispensable for the functioning of the world economy.

I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq War is largely about oil. Thus, projections of world oil supply and demand that do not note the highly precarious environment of the Middle East are avoiding the eight-hundred-pound gorilla that could bring world economic growth to a halt. I do not pretend to know how or whether the turmoil in the Middle East will be resolved. I do know that the future of the Middle East is a most important consideration in any long-term energy forecast. Even though oil-use intensity has been significantly reduced, the role of oil is still such that an oil crisis can wreak heavy damage on the world economy. Until industrial economies disengage themselves from, as President George W. Bush put it, "our addiction to oil", the stability of the industrial economies and hence global economy will remain at risk.

Alan Greenspan, The Age of Turbulence, pg. 463

Edited September 17, 2007 by Aggrad02

[jordanz]

The energy bulletin article explains it pretty wel

I read the energy bulletin article. The only point that it convincingly makes is that a devaluation of the dollar would be bad. It does not provide any evidence that Iraq switching to Euros would cause a devaluation.

Think about it. If Iraq, Iran, Saudi Arabia, Russia or any other country that has mass exports that are bought with dollars were to no longer accept dollars for their exports, what do you think would happen to the value of the dollar?

Nothing. I buy stuff from around the world all the time, I never need to consider what currency is ultimately making it to the seller. That's what markets are for.

If you had to buy euros before you bought oil, the value of the dollar in terms of the euro would sink.

That doesn't follow. The party buying my Dollar and selling me a Euro obviously values my Dollar. That person will use the Dollar for another trade. By this argument, every time I buy any product the value of that product should sink. Now, of course, if no one in the world accepted dollars for anything the dollar would sink. But, we're talking about only 1 commodity here.

The dollar declined when interest rates were low because of the increase of the circulating money supply

That's not how I'd put it. The dollar declined because traders could get a better return on their investments elsewhere.

[Aggrad02]

If you had to buy euros before you bought oil, the value of the dollar in terms of the euro would sink.

That doesn't follow. The party buying my Dollar and selling me a Euro obviously values my Dollar. That person will use the Dollar for another trade.

You still don't understand. If the dollar couldn't buy oil, then the person valuing your dollar would not value it as much. And right now there are trillions of dollars in saving around the world by governments because it can buy oil. If it no longer could they would dump their dollars for Euro's and the dollar would decline. Remember our dollar is backed by absolutely nothing, nothing what so ever.

--Dustan

[Michael Stuart Kelly]

Jordan,

I will not argue. We disagree and you sound like one who is already convinced of your view. I know I am of mine.

If you don't agree with Greenspan, either, take it up with him. Maybe you can teach him something.

Michael

[jordanz]

You still don't understand. If the dollar couldn't buy oil, then the person valuing your dollar would not value it as much.

You make it sound like oil is the only commodity in the world. The person buying my dollar may have no interest in oil whatsoever.

[jordanz]

Jordan,

I will not argue. We disagree and you sound like one who is already convinced of your view. I know I am of mine.

Actually, I wouldn't say I'm convinced. I've encountered the War For Oil position a lot and have never heard a good argument for it.

[Bidinotto]

Greenspan clarified his comment about "war for oil" in an interview with Bob Woodward of the Washington Post.

He didn't quite mean what everyone thinks he meant.

[Aggrad02]

You still don't understand. If the dollar couldn't buy oil, then the person valuing your dollar would not value it as much.

You make it sound like oil is the only commodity in the world. The person buying my dollar may have no interest in oil whatsoever.

It is the main commodity in the world. You are acting like our dollars are worth something. They are not. Previously OPEC had a rule that all oil it sold would be sold in dollars (hence the name petrodollars), not any currency that was brought, but dollars. This means that anyone wanting to buy oil and didn't already have dollars had to get them. Supply and demand is pretty simple. If you have to have dollars to buy oil and oil is in high demand, then that raises the demand and the value of dollars. This also forced all of the OPEC countries to hold their reserves in dollars (more dollars coming in than were going out, btw same thing happens with China when we buy all of their cheap junk). Now if Iraq, Iran, Lybia and Venezuela all decide to no longer accept the dollar for oil but euros instead, demand for the dollar goes down, and the value of dollars goes down. Also since these countries are going to be spending their dollars and replacing their reserves with euros, more dollars will become active in the market place, increasing the supply (and with the demand going down due to less oil being sold in dollars) further decreasing the value of the dollar.

How you cannot understand this I do no understand. How you cannot understand that wars in the Middle East are about oil, I also cannot understand.

What do you think the whole fight with Iran is about. We overthrew their country in '53 because of oil. We supported Hussein because of oil, we support the Saudi Royal family because of oil. We supported the attempted coup against Chavez because of oil.

Do you really think we attacked Iraq because they were a threat? They had no weapons and no army, and were not working with terrorist. Iran is also not a threat to us, they also don't have weapons, and have no way of attacking us, and are not working with al-qeada. This administration does not care one bit about safety, if they did they would have secured our borders, and would do something about Saudi Arabia. The home to the majority of the terrorist, the terrorist money and the extremist Islamic madrahsas. But we don't do anything about the Saudi's because the oil keeps flowing and they keep buying debt. Same with China. China has a horrible trade record, environmental record, and human rights record. They are no better than Cuba, but China provides cheap goods and buys our debt, so we do nothing about it.

-Dustan

[Michael Stuart Kelly]

Greenspan clarified his comment about "war for oil" in an interview with Bob Woodward of the Washington Post.

He didn't quite mean what everyone thinks he meant.

Robert,

You probably missed it, but I already quoted Woodward's article earlier (I am giving it again because the rapid-fire posts confined it to an earlier page):

Here is a further clarification.

Greenspan Says Hussein's Removal Was 'Essential'

By Bob Woodward

Washington Post

September 17, 2007

From the article:

"If Saddam Hussein had been head of Iraq and there was no oil under those sands," Greenspan said, "our response to him would not have been as strong as it was in the first gulf war. And the second gulf war is an extension of the first. My view is that Saddam, looking over his 30-year history, very clearly was giving evidence of moving towards controlling the Straits of Hormuz, where there are 17, 18, 19 million barrels a day" passing through.

Greenspan said disruption of even 3 to 4 million barrels a day could translate into oil prices as high as $120 a barrel -- far above even the recent highs of $80 set last week -- and the loss of anything more would mean "chaos" to the global economy.

Given that, "I'm saying taking Saddam out was essential," he said. But he added that he was not implying that the war was an oil grab.

"No, no, no," he said. Getting rid of Hussein achieved the purpose of "making certain that the existing system [of oil markets] continues to work, frankly, until we find other [energy supplies], which ultimately we will."

Michael