A guest editorial in the Eugene, OR Register-Guard newspaper today reveals that keeping the dollar the dominant global currency is even more important than oil in US foreign policy and war planning. According to “Crude Facts” by M. Reza Behnam, a political scientist specializing in the politics and governments of the Middle East and American foreign policy there, US wars in the Persian Gulf have been more about about stabilizing the oil currency policies that have fueled America’s expansive economy since 1945 than about securing actual oil supplies.

Behnam notes that when the victors in World War II “met at Bretton Woods, N.H., in 1944 to create a modern, stable global economic system, they agreed to inaugurate an international gold-backed monetary standard reliant on the U.S. dollar – a logical decision at the time, since the United States had the largest gold reserves at $35 per ounce of gold.” In 1971, however, “with gold stores dwindling, President Richard Nixon ended the gold standard.

Political and economic uncertainty characterized the 1970s. Inflation soared as the government freely printed dollars to cover the costs of the Vietnam War and President Lyndon Johnson’s Great Society programs. The 1973 oil embargo by Arab nations that belonged to the Organization of Petroleum Exporting Countries – payback for U.S. military aid to Israel during the Yom Kippur War – quadrupled oil prices. With the U.S. economy in a nosedive, the Nixon administration, anxious to maintain the global demand for dollars, persuaded the hostile Saudi government to finance America’s debt with its petroleum wealth. Nixon convinced the Saudis that it was in their best interest to price their oil only in U.S. dollars, and to invest their surplus oil profits in U.S. Treasury bills. For its part, the United States agreed to provide weapons and protection to the House of Saud. The agreement ended the oil embargo and bound two disparate countries together for decades. By 1975, all OPEC countries had priced their oil in dollars.

For more than 40 years, global energy transactions and international trade have been conducted mainly in dollars, maintaining the United States’ status as an economic superpower. The petrodollar bargain of 1974 is why Washington staunchly backs the Saudi autocratic government that represses half its population [the Shia minority], funds extremist Sunni groups worldwide, and nurtured 15 of the 19 hijackers who carried out the terrorist attacks on Sept. 11, 2001. It also explains Washington’s support for Saudi Arabia’s devastating bombing campaign in Yemen and the two countries’ obsession with Iran as a regional threat.

America’s wars in the Middle East have everything to do with eliminating challenges to the petrodollar system. Such a challenge was central to President George W. Bush’s decision to invade Iraq, a country with the world’s second-largest oil reserves, and overthrow Saddam Hussein. Saddam’s fate was sealed when – encouraged by the French and eager to end crippling sanctions – he decided, in late 2000, to trade Iraqi oil in euros, the world’s second-largest reserve currency, and converted his $10 billion reserve fund at the United Nations to euros. Bush’s invasion of Iraq in March 2003 finished off this threat to the petrodollar and sent a clear warning to other countries considering an alternative oil transaction currency.

The 2011 intervention in Libya and the overthrow of Muammar Qaddafi can be seen through the same prism. For decades, a number of African countries, led by Qaddafi, had been attempting to establish a pan-African currency based on Libya’s gold-backed dinar. Qaddafi’s goal was to provide the continent with an alternative currency, and to replace the dollar with the Libyan dinar in future oil sales. E-mails from Hillary Clinton’s State Department reveal French President Nicolas Sarkozy’s fears about the threat Qaddafi’s pan-African currency posed to the established economic order. Qaddafi’s life, along with his plan for a united African currency, ended when NATO forces, spearheaded by France and Britain and with U.S. cooperation, invaded Libya.

The 2002 failed coup attempt against President Hugo Chavez in Venezuela – reportedly with the assistance of the CIA – also came shortly after the country considered switching to the euro for its oil sales.” Venezuela continues to be an enemy not because it’s a dictatorship under Chavez’s successor, Nicholas Maduro, but because “in 2007, Chavez instructed the state oil company to change its dollar investments to euros and other currencies.

Cracks appear to be emerging in America’s hegemony over the global financial system, and the United States’ impolitic conduct in the Middle East reflects its angst over these developments. The intensity of U.S. rancor toward Iran has increased as Tehran, along with Moscow, has led the effort to break free from the petrodollar monopoly. That Tehran has been pricing its oil in currencies other than the dollar and seeking to create a Middle East energy exchange market are viewed by Washington as provocative moves, and have placed Iran squarely on America’s target list. Since 2003, Iran has been shifting its foreign-held assets and the reserve funds in its central bank from dollars to euros, and it stopped accepting U.S. dollars for oil in 2007. Another circumvention of the dollar is the establishment of the Iranian Oil Bourse, also known as the Iran Crude Oil Exchange, opened in 2008. Its objective is to sell oil and gas in non-dollar currencies, primarily the euro, the Iranian rial, the Japanese yen, and/or a basket of other major currencies. Onerous Western sanctions have pushed Tehran and Moscow to abjure dollar-denominated trade, favoring euros, rubles, and rials instead. In 2012 Iran, which supplies 15% of China’s oil and natural gas, began conducting its energy deals with China in yuan (China dropped the dollar peg in 2005). India and Russia trade oil with China in rubles and yuan, and China and Japan have agreed to use their own currencies in their transactions. South Korea has also been slowly moving from dollars in its transactions, buying Iranian oil with the Korean won, and shifting its investments to other currencies. As the world’s leading consumer of oil and natural gas, China has enough leverage over Saudi Arabia and the other Gulf oil producers to pay for its oil imports in yuan. Increased trade with China has intensified the pressure on Saudi Arabia to forsake the dollar. The United Arab Emirates has already agreed to use the yuan in its petroleum trade with China.

Saudi petrodollars have financed Washington’s military adventures and spending sprees. As a major holder of U.S. Treasury bills and one of the United States’ largest creditors, the kingdom wields a potent political weapon. It attempted to use that weapon in 2016, threatening to sell as much as $750 billion in Treasuries and assets if Congress passed legislation allowing it to be held liable in U.S. courts for the Sept. 11, 2001, terrorist attacks.

The Saudis have traditionally seen the United States as their chief regional partner, but the unusual visit to Moscow in early October by Saudi King Salman reveals fissures in the 1974 iron-clad agreement, and an acknowledgement of the changing balance of power in the region.

The world’s reliance on the dollar as the global reserve currency is beginning to erode. Demand for the dollar for global oil and gas transactions is lessening as countries have grown weary with America’s dominance of the world economy and use of military force to punish currency dissenters. The momentum toward non-dollar trading could severely undermine the U.S. economy, one of the most debt-ridden in the world. The house of cards built by the United States in the 1970s could easily collapse if the rest of the world abandons the dollar standard. Right now, the resulting massive economic disruption to the world economy isn’t something most developed nations want to try to live with.

The United States, with its economic imbalances and soaring deficits, has the most to gain by working cooperatively with the rest of the world to gradually reform the global monetary system. But that requires it to forego its imperious myths and trade its belligerent superpower role in favor of international mediation to achieve global economic stability and security.”