Paying for a War with IRAQ
By: Jude Wanniski, Polyconomics.com
goldseek.com
When we advised two weeks ago to “Relax on Iraq” we of course anticipated
the Bush administration’s decision to go through the United Nations to seek
a return of the weapons inspectors, and that it was more than obvious Iraq
would invite them back. Indeed, Iraq had already sent a letter of invitation
to UN General Secretary Kofi Annan that, as far as I could tell, set no
preconditions. It was rejected on the grounds that the United States saw
preconditions in the language that suggested the inspectors come when they
wished to Baghdad to discuss what it is they wanted to inspect, which is
hardly a “precondition.” Iraq then sent a second letter to the UN, five
pages in all, which I got by fax from the Iraqi UN Mission, but never read
in the newspapers. It was even clearer there were no preconditions. The UN
did not respond to that letter, but after several conversations between the
Iraqis and Kofi Annan, a third short letter was sent that simply said there
would be no preconditions. Iraqi Deputy Prime Minister Tariq Aziz had
muddied the water with television interviews saying he wanted assurances the
United States and Britain would not attack and that the 11-year-old
sanctions would be lifted. One supposes that Baghdad has been assured
privately that after the inspectors are satisfied, the UN will take up the
issue of sanctions.
The hardliners in the Bush administration have clearly been frustrated by
the President’s decision to go through the United Nations, even though Mr.
Bush still indicates that he reserves the right to go war with Iraq if he is
not satisfied with how the UN handles the issues. What is now becoming
clearer by the day is that the Pentagon intellectuals who have been itching
for a “regime change” in Baghdad have figured out how to pay for the cost of
the military action. No, it is not the feeble economics presented by Larry
Lindsey, the chairman of the National Economic Council in the White House.
Lindsey says the war would cost $200 billion, but once Saddam is removed as
a threat to the region, the U.S. economy will go into a giddy expansion and
tax revenues will flood the Treasury, paying off the costs of the war. The
warriors at the WSJournal editorial page have concocted charts showing the
price of oil always falls after the wars in the Middle East are successfully
concluded. The war on Iraq would be the first “supply-side war,” one
supposes.
No, the GOP War Party has determined that the people of Iraq will pay the
$200 billion it will cost to liberate them. Once Saddam gets the boot, the
Iraqi National Congress -- handpicked by Richard Perle, Paul Wolfowitz and
Jim Woolsey -- will move to Baghdad from its exile status in Washington,
D.C. Out of sincere gratitude to its puppeteer, Uncle Sam, the new Iraqi
government will denationalize the oil fields which the Ba’ath Party
nationalized in 1972-75, handing out franchises to the old cartel that ran
things back then. Woolsey told the Washington Post Sunday: “It’s pretty
straightforward...France and Russia have oil companies and interests in
Iraq. They should be told that if they are of assistance in moving Iraq
toward decent government, we`ll do the best we can to ensure that the new
government and American companies work closely with them." Woolsey said
those oil companies that do not support regime change will be cut out.
ExxonMobil and ChevronTexaco are mentioned in the story as being likely
beneficiaries because they were part of the cartel, as were British
Petroleum and Royal Dutch Shell.
In order to get access to the Iraqi proven reserves, the second highest in
the world, the oil companies that play ball with Uncle Sam’s friends in
Baghdad will have to pay significant fees to the new Iraqi regime. It is out
of these fees that the $200 billion will come, to pay for the liberation of
Iraq. Such is what warhawk Charles Krauthammer calls the new "Benign
Imperialism." The objective aims to serve the interests of the Israeli
government, which is in full support of the "regime change." But that is
only the secondary aim. The primary objective is to control the marginal
cost of a barrel of oil. The U.S. strategic petroleum reserve, which has
been filling up on $30 oil lately, can’t go much beyond a billion barrels in
the ground. In his recent Commentary article, Woolsey argued that the Arab
“oil weapon” might be defeated by using this teeny reserve to control the
marginal barrel. All along, I believe, the hawks have had their sights set
on the 110 billion barrels in Iraq. At $20 a barrel, that comes to $2.2
trillion, quite a slush fund to buy up support from Russia and France and
perhaps China, to swing their votes at the National Security Council. And if
they resist, well then their national oil companies will be cut out of the
action.
If the hawks succeeded in accomplishing these objectives, it would change
the world geopolitical map as the US, not the Arabs, would control the
world`s oil. Sound nice, but what worries old hands like Brent Scowcroft is
the explosion that would likely follow in the Arab "street." The Gulf
monarchies probably would be toppled and so would Egypt`s Hosni Mubarak. The
masterminds who have persuaded the President of the benefits of "regime
change" can afford to theorize at long distance, but the people of Israel
live in what might become a totally lawless neighborhood. It is hard to
understand why Ariel Sharon and Bibi Netanyahu are so eager for a US war
with Iraq, even taking into account the "cover" it would give them to take
care of the Palestinian issue once and for all.
Thankfully, Secretary of State Colin Powell has put things on a track that
could avert all this turmoil. He insists there be a UN resolution on Iraq,
even as the UNMOVIC inspection team gets ready for inspections. It may be
there will be two resolutions, which would be the preferred route, as the
first would direct UNMOVIC to inspect and report back. The second would
authorize the use of force if UNMOVIC reports Iraq is not fully cooperating.
The warhawks want one resolution that will trigger military action as soon
as a pretext can be found to show Iraq is not cooperating.
As for controlling the marginal barrel of oil and "defeating" the oil
weapon, remember all the United States has to do is return to a dollar/gold
standard, and the oil producers of the world will be forced back into market
regulation. Look at the dollar/price of oil from 1950 to 1971 and you will
see a straight line. It was when Richard Nixon broke the link to gold that
Robert Mundell said: "We will soon see a dramatic rise in the price of oil,
and thence all other commodities." His only error was in not seeing that the
oil cartel tried to hold the price of oil down for two years while other
producers of commodities had no cartel. Commodities climbed first, then came
the quadrupling of oil. It would be much neater to regain control of the
dollar/oil price in that manner, instead of experimenting with a "benign
imperium." It falls to Colin Powell, it seems, to save the republic. May the
Force be with him.
JUDE WANNISKI |
