In an exclusive article for New Left Project, Christopher Doran, author of Making the World Safe for Capitalism: How Iraq Threatened the US Economic Empire and had to be Destroyed, argues that US sanctions on Iran are proving to be a major strategic blunder, further eroding US global hegemony. Doran writes:
The latest round of U.S. sanctions targets countries that do business with Iran’s Central Bank, which, combined with the U.S. and EU oil embargoes, should in theory shut down Iran’s ability to export oil and thus force it to abandon its nuclear program by crippling its economy. But instead, Iran is successfully negotiating oil sales via accepting gold, individual national currencies like China’s renmimbi, and direct bartering.
China and India are by far the most significant players, with Russia playing a supporting role. China is Iran’s number one oil export market, followed by India. Both have been paying for at least part of their Iranian oil imports with gold, and according to the Financial Times, have also been paying in their own currencies, the Chinese renmimbi and Indian rupee. As neither currency is easily convertible as international currency, they will be used to pay for Chinese and Indian imports. And on 22 June, Russian media reported that China imported almost 524,000 barrels per day in May, a whopping 35% jump from the previous month.
Doran argues that Iran is playing a similar role to Iraq before the 2003 war, posing a threat to US power in the region through erosion of US dollar dominance:
By accepting and encouraging countries to pay for its oil in currencies other than the U.S. dollar, Iran has deliberately taken the same action that, I argue in Making the World Safe for Capitalism, led directly to the U.S. invasion of Iraq. In September 2000, Saddam Hussein announced that Iraq would no longer accept the “currency of its enemy”, the U.S. dollar, and from that time onwards any country that wanted to purchase oil from Iraq would have to do so in euros. I further argue that the motivation for the United States’ invasion of Iraq was to eliminate the threats a post-U.N. sanctions Iraq posed to the key underpinnings of American economic hegemony, and to install a pro-U.S. client state and permanent American military presence in the region. The book examines how a post-U.N. sanctions Iraq either directly threatened the ongoing success of American economic power, or provided enormous opportunities to extend it.
All the same considerations are in play with Iran, starting with Iran’s direct threat to the dollar as the dominant global reserve currency. But that is just one aspect of the much larger issue: that Iran openly defies U.S. neoliberal hegemony. Like Iraq pre-invasion, Iran is not a member of the WTO, has not had any dealings with the IMF since 1984, and does not have any debt with it or the World Bank. Like Iraq before it, and evidenced by China’s oil development contracts, the U.S. and its oil companies are cut out of any future oil development in Iran. Like a post-sanctions Iraq, Iran has the potential to be the dominant power in the region and to provide development assistance on a vastly different model to that imposed by the WTO, World Bank and IMF, against which so much of the Middle East is rebelling.
The U.S. has shot itself in the foot. Far from isolating Iran, the sanctions are potentially speeding up the demise of the dollar’s dominance by forcing Iran to explore alternative currencies. That so many other countries are so willing to support Iran in direct defiance of the sanctions is what the U.S. clearly bet against. It might end up as the biggest foreign policy blunder in American history. Either that, or yet another war.
Visit New Left Project to read the article in full.
How Iraq Threatened the US Economic Empire and had to be Destroyed
A fresh take on the causes of the 2003 Iraq war. Provides a radical new perspective based on analysis of trends in global political economy.
“A significant contribution to the scholarly literatures on neoliberalism and the US intervention in lraq. Among the most important claims is that neoliberal governance can assume a distinctly militarised form, as it has in Iraq. … Insightful and compelling.” – David McNally, York University, author of Global Slump: The Economics and Politics of Crisis and Resistance
“Doran pulls no punches in revealing the abuses of corporate and state power. His emphasis on the intimate connection between economic and military interests makes for compelling reading. This is a powerful account of how the expansion of the ‘market economy’ into unwelcoming territory is driven by an iron fist.” – Professor Frank Stilwell, University of Sydney