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Aussie, Aussie, Aussie, oil, oil, oil

By David Chibo - posted Friday, 3 April 2009


Last week marked the sixth anniversary of Australia's involvement in the 2003 invasion of Iraq. During that time the numerous reasons cited by the Bush administration for the invasion of Iraq - ranging from Saddam's link to al-Qaida to Iraq's acquisition of WMDs - have been debunked in turn.

Yet despite all the recriminations and enquiries the biggest question of them all remains unanswered. Why did Australia assist the US, in the 2003 Iraq war, and more importantly who profited from this disastrous foreign policy decision?

Brigadier Justin Kelly, the Australian director-general of future land warfare, in April 2005, was one of the first to dismiss the central tenets of the Iraq war and the war on terrorism explaining that the "war" part is all about politics and terrorism is merely a tactic.

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A view shared two years later by Britain's High Commissioner to Australia, Helen Liddell, who explained that Britain's involvement in Iraq was also not prompted by terrorism. "Certainly we are engaged in a war on the streets in Iraq against terrorism, but our raison d'etre for our involvement in Iraq has not been about terrorism.

The real reason for the war was eventually alluded to on July 5, 2007 when then Australian Prime Minister, John Howard, released a report arguing that Australia must stay in Iraq not just to support the US but also because of our "energy dependence" on the strife-torn country. This view was further reinforced by then Defence Minister, Brendan Nelson - who would later retract his statement - during an ABC radio interview, "Obviously the Middle East itself, not only Iraq, but the entire region, is an important supplier of energy, oil in particular, to the rest of the world."

A view reaffirmed by Alan Greenspan, the recently retired head of the US Federal Reserve, later that year. In media coverage in advance of the publication of his memoirs, he is reported to have written that, "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."

In May 2008, during his election campaign, Republican candidate John McCain also implied that the Iraq war was about oil when he inadvertently stated, "My friends, I will have an energy policy that we will be talking about, which will eliminate our dependence on oil from the Middle East that will prevent us from having ever to send our young men and women into conflict again in the Middle East". An opinion he was forced to clarify the following day.

Why oil is so important to US interests is best described by economist Henry CK Liu who was arguably the first to coin the term "dollar hegemony". Dollar hegemony describes a geopolitical phenomenon that emerged after the 1973 oil crisis in which the US dollar, a fiat currency since 1971, continues to serve as the primary reserve currency for international trade.

The US achieved this by switching from the Bretton Woods regime, established in 1945, which required a fixed exchange rate regime based on a gold-backed dollar, to an OPEC oil-backed dollar in 1973. This tectonic shift in the US exchange rate from US gold reserves to Middle Eastern black-gold reserves allowed the US dollar to become a fiat currency and the primary reserve currency internationally.

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Henry CK Liu continues, "This was the price extracted from defenceless oil-producing nations for allowing them to nationalize the Western-owned oil industry on their soil. As long as oil transactions are denominated in fiat dollars, the US essentially controls all the oil in the world financially regardless of specific ownership, reducing all oil producing nations to the status of commodity agents of dollar hegemony."

As a result of this monopoly, in recent years the United States has absorbed about 85 per cent of total global capital flows (about $500 billion each year) from Asia, Europe, Russia and the Middle East.

Any nation that seeks to break this oil denominated monopoly becomes a threat to US economic interests and may find itself vilified, destabilised or attacked as Saddam Hussein found to his dismay after he began selling Iraqi oil under the UN's Oil-for-Food program, in Euros in 2000.

After the invasion a Financial Times article dated June 5, 2003 quietly confirmed the return of the previous economic status quo, "The tender, for which bids are due by June 10, switches the transaction back to dollars - the international currency of oil sales - despite the greenback's recent fall in value."

The main reason for the US's invasion of Iraq is therefore not exclusively about oil. More specifically it's about controlling the US black-gold reserves and keeping oil denominated in US dollars in order to protect US dollar hegemony. The difference is subtle but of essential importance in understanding how the US maintains its superpower status and controls the world's economy.

Nations that had not supported the Iraq war were economically punished by the US. During trade negotiations with New Zealand at the 108th Congress, on October 12, 2004, administration officials highlighted several political and security impediments to a potential FTA, including New Zealand's refusal (PDF 114KB) to support the US in the Iraq war.

Chile, one of the members of the UN Security Council that had voted against the Iraq war, was also punished. Chile and Singapore had both been on the verge of signing a FTA with the US. The deal that had initially been bundled with a similar (FTA) pact for Singapore was "unbundled".

In contrast the Australia-United States FTA was signed on May 18, 2004. One of the few dissenting members of Congress who opposed the US-Australia FTA was Marcy Kaptur, from Ohio, who revealed the main reason for the FTA, "You might ask the question, would we have this agreement before us if Australia did not have troops in Iraq?"

This was later reinforced by Robert Van Gorder, vice-president of the Washington Management Group during his trip to Australia in October 2005. He explained that Australia's support for the US in the war in Iraq would help Australian corporate interests. "It is very helpful, especially under this administration," he said. "Companies from France are still having trouble."

The main Australian corporate interests that benefited from Australia's foreign policy can be found in the Australia United States FTA Business Group (AUSTA). Key members include News Ltd, Westfield Holdings, the Business Council of Australia, the Minerals Council of Australia, the Australian Chamber of Commerce and Industry, BHP Steel, Visy (Pratt Industries) and Southcorp.

One of the key members of the group is none other than Rupert Murdoch's News Ltd which distributes the best-selling newspaper in most Australian capital cities. Murdoch's support for the Iraq war is obvious from his media empire's 175 newspapers. A summary of these newspapers' editorials reveals all actively supported the Iraq war.

Six years later we can now confidently state that the primary reason why Australia helped in the invasion of Iraq was to assist the US in maintaining its economic hegemony through the control of Middle Eastern black-gold reserves and the continued selling of Middle Eastern oil in US dollars.

In return for its military and moral support Australia secured the coveted FTA for its corporate interests - which included a significant portion of the compliant media.

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First published in ABC Unleashed on March 27, 2009.



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About the Author

David Chibo is an Australian-born Iraqi from the Assyrian-Christian community. He spent six months prior to the Iraq invasion working in northern Iraq with local aid groups delivering humanitarian relief as well as providing technical training to the local population. He is also a Melbourne-based freelance journalist for the online Assyrian magazine Zinda and a frequent writer on Orientalism. He is currently working on a thesis - due to be published in an archaeological athletics journal called Nikephorus - titled Gilgamesh Games (See www.gilgameshgames.org) that seeks to trace back the origins of the ancient Greek Olympic Games back to their precursors in ancient Iraq.

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