"This notion that the United States is getting ready to attack Iran is simply ridiculous […]. Having said that, all the options are on the table” (President George W. Bush, February 2005)

Who would have ever imagined it?

Forget about the Prophet Mohammed, Islam, the Koran, President Ahmadinejad and his nuclear program, Islamofascism and all the umpah-pah. The Mullahs do not like American Dollars anymore. As reported by Reuters UK ([http://rtv.rtrlondon.co.uk/2006-12-18/3e56a070.html]) Iran announced that it has ordered its Central Bank to start using Euros for foreign transactions, and to transforms the nation's Dollar-denominated assets held abroad into the single European currency. " The government has ordered the Central Bank to replace the Dollar with the Euro to limit the problems of the executive organs in commercial transactions," government spokesman Gholam Hossein Elham told reporters.

Coming from OPEC's fourth oil producer, this is a move that will undoubtedly have both deep economic reverberations and grave political consequences worldwide. It would certainly appear that rather than 'wiping out Israel' from the face of the planet, Iran is setting the tempo to wipe out American capitalism and influence everywhere. To understand the implications of such a move in financial affairs, one has to first revert to the importance of money in our economic systems and the effects that the ravages of inflation have over it.

Money is one of man's most amazing inventions. Imagine the difficulty of our daily lives without those metal coins and colored pieces of paper. To make any kind of transaction – from shopping for groceries to purchasing a real estate asset – you would have to find someone who had what you want and who wanted what you have, and then the two of you could barter. In a world with thousands of products, one would spend most of the time looking for trading partners and devoting very little time to actually earn an income. The alternative to avoid having to find trading partners would be for each and everyone of us to do a little bit of everything by ourselves.

But with money on the scene everything becomes more straightforward, simple and less time-consuming, and all of us can increase our productivity by and through specialization – that is doing what we do best, and then trade with our partners. As a direct and proximate consequence of our increased productivity, each of us can therefore become richer. It is easy to lose sight of the very basic economic point that we all owe a large part of our high living standards to the existence of money, its possession and the spending power that stems out of it.

But there is a catch: money works best when its value is stable over time. And this is nowhere more true than in international trade.

Economically speaking, the power of the American Dollar and its influence in economic and financial affairs worldwide was born during the United Nations Monetary and Financial Conference held at Bretton Wood, New Hampshire in July 1944. The Conference was attended by the delegates of all 45 allied nations directly and indirectly involved in the fight against the powers of the Axis – Nazi Germany, Imperial Japan and Fascist Italy, and their socio-economic doctrines. As a result of the Bretton Woods Conference, a system of exchange rate among different currencies was set up anchored on the American Dollar, which was made convertible to gold – the common denominator and measure of wealth worldwide. Thus, the American Dollar became de facto the reserve currency of the world, accepted and traded everywhere. This system remained in place until the early 1970's and it allowed countries to accumulate reserves in American Dollars, as opposed to gold.

When in 1970-1971 an economically resurgent Western Europe began demanding payment for their US Dollars, as it became clear that the American Government did not have enough gold reserves to buy back all those Dollars, the US Treasury under the Nixon Administration rather than defaulting on its payment 'de-anchored' the Greenback – that is it severed the link between the Dollar and gold. To avoid an international collapse of the American currency in world markets, however, the US treasury had to substitute gold with another valuable commodity so as to entice foreign countries to keep their foreign reserves in Dollars and to continue accepting the American currency.

Thus in 1972-73 an iron-clad arrangement was made with Saudi Arabia to support the power of the House of Saud in exchange for accepting only US Dollars for its oil. The rest of OPEC was to follow suit and also accept only American Dollars. Because the world had to buy oil from the Arab oil-producing countries, it now had the reason to hold Dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world's demand for Dollars could only increase. Even though Dollars could no longer be exchanged for gold, they were now exchangeable for oil. The Petrodollar was born.

In 2000, the first man who actually began demanding Euros for his oil was none other than Saddam Hussein of Iraq – and we all know what has happened to him. To be more specific, in fact, Saddam Hussein Abd al-Majid al-Tikriti (1937-2006), former President of Iraq, made two strategic mistakes, the second one of which would ultimately cost him his neck – literally.

Firstly, on August 2, 1990 he invaded Kuwait, a country very friendly with both the United Kingdom and the United States, and holding approximately ten percent of the world's oil reserves. Saddam, furthermore, became a real threat to Saudi Arabia as well. By invading Kuwait and threatening Saudi Arabia, Saddam breached the Carter Doctrine postulated by President Jimmy Carter in 1980, which states that "[…] an attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force. " The Carter Doctrine was later on upheld by President George HW Bush in 1989 with National Security Directive 26, which declares that "Access to Persian Gulf oil and the security of key friendly states in the area are vital to US national security […] . " The Gulf War ensued in January 1991.

The second mistake of Saddam was to start demanding payment for his oil in Euros. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business the need arose to make an example of anyone who demanded payment in currencies other than US Dollars. The punishment came with the worsening of the geo-political situation after the 9/11 attacks on the Twin Towers and an increased perception and worry about Saddam's weapons of mass destruction – which he had used extensively against the Kurds and his own citizens. President Bush's Shock-and-Awe intervention in Iraq followed, which ultimately brought about the demise of the Iraqi dictator.

Contemporary warfare has traditionally involved underlying conflicts regarding economics and resources. Today these intertwined conflicts also involve international currencies, and thus increased complexity. Current geopolitical tensions between the United States and Iran extend beyond the publicly stated concerns regarding Iranian nuclear intentions, and likely include a proposed Iranian "petroeuro" system for oil trade – the Iranian Oil Bourse ('Bourse' is the French word for Stock Exchange) . The proposed Iranian Oil Bourse signifies that without some sort of US intervention, the Euro is going to establish a firm foothold in the international oil trade.

This is so, because the Europeans would no longer have to buy and hold Dollars in order to secure their payment for oil, but would instead pay with their own currency. The adoption of the Euro for oil transactions would provide the European currency with a reserve status that would benefit the European at the expenses of the Americans. Given US foreign debt levels and trade deficit, Tehran's objective constitutes an obvious encroachment on the Dollar supremacy in the crucial international oil markets, and America can hardly afford that to happen. It is really a case of lethal economic terrorism and financial warfare, a matter of life and death.

And speaking of economic terrorism and financial warfare, it is very interesting and worth mentioning the link between oil and Euros on one side and Iranian nuclear program on the other side that Gholam Hossein Elham has made during the foresaid announcement. He has stated: " They (the Westerners) should put an end to their hostilities towards our nation and should also be aware that we are capable of achieving nuclear technology through very transparent and legal methods – something that they must respect. their time with venting hostility against this nation, otherwise they will be harmed, more so than us. "

If Iran follows up with the intention to charge Euros for its oil, the upcoming Iranian Bourse will introduce Petroeuros currency hedging in direct competition with traditional Petrodollars. More than that, in political terms, it will pit America, Israel and Sunni Islam against Iran, Syria and Shiite Islam and will fundamentally create new dynamics and competition into the largest markets in the world – those of global oil and gas trade. One of the Federal Reserve's nightmares may well begin to unfold if it appears that international buyers will have a choice of buying a barrel of oil for USD 60 on the NYMEX and IPE – or purchase a barrel of oil for € 45 – € 50 through the Iranian Bourse. In essence, America would no longer be able to expand effortlessly its debt-financing with the issuance of US Treasury bills, and the international demand and liquidity of the American Dollar would fall. This is a very good reason to go to war.

Welcome to 2007.

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