The right to kill women?

We have four days to make sure the Pakistan Parliament feels the world is watching and we won’t go away until protection from honour killings is finally removed from Pakistan’s law. Let’s make sure attention to Saba’s story at the Oscars is massive, and then take our call to Pakistan with a delegation of influential leaders the PM and his  daughter respect. Sign and share now to get the word out everywhere:

Dear friends across the world,

For marrying the man she loved, Saba’s own father shot her in the head, stuffed her in a bag, and dumped her in a river. Then he walked free because of a loophole in Pakistani law that allows  men to commit so-called “honour killings”. But, incredibly, Saba survived and she has created a ray of hope to finally stop these outrages! We have four days to help her.

Saba’s story is now an Oscar-nominated documentary, and it’s all over the news. In response, the Pakistani PM just promised to end these heinous crimes, and sources say his daughter Maryam, a rights advocate, is overseeing the reform. But activists fear that the bill will only be passed if the Oscar buzz is massive and public pressure is sustained.


Previous Share Next How Does the US Empire Control the World? Petrodollars Rule, Ok! (Part 1)



The petrodollar is the only life support machine left for the U.S. and this is precisely why Washington goes after any country that tries to destroy it.(1)


The United States now exercises control over most of the world and threatens countries it does not directly control. This was not always true. When the US was forced to retreat from Saigon at end of the Vietnam War, it was divided internally and opposed by many European countries who are now its closest friends. While the Chinese embrace of foreign investment and a capitalist economy in the late 1970s and the collapse of the old Soviet Union in 1991 have both helped to change the world we live in today, the most important dynamic behind the consolidation of the US Empire in recent decades has been little understood, particularly by its critics. The US has fought several wars for oil, but this focus on the struggle for oil and gas as commodities has masked much more important developments. The real force that has propelled the US into its present position is not just control of oil and gas, but the control of the money that must be paid for them, known as Petrodollars.

It is impossible to overstate the importance of the Petrodollar system, organized by the US in the 1970s. Thanks to a monopoly price for crude oil and the requirement that crude oil be paid for in US dollars, billions of dollars flow year after year from oil producing countries to the giant US banks. This huge flow of cash supports the three pillars of US power today: the predatory Western financial system, the massive US military presence, and the monopoly price for oil paid for in US dollars.

This article will examine how the Petrodollar system was established and the consequences of this system. Many of the things which are taken for granted in the political and economic world today can be traced back to this system. We will see that it has changed the nature of the capitalism that has existed for at least 150 years. It also throws light on the nature of the conflict between the US Empire and the leaders of the BRICS, Russia and China.

The US has been working to control the world for at least 100 years. In 1900 its chief rival was the British Empire, which had been dominant in the world since its defeat of Napoleon’s France. However, as explained by the Anonymous Author (AA) of Chapter 1 of The WikiLeaks Files, the US had a different strategy than the policy of territorial control used by the previous European empires from Spain and Portugal to the British. The US did not want colonies, but governments that were open to investment by US companies. They wanted access to the capital, labor and resources of all countries.

AA describes the US policy as “liberal internationalism”. It was begun by Woodrow Wilson and continued by Franklin D Roosevelt and his successors. The policy was based on the idea that military, political and economic intervention in other countries is justified if it produces

“a global system consisting of liberal-democratic nation-states, connected by more or less free markets, and ruled by international law. In this world-view, the goal of achieving a liberal world system trumps the commitment to state sovereignty. The US sees itself as the natural vanguard of such a global order, as well as the chief bearer of any right to suppress state sovereignty in the pursuit of liberal goals.”(2)

This international system we now understand as the “Free World” is free because the US corporations, and the corporations of most other countries, are “free” to invest in any and all countries. When they existed, the main opponents of the “Free World” were the “communist” countries of the USSR and later the People’s Republic of China. They refused to allow any capitalist investment by any country within their territory.

For a number of different reasons in the early 1970s the US appeared to lose its dominant position in the Free World. The wealthy US was virtually broke after wasting its money in the Vietnam War which they eventually lost. The ruling elite were also divided by the war. This is why Daniel Elsberg, who released the Pentagon Papers, was and is still seen as a hero in the US, while Julian Assange, Chelsea Manning and Edward Snowden are seen as traitors to be punished by execution. The US elite are no longer divided. They have all agreed to the current US foreign policy, so criticism is not allowed. The actions of all these four people are essentially the same, but the political climate in the US has completely changed.

The other problem the US faced was that by the 1970s its economy was in a very different relative position compared to where it was at the end of World War II. In 1945 the US had the only intact industrial economy in the world. Between 1945 and 1970 the world GDP grew by an average of 4.8% per year, and the total volume of exports rose 290% between 1945 and 1968.(3) But the money wasted during the Vietnam War took vital investment funds from the productive economy.(4) Further the industrial power of the two defeated enemies, Germany and Japan, had grown so much that the US was no longer unchallenged as the dominant industrial power.(5) Just when it seemed the US could loose its dominant economic and political power, the Petrodollar System was introduced and created the conditions for the US Empire we see today.

To understand the way the Petrodollar system works we need to look at how the US dollar serves as a “reserve currency” for international trade.Trade between different nations faces one obvious problem. We know Australia sells coal to China.(6) How is China going to pay for Australian coal? In Chinese money, known as renminbi, the basic unit is the yuan (sign: ¥). But what good are ¥100,000 in Australia, where everything is bought and sold for Australian dollars? If Australia and China always traded goods with each other of the same value over a year, there would be no problem. However in most cases of international trade this does not happen. When we realize that there are over 100 different countries with more than 100 different currencies, it might seem that international trade would be impossible.

Actually this problem was solved over 200 years ago. Trading nations used gold to measure the value of imports and exports, and a trade imbalance was settled with transfers of gold bullion. Then the British Pound Sterling came to be recognized as a “reserve currency” instead of gold because the Bank of England would exchange Pounds for gold at a fixed exchange rate. This meant that trading nations could value their commodities or services in Pounds and pay debts or receive payments from other countries in Pounds because the Pound was “as good as gold”. After the end of World War II, the US dollar replaced the Pound as the world’s reserve currency. It was given this status by treaty following the Bretton Woods Agreement, formulated in July 1944. As a part of this agreement the US agreed to exchange the US dollar for gold at the rate of $35 per ounce of gold.(7)

However in the 1960s the US created more and more money to pay for the Vietnam War and President Johnson’s War on Poverty. This led to a situation in which the volume of US dollars in circulation was greater than its supply of gold. France and a few other countries recognized this and began asking for gold in exchange for US dollars. The US supply of gold dropped from 20,000 tons in 1958 to 8,000 tons in 1970. At this point the US could have continued to honor the gold standard for its currency by re-evaluating the US dollar at a higher exchange rate. It could have continued to exchange its currency for a different quantity of gold.

Instead,the US decided in September 1971 to go off the gold standard. This meant that they would no longer exchange the US dollar for any amount of gold. Tyler Durden of the blog Zero Hedge estimates that in 1971 the exchange rate of US dollars for gold would have altered from the original $35 per ounce to $400 per ounce.(8) Now gold is trading in a range from US$1850 to US$1870 per ounce, and some think it is being artificially forced down by the large US banks. Is gold now worth more than it was in 1944, or is the US dollar worth less?


The US set up the current world wide financial system in 1971 after they abandoned the gold standard and stopped exchanging US dollars for gold. In this new system the US dollar is no longer derives its value from a specific amount of gold, something which has a use or value independently of the financial system. Instead the US dollar became a “fiat” currency. Fiat currency is money which derives its value from government regulation or law rather than something like gold or silver which has non-monetary value. In this case it derives its value from the determination of the US to require any purchase of crude oil anywhere in the world to be paid for in US dollars. The system has been explained as follows: “Today’s money is not backed by gold. It is now backed by nothing at all, except our trust in the monetary system.”(9) However this is a rather superficial assessment of the workings of the US dollar as a fiat reserve currency for world trade. Here we see a more sober account: “This ‘trust’ itself is backed by coercion (the world’s dependency on oil) and ultimately by the US military.”(10) In individual countries a government can enforce the use of its fiat currency by law. There is no such law that covers the world as a whole, so in the end the US must use political and/or military force to make countries use the US dollar for international trade in oil and other items.


The role of reserve currency for the US fiat currency came about because of the Petrodollar system. It was put together during the “oil crisis” or the “Energy Crisis” in the early 1970s. In response to the US move to break the connection between the dollar and gold, the Organization of Petroleum Exporting Countries (OPEC) began discussing the viability of pricing oil on a basket of different currencies. However the US quickly realized that in such a system the US dollar would no longer be the one, dominant currency for world trade. It would cease to be the world’s reserve currency. Instead the US suggested to Saudi Arabia that all its crude oil must be paid for in US dollars, and eventually all OPEC members agreed.(11)

Around this same time there was an increase in tension and military confrontation between Israel and the Arab states. Because of US aid to Israel, OPEC raised the price of crude oil, cut production levels and then introduced an oil embargo on the US and other countries in 1973. The price of crude oil rose from $3 per barrel to $12 per barrel, and increase of 400%.(12)

While the world saw these events arising from an antagonism between OPEC and the US, many believe that the situation was manipulated by the US so the Arab countries in OPEC would take the blame for the massive increase in the price of crude oil. In fact, the major oil companies worked with OPEC to raise the price of crude, which meant that they would also increase their profits. At the same time the US government also agreed to allow the major oil companies to form a world-wide monopoly or cartel for crude oil. These policies have continued until the present day. This means that there is no “free market” for oil. The price of oil is set worldwide by the major oil companies. With this policy the nature of worldwide capitalism was changed. The key virtue of capitalism is supposed to be “free” competition between independent firms taking risks which will drive innovation and lead to falling prices. Under a monopoly system, there is no risk, there is no competition, and nothing to stop ever increasing prices. Politicians love to praise the virtues of capitalism, but never explain that we no longer live in a real capitalist system.

F. W. Engdahl describes a secret meeting of the Bilderberg group in 1973 where the major banks in the West learned how the flow of cash from OPEC countries would be managed.

“In May 1973 (…) a group of 84 of the world’s top financial and political insiders met at Saltsjobaden, Sweden, the secluded island resort of the Swedish Wallenberg banking family. This gathering of [the] Bilderberg group heard an American participant, Walter Levy, outline a ‘scenario’ for an imminent 400 percent increase in OPEC petroleum revenues. The purpose of the secret Saltsjobaden meeting was not to prevent the expected oil price shock, but rather to plan how to manage the about-to-be-created flood of oil dollars, a process U.S. Secretary of State Kissinger later called ‘recycling the petrodollar flows.'”(14)

The world’s major banks had no interest in stopping these huge price increases. Instead they were rubbing their hands with glee because of the huge and continuing flow of dollars which was going to be deposited in their vaults.

The Petrodollar system requires the OPEC countries to reinvest their profits from the sale of overpriced oil in U.S. debt securities held in Western banks or US government securities. (Some of the money is spent in arms deals including payments for US military bases in the Middle East.) For example, 70% of all Saudi assets in the United States were held in a New York Federal Reserve account in 1999.(15) The money is then invested in US government securities which allows the US to create more dollars. These are then loaned by the major banks of the West or the International Monetary Fund (IMF) to less-developed countries. The less-developed countries use these loans to buy the oil and other goods. The process of recycling is complete when Western banks and the IMF obtain cash and investments from oil exporting countries. The system of “recycling” petrodollars completes itself in four transactions:

1. Profits from the sale of crude by oil exporting countries (OPEC) are invested in Western banks.
2. Western banks and the IMF loan money to less developed countries.
3. Less developed countries use money loaned to them to buy oil from exporters.
4. Profits from the sale of crude by oil exporting countries are invested in Western banks. (This completes the recycling.)(16)

The result of these changes is summarized here:

“The events surrounding the oil crisis of 1973 have helped shape the world’s power relations in favor of global financial institutions, big oil companies and the military sector. The rush toward increased structural concentration for the control of economic activity is driven by high oil prices and the recycling of the oil producing countries’ surpluses into U.S. debt securities and arms deals.”(17)

There are at least three ways that the Petrodollar system works for the US to give it power over all other countries. The Petrodollar system puts all the profits from the sale of crude oil in the vaults of the major US banks. With much more money to invest or loan, the US banks have a clear advantage over the investors in other countries. Further, any country which does not have enough export income to buy oil must borrow US dollars from the IMF or the major US banks. Because most countries must import oil to function, the lenders can set any conditions on these loans they wish. These countries have no choice other than accepting any conditions. This certainly helps to create the well known poverty and underdevelopment in the 3rd world. These countries are simply bled dry by the investment vultures who run these institutions.

But the Petrodollar system also gives US government a significant advantage. All other countries need to focus on their balance of payments to make sure they have enough international currency to cover the cost of imported goods. However the US can simply print more money to pay for what it wants. Why is this? Countries want to have US dollars because they need US dollars to trade with other countries. As explained above, this is the role of a reserve currency. Without a reserve currency of one kind or another, world trade, and trade in oil and gas, would simply grind to a halt. Since there is no alternative to the US dollar, and everyone must have dollars to export or import goods, there is no practical limit on the amount of US dollars they create. This may seem insane, but this is how the world economy has worked since the 1970s.

So why is the US dollar still the reserve currency for world trade? Tyler Durden explains the even though the Federal Reserve Bank in the US has inflated the value of the US dollar so it loses value against other commodities, there has been no real alternative:

“The German Deutsche mark held its value better, but the German economy and its trade was a fraction that of the US, meaning that holders of marks would find less to buy in Germany than holders of dollars would find in the US. So demand for the mark was lower than demand for the dollar. Of course, psychological factors entered the demand for dollars, too, since the US was the military protector of all the Western nations against the communist countries.”(18)

Durden is quite aware of the power the US has from the dollar being the reserve currency and the way it is being used: “We need to look at the concept of a reserve currency differently, because it is important. We need to look at it as a privilege and a responsibility and not as a weapon we can use against the rest of the world.”(19)

When the US abandoned the gold standard for the US dollar and forced OPEC to sell all oil for US dollars, they forced all countries needing oil to acquire dollars, either by trade or by loans from US banks or the IMF. The aim the Petrodollar system is to force the world to accept the US dollar as the reserve currency, thus allowing the US to occupy the uniquely powerful position this creates. All countries must balance exports and imports except the US. Furthermore, the profit from the sale of oil by OPEC ends up in US banks. We will see in the next sections how the vastly increased power of these giant banks have totally transformed both economic and political life around the world.


US abandoned the gold standard and introduced the US dollar as a fiat currency.
Multinational oil companies and OPEC agree to fix world oil prices.
Oil prices increase by 400%.
US allowed the creation of a world wide oil monopoly.
Western banks flooded with dollars paid to OPEC countries for their oil.
All countries must have dollars for oil and any other international trade.
Western banks can force countries which borrow dollars to change their policies to suit the banks.
The US can print money but not suffer the consequences all other countries would.
The US government, major oil companies and biggest US banks are the winners in the Petrodollar system.


We all know that the world has changed dramatically since 1971. However even few of the opponents of the now all powerful US Empire realize that most of what we have seen in the last 40 years can be traced back directly to the introduction of the Petrodollar system. In Part 2 and Part 3 of this series we examine many of the consequences we all live with today. The topics to be discussed are:

1. Dominance of Banks and Finance Capital
2. The Dominance of Finance over Production of Things
3. Examples of Traditional Capitalism and the New Financial “Entrepreneur”
4. The Dominance of Borrowing Over Saving
5. Marx and Classical Economics on Earned and Unearned Income
6. Is There a Return to Serfdom in the Capitalist World?
7. Dominance of US Banks Over Other Countries and their Leaders
8. The Change in Investment Strategies by International Investors
9. Rapid Concentration of Wealth
10. Global Push for Privatization
11. Global Push for Low Tax and Austerity:
12. Global Push for “Trade” Agreements:
13. Increase in Speculation
14. Speculation against Currencies as Economic Warfare

15. Bank Fraud before 2008 Was Punished
16. Crime and Corruption in 2008 with No Penalties
17. Petrodollar System a Disaster for 3rd World
18. Huge US Military Build-up
19. Energy Wars: Unocal Pipelines through Afghanistan
20. Energy Wars: Pipelines through Syria
21. Energy Wars: Iraq Challenges the Petrodollar System
22. Energy Wars: Petrodollars and Libya
23. The Financial Battle Between the US Empire and Russia and China: Can there be an Alternative to the Dollar as a Reserve Currency?

A1. Multinational Oil Companies and OPEC Agree to Fix World Oil Prices and Oil
A2. Who Are the Winners in this New System of Petrodollars?
A3. “Australian” Banks Are a Foreign-Owned Monopoly


2. The WikiLeaks Files (TWF), London, Verso Books, 2015, p. 25.
3. TWF p. 119.
4. Ibid.
5. Ibid.
6. This is just an example. Australia now conducts some of its trade with China in yuan.
9. Smithy, WIZARDS OF MONEY, 1999-2002, Ch. 1. How Money is Created,
10. Letter of Jack F. Bennett (assistant secretary of the U.S. Treasury) to Henry Kissinger, February 1975. ‘Subject: Special Arrangements for Purchase of U.S. Government Securities by the Saudi Arabian Government.’ International Currency Review. Vol. 20, no. 6, January 1991.
14. Engdahl, F.W., A Century of War: Anglo-American Oil Politics and the New World Order, London: Pluto, 2004, ISBN 0-7453-2309-XF, p. 38.
15. Spiro, David E., The hidden hand of American hegemony: petrodollar recycling and international markets, Ithaca, NY : Cornell University Press, 1999.

Tags: archive, petrodollars, usa vs russia/china

How Does the US Empire Control the World? Petrodollars Rule, Ok! (Part 2)