Amen.

It sounds like quite an ambitious agenda given that none of those goals has so far even been given a fair hearing.

I am not sure for example that Kim Sun is willing to give up power in N.Korea for a broad based amnesty and two civilian reactors? My guess given his past actions is no.

The European Union has so far not been able to negotiate, peacefully with Iran to give up their nuclear ambitions. Clearly we are not talking civilian reactors here, but the pursuit of nuclear weapons á la Pakistan, India and N. Korea. If that is their goal they should withdraw from the NPT and get on with it.

I agree the world cannot rely on China and the USA as the consumers of last resort and only pillars of economic growth as per my comments in the Survey of the World Economy forum. No argument here.

The UN must be reformed and I do not think you can just blame this on an obstructionist USA. France, China and Russia must especially share the blame for a disfunctional UN as well as all countries that follow strictly nationalist policies at the expense of broad concensus.

I am not familar with the protocol you reccommend every nation sign? Is this a guarantee of oil supplies? What about corruption? It is fine to allocate oil for emergency services in each country for example, but who polices that the oil is not stolen and sold on the black market to enrich corrupt politicans and their cronies such as in Zimbabwe?

Although I share your desire to unwind global fiscal imbalances and think that America must urgently address this issue, your proposal is one that I cannot agree with for the simple reason that I do not share your admiration for the strength and stability of the euro because although there is a stabillity charter governing debts & deficits many countries like Italy, Greece, Spain and Portugal lied about the state of their finances to join the euro, benefitted from substantially lower interest rates in the euro, but now are finding that they cannot control their debts & deficits anymore either. Simply not enough economic convergence before they joined the euro. And this has also meant that even countries like France & Germany have also had problems keeping their debts & deficits under control. Even if you do not agree with me on any other topic, you have to address the economic problems in the eurozone and admit that their external imbalances are on the whole no worse than the US'?

But, even if I were to accept your premise that America's imbalances are unsustainable and Europe's are an admirable goal of debt & deficit control not withstanding their structural weaknesses, I am wondering how you envision holding dollars to euros at par in a basket given their different business cycles, growth rates, tax rates, interest rates and other differences in the two economies? If the ERM did not work within Europe, I do not see a basket working between the eurozone and the USA? I think a currency union would be disasterous. Who wouldn't want to borrow at European levels and invest in a faster growing US economy? Afterall, is that not what is happening in Europe today? Spain, Ireland, Portugal and other countries using Germany, Holland & Belgium's stability to borrow more cheaply and then invest in faster growing areas? You would have to clarify this for me please?

Well, I have to dash. It's been nice. Sure, I'll buy your book. I'll be interested to know how you answer these questions? Cheers.

MrBill,
You stated:

"I'll buy your book. I'll be interested to know how you answer these questions?"

Thanks, you were a "hard sell." but I think many of the answers to your questions are in Chapter 1 and 7.

Briefly, I think the imbalances in the US are far worse than the EU (trade balance, systemic budget deficits and overall foreign debt in the US is incomparable to other industrialized economies). Most frustrating is that the EU uses far less energy than the US - while it still maintains a high quality manufactuirng base (& positive trade balance), and is moving foward rapidly and earnestly with renewable energy implementations. We have neither of these structural advantages, and that will make the 21st century far different than the 20th century.

Secondly, I completely reject the premise that the US enjoys a faster "growing" economy than the EU. The main thing "growing" in the US is not the real economy, but rather, debt financing. I think the average US worker is now $350,000 in debt (aggregated debt levels). I agree with Fingleton that the service sector/IT economy is not the future, as real wealth creation is found in manufacturing and production...and both the EU and China have done a better job of preserving the real means for real economic growth.

Furthermore, the methodology used by the US gov't to calculate unemployment is also fundamentally flawed, and our umemployment is actually similar to Germany. I read somewhere that using the current unemployment rate methodolgy would have cut the reported unemployment rate back 1933 in half. Why? Because after 12 months the unemployed dissappear from the states. Other statisitics such as GDP are flawed too, but again, this is all outlined in chapter 1.

I am not alone in my comparison of the US vs. EU eoconomies, as OPEC, the BIS and IMF, all agree that the US is structually imbalanced, while the EU, depsite its numersous problems, is still "more balanced" than the US (quote from an OPEC exec). However, to me the larger question is: Who uses less hydrocarbon energy - yet still produces viable goods and services - and who can weather the iminent energy crisis better?

BTW, if you are still in Cyprus, I'll be on Greek Public TV next month (They interviewed me on Sept 26th. Send me a PM if interested, as perhaps you have access to that TV station)

I am not sure about Greek TV in Cyprus. I think this is my pennance on earth for my sins? I only get a few channels, and they are all of poor quality, so I am forced to watch CNN, Euronews & CCTV most of the time. Not a very varied diet considering CNN & Euronews often report the same stories and they repeat every hour on the hour. CCTV gives an interesting slant of events. Much like reading news at http://english.aljazeera.net you just get a non-US centric perspective of current events.

In any case, I have posted a full reply to your posting under a Survey of the Global Economy as it is quite long and may not belong here under books & media reviews. However, you can find it at




A Survey of the Global Economy

Thanks.

I just read Petrodollar Warfare, and was just as scared as when I first read The Party's Over. The economic implications of Peak Oil are about twice as scary. I got the feeling that the US was like the kid who's father owned the car dealership. While it was good times the kid always had a new car. Now dad's selling the dealership. The good times are over. The reason we could use oil and gas with such wild abandon was that we were the dealers. Now there is a bit of competition coming for the dealership. I am worried about the economy now, and not just the impending oil crisis. The cost of everything is rising too fast. Is it the dollar tanking? Maybe the rest of the world will take us out of the equation just to preserve the oil that's left. Especially if we take on Iran over the oil bourse. Great...

Revi,
Thanks for the kind words about my book. I feel it is vitally important that people understand the underyling reasons for current geopolitical tensions, and with your knowledge, you will be far more immune to the "shows and feights" of political leaders as they attempt to whip the citizenry into a frenzy for more oil depletion or oil currency related warfare. If things should begin to unwind into a more sustainable enviroment, you will be amoung the "early adoptors" that recognize the necessay changes.

I also try to make the point in the book that an alternative geopolitical course is still possible, but we as citizens must give the politicians the needed impetus for the sacrifices that are required, especially here in the U.S. Bottom line: We need to once again live within our means from an energy and fiscal perspective, as that is the fundamental message of Petrodollar Warfare. Thanks again for your comments about my book.

Opps, I was not logged in previously, but it's just me, Petrodollar...

Why didn't you say so in the first place?

We're certainly living within our means, but it seems like everybody else isn't. We live in a smallish house that's almost paid off, have solar hot water, a woodstove and a woodlot to feed it, and have shrunk our cars. It still seems like the wolf is at the door. Well, he'll just have to wait. I hope we can hold it all together until the mortgage is paid and the kid is off to college. If the dollar doesn't tank too badly we might just make it...

William Clark, I just sent you a PM with an important, off-line question.

Questions for William R Clark:

1.) Do you know the name of the German Software Company that wrote the software for the Iranian Oil Bourse to function? Is it SAP? I went to their site and typed Iranian Oil Bourse in their search block and came up with this:

http://www.sap.com/industries/oil-gas/index.epx

Not exactly a match, but they are involved in that industry.

2.) The bourse is suppose to function on 2006-03-20, but will there be any test transactions before that? Won't the software have to be proven before the bourse functions?

3.) How many oil producers beside Iran will use the bourse? I'm sure some will sign on later, but what about at first?

4.) If the Bourse is a success, then what percentage of oil sales will be in euros by the end of March 2006?

5.) Do they have any contracted customers at present?

Thanks

Euric,
Those are good questions. However, I do not know the answers to your specific questions. I doubt that anyone knows those answers except for the entities immediately involved with the bourse.

Only time will tell, but my guess is that many of the European Union will use the bourse (certainly Italy), and depending on their trade relationship and currency reserves with the US vs. the EU, some Asian countries are likely to participate too. The Asia Clearing Unit (ACU) already pays Iran with euros for its oil, even though the price of the trades is dollar-denominated.

According to the CIA World Fact book, these are Iran's main export partners:

Japan 18.4%, China 9.7%, Italy 6%, South Africa 5.8%, South Korea 5.4%, Taiwan 4.6%, Turkey 4.4%, Netherlands 4% (2004)

As for total trade volumes, all I can say is that Iran supposedly has 10% of the world's oil reserves, contributes about 5% of total oil exports (almost 4 mb/ls global), and has the 2nd largest natural gas reserves in the world (after Russia). If Saudi and others begin utilizing the bourse (per earlier articles), and Russia too, then a substantial part of global oil trades could be conducted via the bourse...But like I said, only time will tell, and dynamics are unpredictable.

Iran supplies about 2.4 mbpd to world markets

Non-EU alligned countries & interests

Japan imports 550.000 bpd and have $2 billion invested in the Azadegan oilfield

China imports 300.000 bpd have have indicated a willingness to invest up to $2 bio in the Yadavaran oilfield

India imports 150.000+ bpd from Iran and has $22 bio LPG imports lined-up from Iran over the next 25-years. India is participating in a $7 bio pipeline between India and Iran via Pakistan

Russia currently has no sizeable investments in Iran for the obvious reason that it would jeaopardize its relations with Iraq where it has significant oil & gas interests some of which are in dispute.

Russian oil companies, such as Lukoil, publish their public accounts under international accounting standards in dollars, so any euro sales would introduce foreign exchange risk and if hedged become on balance sheet liabilities and therefore potentially lower their ROE and therefore share price.

Royal Dutch Shell buys about 200.000 bpd of Iranian crude and has $1 bio invested in the Soroush/Nowruz oilfields. RDS hopes to invest in LNG in Iran along with Spain's Repsol.

Korea refines about 100.000 bpd of Iranian crude and has an investment of $1.6 bio in the South Pars gas field. Given America's security guarantees to S. Korea they would not likely jeopardize this arrangement while N. Korea is busy building & test firing warheads.

Turkey consumes 140.000 bpd of Iranian crude, but as a member of NATO and a US partner they are also unlikely to back an Iranian plan despite their EU membership aspirations.

EU alligned interests

Italy's ENI lifts +/- 60.000 bpd of Iranian crude and has $1 bio invested in the Darkhovin oilfield. Italy was a member of the coalition of the willing in Iraq and is closely alligned with the UK and the USA.

Spain's Total imports modest amounts of Iranian crude oil. It hopes to invest in an LNG project with RDS. It is involved in projects in Sirri, Doroud & Balal oilfields as well as the South Pars gas field along with Russia's Gazprom and Malaysia's Petronas.

source: Reuters & Bloomberg

Other OPEC producers such as Saudi Arabia, UAE, Nigeria and Kuwait are unlikely to follow Iran's lead for religious and political reasons. According to a recent article in The Economist ME purchases of US treasury bills are falling and much more oil wealth is being invested locally in Middle Eastern economies as well as invested in non-US stocks & bonds. In particular the Dubai stock exchange has become an attractive alternative for dollar investments outside of the USA for security reasons. Although there seems to be no widespread exodus from US denominated assets (at the present).

source: Recycling the petrodollars

RE Russians continuing to price oil in dollars

So while no news is no news on the status of the IOB, it looks like the NYMEX is set to go head to head with the ICE for their share of the electronically traded market? I have not traded the Emini on the CME, but other traders tell me they like it? I prefer electronic trading in any case. Faster execution and more price transparency. I have never been happy with my fills on the NYMEX open outcry, although they have been the acknowleged price & volume leader. They obviously are feeling the heat from the ICE which continues to creep up in volumes and is now a serious alternative to the NYMEX. However, if the REBCO, the new Urals blend contract, and the NYMEX Brent are successful the ICE may have to come up with something new? Perhaps a contract in euros?

If what you say here is true, then using the petrodollars for anything other then purchasing US debt (treasuries) is just as bad as switching to a different currency for the sale of oil. In essence, the users of petrodollars are in fact cashing in their dollars for goods and services. forcing the US Central Bank to keep raising interest rates to keep the dollar from losing value. The euro has dropped in value in recent weeks because the ECB still has low rates. Now, they are talking of raising them too.

There doesn't have to be a mass selling of dollar assets to bring down the petrodollar. Bringing down a super-power has to be done delicately so as not to bring everyone else down with it.

Is there a website that shows how much of the treasuries are being purchased either daily or monthly?