There would be one important drawback: in the aftermath of war, Iraq would have almost no viable economy and no money to pay for its own reconstruction. Oil was its only natural resource and its only viable currency. Yet contractors would demand to be paid in U.S. dollars, not oil; a contractor can't spend a barrel of oil.
Treasury to the Rescue
Clearly, an intermediary would be needed; someone who could take Iraqi oil IOUs (issued by our puppet, the new Iraqi government) now, pay cash to the contractors to rebuild Iraq's infrastructure and oil industry, and redeem or sell those IOUs later to replace the cash outlays.
Enter the United States Treasury. Only the U.S. Treasury would have the wherewithal to execute a transaction of this size. The government could pay the contractors and oilfield service companies directly with funds from the U.S. Treasury and take Iraqi oil IOUs as a receivable in return. Later, after the Iraqi oil fields were producing again, the U.S. government could redeem the IOUs for barrels of oil.
How much oil? Oceans of it. Since the U.S. would be both the seller and the buyer in this transaction, the U.S. would be able to dictate its own nearly rock-bottom price per barrel for reimbursement.
For example, the price of crude oil in 2003 was about $28 a barrel. In this scenario, the seller (U.S. puppet) and the buyer (U.S. Treasury) might have "agreed" on a price of $6.00 a barrel an 80% discount. At that rate, it could take decades for Iraq to extract and export enough oil to repay its obligation to the U.S.
One consequence of this deal would be to break OPEC as a viable pricing and production cartel. With the U.S. now in control of the world's third-largest oil reserves and selling oil to itself for $6.00 a barrel, it would be impossible for OPEC to sell its members' oil to other countries at $28. Henceforth, the U.S., Canada, and maybe Saudi Arabia would set the world's oil price and production targets for crude oil. The world would buy much of its oil from or through us, which could quickly eliminate the U.S. trade deficit.
Next Page 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
2
2
1
