Progression/Regression of the Daughter of the East

The following are some of the key events in her career:

April 1979: Benazir Bhutto is imprisoned just before her father, Zulfiqar Ali Bhutto, is executed by Gen Zia ul Huq. She is sentenced to five years in jail.

1984: Bhutto is allowed to leave for London for health reasons after spending most of her years in prison in solitary confinement. She reorganises her father’s Pakistan People’s Party (PPP) in London and takes over its leadership.

April 1986 : Bhutto returns from exile in London and holds political rallies, attracting massive crowds.

Dec 6, 1988: Bhutto becomes the first woman prime minister of a Muslim nation after winning parliamentary elections.

Aug 6, 1990: Bhutto government dismissed by President Ghulam Ishaq Khan on grounds of corruption charges against her and husband Asif Zardari. Her political opponent Nawaz Sharif of the Pakistan Muslim League is made prime minister.

July 1993: President Ghulam Ishaq Khan dismisses Sharif as prime minister, also on grounds of alleged corruption.

Oct 19, 1993: Bhutto takes oath for a second term as prime minister after elections in which no party is a clear winner. She takes the support of smaller parties.

Sep 1996: Murtaza Bhutto, Benazir’s younger brother, is shot dead by policemen along with six of his political workers.

Nov 5, 1996: Bhutto government dismissed again – this time by President Farooq Leghari, not only on charges of corruption but also of carrying out staged killings.

Feb 1997: Sharif becomes prime minister again after his PML convincingly wins general elections.

April 14, 1999: Bhutto and Zardari found guilty of corruption charges involving a Swiss company, while she is out of the country. Zardari goes to jail, and Bhutto remains in self-exile.

May 1999: Pakistani troops and militants occupy positions in the Kargil area of Kashmir. Strains emerge between Sharif and Musharraf after international condemnation led by the US.

Oct 1999: Sharif sacks Musharraf, but the general hits back by leading an army coup against him and taking control of administration.

Aug 2000: Musharraf bars Bhutto and Sharif from active politics.

Dec 2000: Sharif goes into exile.

July 2002: Court sentences Bhutto (in absentia) to three years in prison on corruption charges.

July 2003: A Swiss court convicts Bhutto and Zardari for money laundering. Given jail sentences and fined.

Nov 2003: Sentence overturned by a higher court.

Nov 2004: Zardari released from prison in Pakistan.

Mar 2005: PPP says it is increasing contact with Musharraf.

Oct 5, 2007: Musharraf signs a corruption amnesty against Bhutto.

Oct 6, 2007: Musharraf wins presidential election.

Oct 18, 2007: Bhutto returns to Pakistan from eight years in self-exile.

Nov 15, 2007: Musharraf’s five-year presidential term and the term of the sitting parliament expires.

Jan 8, 2008: The date for parliamentary elections – that are now in doubt after Bhutto’s assassination.

The machinations of evil

The assassination of Benazir Bhutto has created conditions which contribute to the ongoing destabilization and fragmentation of Pakistan as a Nation.

The process of US sponsored “regime change”, which normally consists in the re-formation of a fresh proxy government under new leaders has been broken. Discredited in the eyes of Pakistani public opinion, General Pervez Musharaf cannot remain in the seat of political power. But at the same time, the fake elections supported by the “international community” scheduled for January 2008, even if they were to be carried out, would not be accepted as legitimate, thereby creating a political impasse.

There are indications that the assassination of Benazir Bhutto was anticipated by US officials:

“It has been known for months that the Bush-Cheney administration and its allies have been maneuvering to strengthen their political control of Pakistan, paving the way for the expansion and deepening of the “war on terrorism” across the region.

Various American destabilization plans, known for months by officials and analysts, proposed the toppling of Pakistan’s military…

The assassination of Bhutto appears to have been anticipated. There were even reports of “chatter” among US officials about the possible assassinations of either Pervez Musharraf or Benazir Bhutto, well before the actual attempts took place. (Larry Chin, Global Research, 29 December 2007)

Political Impasse

“Regime change” with a view to ensuring continuity under military rule is no longer the main thrust of US foreign policy. The regime of Pervez Musharraf cannot prevail. Washington’s foreign policy course is to actively promote the political fragmentation and balkanization of Pakistan as a nation.
A new political leadership is anticipated but in all likelihood it will take on a very different shape, in relation to previous US sponsored regimes. One can expect that Washington will push for a compliant political leadership, with no commitment to the national interest, a leadership which will serve US imperial interests, while concurrently contributing under the disguise of “decentralization”, to the weakening of the central government and the fracture of Pakistan’s fragile federal structure.
The political impasse is deliberate. It is part of an evolving US foreign policy agenda, which favors disruption and disarray in the structures of the Pakistani State. Indirect rule by the Pakistani military and intelligence apparatus is to be replaced by more direct forms of US interference, including an expanded US military presence inside Pakistan.

This expanded military presence is also dictated by the Middle East-Central Asia geopolitical situation and Washington’s ongoing plans to extend the Middle East war to a much broader area.

The US has several military bases in Pakistan. It controls the country’s air space. According to a recent report: “U.S. Special Forces are expected to vastly expand their presence in Pakistan, as part of an effort to train and support indigenous counter-insurgency forces and clandestine counterterrorism units” (William Arkin, Washington Post, December 2007).
The official justification and pretext for an increased military presence in Pakistan is to extend the “war on terrorism”. Concurrently, to justify its counterrorism program, Washington is also beefing up its covert support to the “terrorists.”

The Balkanization of Pakistan

Already in 2005, a report by the US National Intelligence Council and the CIA forecast a “Yugoslav-like fate” for Pakistan “in a decade with the country riven by civil war, bloodshed and inter-provincial rivalries, as seen recently in Balochistan.” (Energy Compass, 2 March 2005). According to the NIC-CIA, Pakistan is slated to become a “failed state” by 2015, “as it would be affected by civil war, complete Talibanisation and struggle for control of its nuclear weapons”. (Quoted by former Pakistan High Commissioner to UK, Wajid Shamsul Hasan, Times of India, 13 February 2005):

“Nascent democratic reforms will produce little change in the face of opposition from an entrenched political elite and radical Islamic parties. In a climate of continuing domestic turmoil, the Central government’s control probably will be reduced to the Punjabi heartland and the economic hub of Karachi,” the former diplomat quoted the NIC-CIA report as saying.
Expressing apprehension, Hasan asked, “are our military rulers working on a similar agenda or something that has been laid out for them in the various assessment reports over the years by the National Intelligence Council in joint collaboration with CIA?” (Ibid)

Continuity, characterized by the dominant role of the Pakistani military and intelligence has been scrapped in favor of political breakup and balkanization.

According to the NIC-CIA scenario, which Washington intends to carry out: “Pakistan will not recover easily from decades of political and economic mismanagement, divisive policies, lawlessness, corruption and ethnic friction,” (Ibid) .

The US course consists in fomenting social, ethnic and factional divisions and political fragmentation, including the territorial breakup of Pakistan. This course of action is also dictated by US war plans in relation to both Afghanistan and Iran.

This US agenda for Pakistan is similar to that applied throughout the broader Middle East Central Asian region. US strategy, supported by covert intelligence operations, consists in triggering ethnic and religious strife, abetting and financing secessionist movements while also weakening the institutions of the central government.

The broader objective is to fracture the Nation State and redraw the borders of Iraq, Iran, Syria, Afghanistan and Pakistan.
Pakistan’s Oil and Gas reserves

Pakistan’s extensive oil and gas reserves, largely located in Balochistan province, as well as its pipeline corridors are considered strategic by the Anglo-American alliance, requiring the concurrent militarization of Pakistani territory.

Balochistan comprises more than 40 percent of Pakistan’s land mass, possesses important reserves of oil and natural gas as well as extensive mineral resources.

The Iran-India pipeline corridor is slated to transit through Balochistan. Balochistan also possesses a deap sea port largely financed by China located at Gwadar, on the Arabian Sea, not far from the Straits of Hormuz where 30 % of the world’s daily oil supply moves by ship or pipeline. (Asia News.it, 29 December 2007)

Pakistan has an estimated 25.1 trillion cubic feet (Tcf) of proven gas reserves of which 19 trillion are located in Balochistan. Among foreign oil and gas contractors in Balochistan are BP, Italy’s ENI, Austria’s OMV, and Australia’s BHP. It is worth noting that Pakistan’s State oil and gas companies, including PPL which has the largest stake in the Sui oil fields of Balochistan are up for privatization under IMF-World Bank supervision.
According to the Oil and Gas Journal (OGJ), Pakistan had proven oil reserves of 300 million barrels, most of which are located in Balochistan. Other estimates place Balochistan oil reserves at an estimated six trillion barrels of oil reserves both on-shore and off-shore (Environment News Service, 27 October 2006) .
Covert Support to Balochistan Separatists

Balochistan’s strategic energy reserves have a bearing on the separatist agenda. Following a familiar pattern, there are indications that the Baloch insurgency is being supported and abetted by Britain and the US.

The Balochi national resistance movement dates back to the late 1940s, when Balochistan was invaded by Pakistan. In the current geopolitical context, the separatist movement is in the process of being hijacked by foreign powers.

British intelligence is allegedly providing covert support to Balochistan separatists (which from the outset have been repressed by Pakistan’s military). In June 2006, Pakistan’s Senate Committee on Defence accused British intelligence of “abetting the insurgency in the province bordering Iran” [Balochistan]..(Press Trust of India, 9 August 2006). Ten British MPs were involved in a closed door session of the Senate Committee on Defence regarding the alleged support of Britain’s Secret Service to Balcoh separatists (Ibid). Also of relevance are reports of CIA and Mossad support to Baloch rebels in Iran and Southern Afghanistan.

It would appear that Britain and the US are supporting both sides. The US is providing American F-16 jets to the Pakistani military, which are being used to bomb Baloch villages in Balochistan. Meanwhile, British alleged covert support to the separatist movement (according to the Pakistani Senate Committee) contributes to weakening the central government.

The stated purpose of US counter-terrorism is to provide covert support as well as as training to “Liberation Armies” ultimately with a view to destabilizing sovereign governments. In Kosovo, the training of the Kosovo Liberation Army (KLA) in the 1990s had been entrusted to a private mercenary company, Military Professional Resources Inc (MPRI), on contract to the Pentagon.

The BLA bears a canny resemblance to Kosovo’s KLA, which was financed by the drug trade and supported by the CIA and Germany’s Bundes Nachrichten Dienst (BND).

The BLA emerged shortly after the 1999 military coup. It has no tangible links to the Baloch resistance movement, which developed since the late 1940s. An aura of mystery surrounds the leadership of the BLA.

Washington favors the creation of a “Greater Balochistan” which would integrate the Baloch areas of Pakistan with those of Iran and possibly the Southern tip of Afghanistan (See Map above), thereby leading to a process of political fracturing in both Iran and Pakistan.

“The US is using Balochi nationalism for staging an insurgency inside Iran’s Sistan-Balochistan province. The ‘war on terror’ in Afghanistan gives a useful political backdrop for the ascendancy of Balochi militancy” (See Global Research, 6 March 2007).

Military scholar Lieutenant Colonel Ralph Peters writing in the June 2006 issue of The Armed Forces Journal, suggests, in no uncertain terms that Pakistan should be broken up, leading to the formation of a separate country: “Greater Balochistan” or “Free Balochistan” (see Map below). The latter would incorporate the Pakistani and Iranian Baloch provinces into a single political entity.

In turn, according to Peters, Pakistan’s North West Frontier Province (NWFP) should be incorporated into Afghanistan “because of its linguistic and ethnic affinity”. This proposed fragmentation, which broadly reflects US foreign policy, would reduce Pakistani territory to approximately 50 percent of its present land area. (See map). Pakistan would also loose a large part of its coastline on the Arabian Sea.

Although the map does not officially reflect Pentagon doctrine, it has been used in a training program at NATO’s Defense College for senior military officers. This map, as well as other similar maps, have most probably been used at the National War Academy as well as in military planning circles. (See Mahdi D. Nazemroaya, Global Research, 18 November 2006)

“Lieutenant-Colonel Peters was last posted, before he retired to the Office of the Deputy Chief of Staff for Intelligence, within the U.S. Defence Department, and has been one of the Pentagon’s foremost authors with numerous essays on strategy for military journals and U.S. foreign policy.” (Ibid)

It is worth noting that secessionist tendencies are not limited to Balochistan. There are separatist groups in Sindh province, which are largely based on opposition to the Punjabi-dominated military regime of General Pervez Musharraf (For Further details see Selig Harrisson, Le Monde diplomatique, October 2006)

“Strong Economic Medicine”: Weakening Pakistan’s Central Government

Pakistan has a federal structure based on federal provincial transfers. Under a federal fiscal structure, the central government transfers financial resources to the provinces, with a view to supporting provincial based programs. When these transfers are frozen as occurred in Yugoslavia in January 1990, on orders of the IMF, the federal fiscal structure collapses:
“State revenues that should have gone as transfer payments to the republics [of the Yugoslav federation] went instead to service Belgrade’s debt … . The republics were largely left to their own devices. … The budget cuts requiring the redirection of federal revenues towards debt servicing, were conducive to the suspension of transfer payments by Belgrade to the governments of the Republics and Autonomous Provinces.

In one fell swoop, the reformers had engineered the final collapse of Yugoslavia’s federal fiscal structure and mortally wounded its federal political institutions. By cutting the financial arteries between Belgrade and the republics, the reforms fueled secessionist tendencies that fed on economic factors as well as ethnic divisions, virtually ensuring the de facto secession of the republics. (Michel Chossudovsky, The Globalization of Poverty and the New World Order, Second Edition, Global Research, Montreal, 2003, Chapter 17.)

It is by no means accidental that the 2005 National Intelligence Council- CIA report had predicted a “Yugoslav-like fate” for Pakistan pointing to the impacts of “economic mismanagement” as one of the causes of political break-up and balkanization.

“Economic mismanagement” is a term used by the Washington based international financial institutions to describe the chaos which results from not fully abiding by the IMF’s Structural Adjustment Program. In actual fact, the “economic mismanagement” and chaos is the outcome of IMF-World Bank prescriptions, which invariably trigger hyperinflation and precipitate indebted countries into extreme poverty.

Pakistan has been subjected to the same deadly IMF “economic medicine” as Yugoslavia: In 1999, in the immediate wake of the coup d’Etat which brought General Pervez Musharaf to the helm of the military government, an IMF economic package, which included currency devaluation and drastic austerity measures, was imposed on Pakistan. Pakistan’s external debt is of the order of US$40 billion. The IMF’s “debt reduction” under the package was conditional upon the sell-off to foreign capital of the most profitable State owned enterprises (including the oil and gas facilities in Balochistan) at rockbottom prices .

Musharaf’s Finance Minister was chosen by Wall Street, which is not an unusual practice. The military rulers appointed at Wall Street’s behest, a vice-president of Citigroup, Shaukat Aziz, who at the time was head of CitiGroup’s Global Private Banking. (See WSWS.org, 30 October 1999). CitiGroup is among the largest commercial foreign banking institutions in Pakistan.
There are obvious similarities in the nature of US covert intelligence operations applied in country after country in different parts of the so-called “developing World”. These covert operation, including the organisation of military coups, are often synchronized with the imposition of IMF-World Bank macro-economic reforms. In this regard, Yugoslavia’s federal fiscal structure collapsed in 1990 leading to mass poverty and heightened ethnic and social divisions. The US and NATO sponsored “civil war” launched in mid-1991 consisted in coveting Islamic groups as well as channeling covert support to separatist paramilitary armies in Bosnia, Kosovo and Macedonia.

A similar “civil war” scenario has been envisaged for Pakistan by the National Intelligence Council and the CIA: From the point of view of US intelligence, which has a longstanding experience in abetting separatist “liberation armies”, “Greater Albania” is to Kosovo what “Greater Balochistan” is to Pakistan’s Southeastern Balochistan province. Similarly, the KLA is Washington’s chosen model, to be replicated in Balochistan province.
The Assassination of Benazir Bhutto
Benazir Bhutto was assassinated in Rawalpindi, no ordinary city. Rawalpindi is a military city host to the headquarters of the Pakistani Armed Forces and Military Intelligence (ISI). Ironically Bhutto was assassinated in an urban area tightly controlled and guarded by the military police and the country’s elite forces. Rawalpindi is swarming with ISI intelligence officials, which invariably infiltrate political rallies. Her assassination was not a haphazard event.

Without evidence, quoting Pakistan government sources, the Western media in chorus has highlighted the role of Al-Qaeda, while also focusing on the the possible involvement of the ISI.

What these interpretations do not mention is that the ISI continues to play a key role in overseeing Al Qaeda on behalf of US intelligence. The press reports fail to mention two important and well documented facts:
1) the ISI maintains close ties to the CIA. The ISI is virtually an appendage of the CIA.
2) Al Qaeda is a creation of the CIA. The ISI provides covert support to Al Qaeda, acting on behalf of US intelligence.
The involvement of either Al Qaeda and/or the ISI would suggest that US intelligence was cognizant and/or implicated in the assassination plot.

The puppet masters revealed

The Proposed Iranian Oil Bourse

Abstract: the proposed Iranian Oil Bourse will accelerate the fall of the American Empire.

By Krassimir Petrov, Ph.D.

I. Economics of Empires

01/19/06 “Gold Eagle” — – A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military. One part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes.

Historically, taxing the subject state has been in various forms-usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, imperial taxation has always been direct: the subject state handed over the economic goods directly to the empire.

For the first time in history, in the twentieth century, America was able to tax the world indirectly, through inflation. It did not enforce the direct payment of taxes like all of its predecessor empires did, but distributed instead its own fiat currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars and paying back later each dollar with less economic goods-the difference capturing the U.S. imperial tax. Here is how this happened.

Early in the 20th century, the U.S. economy began to dominate the world economy. The U.S. dollar was tied to gold, so that the value of the dollar neither increased, nor decreased, but remained the same amount of gold. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, had substantially increased the amount of currency in circulation, and thus rendered the backing of U.S. dollars by gold impossible. This led Roosevelt to decouple the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not an empire. The fixed value of the dollar did not allow the Americans to extract economic benefits from other countries by supplying them with dollars convertible to gold.

Economically, the American Empire was born with Bretton Woods in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world’s gold. An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold. However, the guns-and-butter policy of the 1960’s was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ’s Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar holdings of foreigners via persistent U.S. trade deficits was tantamount to a tax-the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that U.S. imposed on rest of the world.

When in 1970-1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of “severing the link between the dollar and gold”, in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond- the world was taxed and it could not do anything about it.

From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and that reason was oil.

In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it 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 economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world. If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist. Thus, Imperial survival dictated that oil be sold only for dollars. It also dictated that oil reserves were spread around various sovereign states that weren’t strong enough, politically or militarily, to demand payment for oil in something else. If someone demanded a different payment, he had to be convinced, either by political pressure or military means, to change his mind.

The man that actually did demand Euro for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably Euro and Yen, the danger to the dollar was clear and present, and a punitive action was in order. Bush’s Shock-and-Awe in Iraq was not about Saddam’s nuclear capabilities, about defending human rights, about spreading democracy, or even about seizing oil fields; it was about defending the dollar, ergo the American Empire. It was about setting an example that anyone who demanded payment in currencies other than U.S. Dollars would be likewise punished.

Many have criticized Bush for staging the war in Iraq in order to seize Iraqi oil fields. However, those critics can’t explain why Bush would want to seize those fields-he could simply print dollars for nothing and use them to get all the oil in the world that he needs. He must have had some other reason to invade Iraq.

History teaches that an empire should go to war for one of two reasons: (1) to defend itself or (2) benefit from war; if not, as Paul Kennedy illustrates in his magisterial The Rise and Fall of the Great Powers, a military overstretch will drain its economic resources and precipitate its collapse. Economically speaking, in order for an empire to initiate and conduct a war, its benefits must outweigh its military and social costs. Benefits from Iraqi oil fields are hardly worth the long-term, multi-year military cost. Instead, Bush must have gone into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with Euro. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet and declared the mission accomplished-he had successfully defended the U.S. dollar, and thus the American Empire.

II. Iranian Oil Bourse

The Iranian government has finally developed the ultimate “nuclear” weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006. It will be based on a euro-oil-trading mechanism that naturally implies payment for oil in Euro. In economic terms, this represents a much greater threat to the hegemony of the dollar than Saddam’s, because it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this euro oil system:

The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the Americans.
The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros, thus protecting themselves against the depreciation of the dollar. One portion of their dollars they will still want to hold onto; a second portion of their dollar holdings they may decide to dump outright; a third portion of their dollars they will decide to use up for future payments without replenishing those dollar holdings, but building up instead their euro reserves.
The Russians have inherent economic interest in adopting the Euro – the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. Adoption of the Euro will immediately take care of the first two blocs, and will over time facilitate trade with China and Japan. Also, the Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism, and if embracing the Euro will stab the Americans, they will gladly do it and smugly watch the Americans bleed.
The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy.
Only the British will find themselves between a rock and a hard place. They have had a strategic partnership with the U.S. forever, but have also had their natural pull from Europe. So far, they have had many reasons to stick with the winner. However, when they see their century-old partner falling, will they firmly stand behind him or will they deliver the coup de grace? Still, we should not forget that currently the two leading oil exchanges are the New York’s NYMEX and the London’s International Petroleum Exchange (IPE), even though both of them are effectively owned by the Americans. It seems more likely that the British will have to go down with the sinking ship, for otherwise they will be shooting themselves in the foot by hurting their own London IPE interests. It is here noteworthy that for all the rhetoric about the reasons for the surviving British Pound, the British most likely did not adopt the Euro namely because the Americans must have pressured them not to: otherwise the London IPE would have had to switch to Euros, thus mortally wounding the dollar and their strategic partner.

At any rate, no matter what the British decide, should the Iranian Oil Bourse accelerate, the interests that matter-those of Europeans, Chinese, Japanese, Russians, and Arabs-will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the operation’s exchange:

Sabotaging the Exchange-this could be a computer virus, network, communications, or server attack, various server security breaches, or a 9-11-type attack on main and backup facilities.
Coup d’état-this is by far the best long-term strategy available to the Americans.
Negotiating Acceptable Terms & Limitations-this is another excellent solution to the Americans. Of course, a government coup is clearly the preferred strategy, for it will ensure that the exchange does not operate at all and does not threaten American interests. However, if an attempted sabotage or coup d’etat fails, then negotiation is clearly the second-best available option.
Joint U.N. War Resolution-this will be, no doubt, hard to secure given the interests of all other member-states of the Security Council. Feverish rhetoric about Iranians developing nuclear weapons undoubtedly serves to prepare this course of action.
Unilateral Nuclear Strike-this is a terrible strategic choice for all the reasons associated with the next strategy, the Unilateral Total War. The Americans will likely use Israel to do their dirty nuclear job.
Unilateral Total War-this is obviously the worst strategic choice. First, the U.S. military resources have been already depleted with two wars. Secondly, the Americans will further alienate other powerful nations. Third, major dollar-holding countries may decide to quietly retaliate by dumping their own mountains of dollars, thus preventing the U.S. from further financing its militant ambitions. Finally, Iran has strategic alliances with other powerful nations that may trigger their involvement in war; Iran reputedly has such alliance with China, India, and Russia, known as the Shanghai Cooperative Group, a.k.a. Shanghai Coop and a separate pact with Syria.

Whatever the strategic choice, from a purely economic point of view, should the Iranian Oil Bourse gain momentum, it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar. The collapsing dollar will dramatically accelerate U.S. inflation and will pressure upward U.S. long-term interest rates. At this point, the Fed will find itself between Scylla and Charybdis-between deflation and hyperinflation-it will be forced fast either to take its “classical medicine” by deflating, whereby it raises interest rates, thus inducing a major economic depression, a collapse in real estate, and an implosion in bond, stock, and derivative markets, with a total financial collapse, or alternatively, to take the Weimar way out by inflating, whereby it pegs the long-bond yield, raises the Helicopters and drowns the financial system in liquidity, bailing out numerous LTCMs and hyperinflating the economy.

The Austrian theory of money, credit, and business cycles teaches us that there is no in-between Scylla and Charybdis. Sooner or later, the monetary system must swing one way or the other, forcing the Fed to make its choice. No doubt, Commander-in-Chief Ben Bernanke, a renowned scholar of the Great Depression and an adept Black Hawk pilot, will choose inflation. Helicopter Ben, oblivious to Rothbard’s America’s Great Depression, has nonetheless mastered the lessons of the Great Depression and the annihilating power of deflations. The Maestro has taught him the panacea of every single financial problem-to inflate, come hell or high water. He has even taught the Japanese his own ingenious unconventional ways to battle the deflationary liquidity trap. Like his mentor, he has dreamed of battling a Kondratieff Winter. To avoid deflation, he will resort to the printing presses; he will recall all helicopters from the 800 overseas U.S. military bases; and, if necessary, he will monetize everything in sight. His ultimate accomplishment will be the hyperinflationary destruction of the American currency and from its ashes will rise the next reserve currency of the world-that barbarous relic called gold.

About the Author: Krassimir Petrov (Krassimir_Petrov@hotmail.com) has received his Ph. D. in economics from the Ohio State University and currently teaches Macroeconomics, International Finance, and Econometrics at the American University in Bulgaria. He is looking for a career in Dubai or the U. A. E.

Its all very Bushy

Turmoil in Pakistan Tempts the Democrats

Michael Shank, Arab News

The Democratic presidential candidates have been salivating for a situation like Pakistan to come along the campaign trail. Eternally looking soft on security and stuck with no road map for Iraq and Afghanistan, Pakistan offers the candidates an opportunity to brandish new security strategies. With President Pervez Musharraf’s violent crackdown on opposition parties, human rights organizations, media, lawyers, and the general populace, they have the perfect opportunity to posture. Trouble is, however, with Democratic White House hopefuls Obama, Biden, Clinton, and Edwards slating new strategies for Pakistan: They all have got their analysis flat wrong.

Illinois Senator Barack Obama, to his credit, was first out of the misguided gate long before Musharraf derailed all semblance of civility. Still spinning from fellow candidate and New York Senator Hillary Clinton’s jab at his offer to dialogue with adversaries (too naïve and inexperienced, she said) Obama countered Clinton’s criticism by swinging hard at Pakistan. In an about-face – to appear hard, not soft, on security – the plan was simple: Move from the wrong battlefield, i.e. Iraq, to the right battlefield, i.e. Pakistan. If actionable intelligence exists on high-value terrorist targets, said Obama, then US strikes will follow, regardless of cooperation from Islamabad. Eagerness got the better of Obama on this one, though, as foreign policy wonks from Washington to Waziristan cited this as utterly ill-advisable and wrong-headed.

Delaware Sen. Joe Biden, more recently, has emerged as the candidate least cautious to ramp up rhetoric on Pakistan. His first gaffe, assisted by candidate and Gov. Bill Richardson: Comparing Pakistan of today to Iran of the late 1970s. Biden conjectured that conservative religious types of today will similarly rise to overthrow the US-backed regime. As the Shah was replaced by the Supreme Leader and the Ayatollahs, the analogy beckoned, so too will Musharraf be replaced by the Muttahida Majlis-e-Amal.

Thankfully, extremism’s foothold remains weak as Islamic parties have never polled well in Pakistan, garnering roughly 11 percent of the vote. (Moreover, any non-democratic seizing of power by conservatives would result in a massive public uprising on par with present-day protests.) Contrast that with the competition to Musharraf, former Prime Ministers Benazir Bhutto and Nawaz Sharif, at 65 percent of the vote, a number likely to rise given the recent bombing and house arrest targeting Bhutto, both of which increased her political profile. Add to that a sizeable pocket of progressives abstaining from either party, disaffected by the corruption in both Bhutto and Sharif’s regimes, and a trend toward moderate mandates emerges. What Biden should focus on instead then is maintaining this mandate, a task increasingly compromised by US military aid to Musharraf.

Biden’s second gaffe: With the help of Massachusetts Sen. John Kerry in a recent foreign affairs subcommittee resolution, he pledged to suspend “assistance for the purchase of weapon systems not directly related to the fight against Al-Qaeda and the Taleban.” Translation? No aid will be cut; Pakistan claims all fights are related. Better if Biden would bide his time until a more laudable policy emerged. Like Obama, enthusiasm to separate from the presidential pack got the better of Biden. More laudable would be if Obama and Biden bid military bluster adieu and plotted out non-military strategies to undermine Taleban operations in Pakistan. As in Iraq, a military solution – the only response executed by Musharraf to date – is not the answer. It is the political, economic, and social sectors – and the need for stability within each – to which the president and by proxy the United States, must attend.

Clinton in her vehement condemnation of emergency rule in Pakistan perhaps came closest in countenancing the real source of the problem. The failed policies of the Bush administration were to blame, the senator said, diverting “resources and attention from the fight against terrorism on the Afghanistan-Pakistan border, while inciting radical elements inside Pakistan.” While correct on the former point i.e. Bush administration policies are problematic, it is the latter point where she drifts. In fact, there is no diversion from the border fight, but rather a too heavy-handed approach. The indiscriminate shelling of border villages by Musharraf, aided by American intelligence, finances, and equipment, is helping radicalize locals against the government. Clinton’s showing of cards with this quote, gives clues to how she might fight the war once president: Bomb the border better.

Former North Carolina Sen. John Edwards, lastly, ranks weakest among all four candidates mentioned here, only because of his lack of learnedness. Edwards mistakenly thinks that “we provide billions of dollars in assistance of all kinds,” to Pakistan. Perhaps, had Edwards done his homework, he would know that of the $10 billion in US aid sent to the country since 2001, only $26 million has been funneled toward democratic elections. Most of US assistance is of the military kind, not the social, contrary to what US Deputy Secretary of State John Negroponte claims when protesting aid withdrawal, citing social sector concerns.

If any of the Democratic presidential candidates actually focused on the social concerns of Pakistanis, much could be done to undermine the radical extremism worrying Clinton and others. Pakistan now ranks below Myanmar in the United Nations Human Development Index’s social indicators – a fact not terribly surprising given that Musharraf, in the last eight years of rule, has invested only 2 percent of GDP on education. Pakistan then, for the Democratic candidate confounded with the conflicts in Iraq and Afghanistan, is a huge opportunity; a little social investment will go a long way. But unfortunately no candidate seems to be approaching Pakistan in that way. The country is merely serving as a study in security strategy, and it appears their success at it is on par with precedent.

- Michael Shank is an analyst with the Institute for Conflict Analysis and Resolution at George Mason University in Virginia