[Dateline, February 9, 2008]

We’ve been talking about the Iranian Oil Bourse, petrodollar recycling and U.S. hegemony around here since 2005, but it has been quiet on this front for awhile now. Until this week. Internet blogs and news sites have been a-buzz about the internet cables cut around the middle-east and the potential implications of such events.

If you’re lost about why the Iranian Oil Bourse matters or what a petrodollar is, then you may want to start by spending some time with this 2006 article by Krassimir Petrov which explains:

• the big picture of how we export inflation
• how the dollar is backed by oil
• why “deficits don’t matter” when you run the world’s reserve currency
• why the petrodollar-based American empire is beginning to fail

This week, a more up-to-date summary of events surrounding the Bourse was published at online journal by Mike Whitney:

So, how important is it that oil continues to be denominated in dollars? Would the United States really wage war to defend the dollar’s status as the world’s “reserve currency”?

The answer to this question could come as early as this week, since the long-awaited Iranian Oil Bourse is scheduled to open between now and February 11. According to Iranian Finance Minister Davoud Danesh-Jafari “All preparations have been made to launch the bourse; it will open during the 10-day Dawn (the ceremonies marking the victory of the 1979 Islamic Revolution in Iran) The bourse is considered a direct threat to the continued global dominance of the dollar because it will require that Iranian “oil, petrochemicals and gas” be traded in “non-dollar currencies.” [Press TV, Iran]

So, what has this got to do with undersea cables? Whitney continues:

within the last week, four of the main underwater cables which carry Internet and telephone traffic to the region have been cut. As a result, three-quarters of the international communications between Europe and the Middle East have been lost. Large parts of the Middle East have been plunged into darkness.

Is this merely a coincidence or is it part of a broader military operation?

Ian Brockwell, of the American Chronicle said, “On the assumption that the cables cut were no accident, we must ask ourselves who would do such a thing and why. Clearly Iran, who were most affected, would gain nothing from such an action and are perhaps the target of those responsible? . . . Maybe this is a prelude to an attack, or perhaps a test run for a future one?

“Communication has always been an important factor in military action, and cutting these cables might affect Iran’s ability to defend itself.” (American Chronicle)

Meanwhile, it seems that some solid research on the cable cuts (including a great map of the cut cables, as shown below) has been done by a blogger at ilovebonnie.net:

We have been told by various organizations that these damages are attributed to power failures or by an anchor being accidentally dragged along the ocean floor during a storm. However, it doesn’t take more than a 5th grade education to start to recognize that there may, in fact, be a pattern to what we are seeing here.

Despite this commonplace assumption that it is just a ship dragging an anchor around, this is demonstrably false in at least one case. As ABC Australia reports:

Egypt’s transport ministry said footage recorded by onshore video cameras of the location of the cables showed no maritime traffic in the area when the cables were damaged.

“The ministry’s maritime transport committee reviewed footage covering the period of 12 hours before and 12 hours after the cables were cut and no ships sailed the area,” a statement said.

“The area is also marked on maps as a no-go zone and it is therefore ruled out that the damage to the cables was caused by ships.”

While there have been some reports of up to 9 cut cables, I have not seen any documentation of that many. I have also seen claims that Iran was completely isolated from the rest of the internet by these actions, but I have found many vociferous denials of such a situation.

It occurs to me that the goal of such an operation, if undertaken by the U.S., would not be to completely sever communications to or from Iran, as that would be obvious, undeniable, and probably considered an outright act of war within the international community. However, it may be enough if communications seem ‘unreliable’ in a country like Iran: large investors might shy away from electronic trading there, instead preferring countries with more stable and robust communications systems (and the naval prowess to protect those communications). Naturally, those countries would be the ones that house the IPE and NYMEX exchanges in London and New York.

Some might call this the stuff of conpiracy theories, but is it so easily dismissed? We think not. In an article published last month, Rob Kirby shows how the market is affected by these geopolitical undercurrents. Why has the dollar dropped like a stone since July 2007, and why have oil and gold rocketed to new all-time highs during the same period? Kirby reminds us that July was the time when Iran “requested” that Japan stop paying for oil shipments in dollars and pay with Yen instead. It becomes much harder to dismiss news and analysis as “tinfoil” when the markets appear to be responding to events as they happen.

Going back briefly to Petrov’s two-year old article, we should take a moment to note his first prediction:

Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the exchange’s operations:

• 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.

Is it all just a strange coincidence, or is the U.S. beginning to wage the next war to prop up the petrodollar empire? Time will tell.