with Chris Cook, designer and builder of the Iranian Oil Bourse
1. (the US went) round to different countries, lending them dollars on a massive scale, particularly in Latin America. They create the dollars through loans. That’s how money is created, which isn’t widely understood. The Chinese are doing exactly the same thing now – it’s economic colonialism. The British did it. Everybody tries to do it.
2. In 2007 I believe the Chinese said to the US: ‘If you continue what you’re doing in Iraq, we’re going to pull the plug on the dollar.’ They would have sold the dollar colossally. At that point, the US announced that they would pull out, and that other countries apart from the US would get oil development. It blew out of the water any chance of the US getting first go at all the low-cost oil.
3. But what the Chinese don’t have that the US did, is the military muscle to go in and enforce the debts. So that’s the realpolitik. If you didn’t pay your debts to Britain in the empire days, they would take your country away from you. US, the same. But China doesn’t have that ability, and I don’t believe they ever will have.
4. Kissinger went to the Shah of Iran (in 1973), who was the boss man in the oil market then, and told him to keep the oil price at $12. The Shah didn’t understand why, but Sheikh Yamani (Saudi Arabia) did. The reason was that at $3 per barrel, it was impossible to finance North Sea oil, Alaskan oil, US Gulf oil. At $12 they could, and they did. The petrodollars from the high prices funded it.