Petrodollar became the essential basis for the US economic hegemony in the

[lovuian]

http://english.pravda.ru/opinion/feedback/80382-4/

A petrodollar is a dollar earned by a country through the sale of oil. In 1972-74 the US government concluded a series of agreements with Saudi Arabia, known as the U.S.-Saudi Arabian Joint Economic Commission, to provide technical support and military assistance to the power of the House of Saud in exchange for accepting only US dollars for its oil. This understanding, much of it never publicised and little understood by public, provided Saudi ruling family the security it craved in a dangerous neighbourhood while assuring the US a reliable and very important ally in OPEC. Saudi Arabia has been the largest oil producer and the leader of OPEC. It is also the only member of the cartel that does not have an allotted production quota. It is the 'swing producer', meaning that it can increase or decrease oil production to bring oil draught or glut in the world market. As a result of this situation, Saudi Arabia practically determines oil prices. Soon after the agreement with Saudi government, an OPEC agreement accepted this, and since then all oil has been traded in US dollars. Hence the oil standard became the dollar standard
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The US , in alliance with Britain , intervened in Iraq militarily in March 2003, and installed its own authority to run the country. The invasion and subsequent occupation of Iraq may well be remembered as the first 'oil currency war'. There is now a wealth of evidence to suggest that the invasion of Iraq had less to do with any threat from Saddam's WMD programme and certainly less to do with fighting international terrorism than it has to do with gaining control over Iraq's oil reserves and in doing so maintaining the US dollar as the dominant currency for the international oil market. In June 2003, Paul Wolfowitz, then US Deputy Defense Secretary, was asked why Iraq , which didn't have weapons of mass destruction, was invaded, while North Korea, which claimed to have a nuclear deterrent, wasn't. Wolfowitz said that 'the most important difference between north Korea and Iraq was that economically we had no choice in Iraq'. There was, of course, a complex of forces and motives which impelled the US government toward war on Iraq . Among these factors, it seems to preserve the U.S. dollar as the leading oil trading currency was a leading motive -- perhaps the fundamental underlying motive, even more than the control of the oil itself.
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Two months after the invasion, the Iraqi euro accounts were switched back to dollars, and it was announced that payments for Iraqi oil would be once again in US dollars only. Global dollar supremacy was once again restored. But the story does not end there. Wars often don't work out as planned. Ironically, the invasion of Iraq with its 'thousands' of 'tactical' mistakes -- as recently admitted by Secretary of State Condoleezza Rice -- was meant to solidify and ensure the US 's post Cold-War global dominance. Paradoxically, despite all these military and political advances and the rapidly increasing grip of US military power in Eurasia, for a variety of economic and political reasons, a growing number of oil producers in the Middle East, South America, and Russia are talking about openly trading oil for euros instead of dollars, or trading oil in a 'basket of currencies'. To do so would accelerate the US dollar's fall, and boost the euro's claim to become the world's second reserve currency. If a nation's economy is only as good as its currency, and the dollar continues to lose value, the US economy would be headed for a steep fall under these conditions.

more...
This article explains why we went to war with Iraq and why we will go to war with Iran

its all about protecting the dollar... the irony is as Bush's deficits destroy it he uses the excuse he is protecting it... The dualism is amazing...

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[orwell]

1. This is all true...

...the deal with the devil (The Saudi and US petrodollar accord) came just in time to rescue the dollar from the de-coupling with gold instigated by Nixon. Without this arrangement, the dollar would have been whacked soundly in the 70's. That one agreement allowed the US to run massive deficits and print money like no third world debtor country could ever dream of. The result was the last 35 years of bullshit "prosperity" for the US, built on a mountain of debt and below market interest rates.

Free markets indeed...