The US Dollar or the Euro?

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```					THE US DOLLAR OR THE EURO?
An analysis of the likelihood of OPEC Countries switching to the Euro from
the US dollar as the currency of petroleum products transaction using the
Lockwood Analytical Method of Prediction (LAMP)

Nwankama W. Nwankama
Baltimore, Maryland
Web site: www.allhandsmgt.com

Nwankama studied Competitive Intelligence and Analytics at American Military
University, having previously graduated from McGill University's Faculty of Engineering

He has also undertaken dozens of corporate development seminars and courses with
the American College, the Nationwide Performance Improvement Organization, Harvard

He is an associate with All Hands Business Solutions, Inc., and a professional in the
production of actionable intelligence through the harnessing of scientific, behavioral and
technological analytic processes – to enable businesses and organizations arrive at
optimal decisions in tough and easy times.

The US Dollar or the Euro?
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Overview .................................................................................................................................... 4
Who is OPEC? ........................................................................................................................... 6
Analysis .................................................................................................................................... 12
Step I: Determination of the Predictive Issue ............................................................................ 12
Step II: Specification of the Actors Bearing on the Problem ...................................................... 12
Step III: Perceptions and Intentions of Each Actor .................................................................... 20
Saudi Arabia ...................................................................................................................... 22
Venezuela.......................................................................................................................... 38
Nigeria ............................................................................................................................... 48
The US as a “Major Actor” but not included in Calculating Alternate Futures ................. 55
Step IV: Possible Courses of Action for each Actor .................................................................. 60
Step V: Major Scenarios within which Alternate Futures are Compared ................................... 61
Step VI: Calculation of the Number of Alternate Futures........................................................... 62
Step VII: Pairwise Comparison of Alternate Futures ................................................................. 63
Step VIII: Rank Ordering of Alternate Futures .......................................................................... 64
Step IX: Analyses of Consequences Alternate Futures ............................................................ 65
Step X: Determination of Focal Events for Alternate Futures .................................................... 77
Step XI: Development of Indicators for each Focal Event ......................................................... 84
Step XII: The Potential of a given Alternate Future “transposing” into another Alternate Future 88
Conclusions.............................................................................................................................. 89
Bibliography ............................................................................................................................. 96

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List of Figures

Figure 1. Average price of crude oil per barrel since 1993 ........................................................ 11
Figure 2: Map of Saudi Arabia .................................................................................................. 23
Figure 3: Visit of US Defense Secretary to Saudi Arabia .......................................................... 28
Figure 4: Map of Venezuela ..................................................................................................... 38
Figure 5: Hugo Chavez and Fidel Castro of Cuba .................................................................... 43
Figure 6: President Hugo Chavez at Arab-South America Summit ........................................... 47
Figure 7: Map of Nigeria ........................................................................................................... 48
Figure 8: US President Bush and Nigeria’s President Obasanjo............................................... 52

List of Tables

Table 1: Greatest Oil Reserves by Country 2006......................................................................... 14
Table 2: OPEC Oil Production ...................................................................................................... 15
Table 3a. US Crude Oil Imports (Top 15 Countries) .................................................................... 17
Table 3b: US Total Imports of Petroleum (Top 15 Countries)...................................................... 18
Table 4: Point Allocation to OPEC Countries ............................................................................... 19
Table 5: Courses of Action of the Actors ...................................................................................... 62
Table 6: Pairwise Comparison of Alternate Futures ..................................................................... 63
Table 7: Rank Ordering of Alternate Futures under Scenario I.................................................... 64
Table 8: Rank Ordering of Alternate Futures under Scenario II................................................... 65

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Overview

The US dollar has been the primary global currency since the mid-1940s. So it has been

with OPEC (the Organization of the Petroleum Exporting Countries) since OPEC begun.

Furthermore, most OPEC countries have traditionally invested their excess dollars in US

securities and government paper. Over the past few years, many economists have been

wondering whether OPEC countries will abandon the US dollar for the Euro, as their currency of

transaction. A switch by OPEC countries from the dollar to the Euro will be devastating to the

US economy.

Beginning in early 1990s, some OPEC countries have demanded or expressed a desire

to be paid using Euros for their oil instead of dollars. Iraq (before the 2003 US invasion) was the

first OPEC country to effectively move to the Euro.1 As of July 2006, Iran has already begun

demanding payment in Euros, and has been systematically converting the bulk of its central

bank assets to the Euro. Iran’s switch, first mooted months before, was expected but President

Ahmadinejad's decision came just as the US was stepping up pressure on other UN Security

Council members to act against Iran for flouting agreements taken with the UN's nuclear

watchdog. The Iranian president's announcement, made in Baku, Azerbaijan during a Mideast

regional economics conference, appeared aimed at weakening the US's resolve to seek

sanctions against Iran if it didn’t comply with the UN International Agency for Atomic Energy's

demands.

Venezuela - a major oil exporter to the US is reportedly thinking about demanding Euros,

not dollars, for its oil. In fact, during the April 14th, 2002 meeting of OPEC ministers in Spain,

1
Garner Ted Armstrong cites four main reasons for Iraq’s switch. First, the US froze Iraqi dollar-based assets in US
banks. Second, there was enough hatred and resentment to justify the move. Third, Europe proved to be more of an
ally of Iraq than of the US and UK. Fourth, the Euro has continued to gain in strength against the dollar.

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Venezuela joined Iran in reiterating their desire to leave the dollar for the Euro. Many observers

wonder if other OPEC members will begin asking for Euros in return for the sale of oil.

OPEC countries comprise of some oil-rich Arab and Muslim countries as well as Nigeria

(which is about 50% Muslim) and Venezuela (non-Muslim). These oil-exporting countries have a

lot of power in influencing world economies through the oil market, and have derived huge

national revenue through their export of petroleum products. Many OPEC countries are

considered hostile to the United States.

If OPEC countries switch to the Euro, the US might complain, but, short of another war

to conquer the OPEC countries, there would be little they could do about it because an oil

embargo will further strangle the US economy.

The economic devastation of a switch by OPEC countries to the Euro would have other

terrible effects on the US. Should OPEC countries switch, it would force US banks and the

Federal monetary authorities to get rid of their dollar holdings in favor of Euros.

If a major move such as this occurs, it would mean the market will be flooded with US

dollars. Some economists claim that this could cause the dollar to drop by virtually fifty percent!

Foreign investors would pull their dollars out of the US stock market and government securities.

In the US, foreign-made goods would skyrocket in price, even though US-made products will

become cheaper in foreign countries and encourage export. The price of gasoline, plastics &

rubber (including tires), greases, lubricants, heating oil, cooking gas and other oil-based

products could more than triple in the US. The already burgeoning US trade deficits would

balloon to impossible heights.

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The US, with its \$8.52 trillion debt, is already the world’s largest debtor nation. Other

nations own much of the US economy. They own huge slices of US real estate. The Japanese

own most of the big buildings in Hawaii. The Japanese also own about 80% of the high rise

buildings in Los Angeles.

If OPEC countries start to demand that they receive Euros for their oil, EU nations might

locally require them to invest those Euros in European central banks, not in the US. Many

economists project that even considering the US and Japanese demands for foreign oil, an

expanded European Union would represent fifty percent of OPEC oil.

Who is OPEC?

OPEC is an international intergovernmental organization of eleven countries most of

whose primary national commodity is crude petroleum. It was created at the Baghdad

Conference on September 10–14, 1960, by five countries - Iran, Iraq, Kuwait, Saudi Arabia and

Venezuela.

Six other countries joined OPEC later. They were Qatar in 1961; Indonesia in1962; Libya

in 1962; United Arab Emirates in 1967; Algeria in 1969; Nigeria in 1971. Ecuador joined in 1973

and left in1992. Gabon joined in 1975 and left in 1994.3 Although only one member nation

2
According to the US Department of the Treasury, Bureau of the Public Debt, US is about \$8.5 trillion in debt. With
an estimated population of 299,269,205, every US citizen's share of this debt is calculated to be \$28,000 and
growing. The National Debt has continued to increase an average of \$1.67 billion per day since September 30, 2005!
See Bureau of the Public Debt Web site at http://www.publicdebt.treas.gov/opd/opdpenny.htm and the National Debt
Clock at http://www.brillig.com/debt_clock/

3
Ecuador and Gabon left OPEC because, being the smallest producers among the OPEC nations, they disagreed
with the scheme of production quotas. On May 31, 2006 Ecuador's Energy Minister Ivan Rodriguez said that his
country was analyzing the possibility of rejoining OPEC. However, presidential spokesman Enrique Proaño said on
the Ecuavisa television network on June 27, 2006 that "OPEC is an organization where all the members are
powerful producers, while we are a marginal producer and could find ourselves obliged to further limit our already

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(Nigeria) has English as an official language, OPEC's official language is English. The official

language of a majority of OPEC member-states is Arabic, as seven current members are Arab

states.

At its creation OPEC was intended primarily to be a policy research institution for the oil

states, but over the years, OPEC’s has gained more powers in influencing world economies.

According to OPEC, their objective is:

“To co-ordinate and unify petroleum policies among Member Countries, in order to
secure fair and stable prices for petroleum producers; an efficient, economic and regular
supply of petroleum to consuming nations.”4

Continuing, OPEC states the duties of it member countries as being to:

“Coordinate their oil production policies in order to help stabilize the oil market and to
help oil producers achieve a reasonable rate of return on their investments .. (and) to
ensure that oil consumers continue to receive stable supplies of oil.”5

Benjamin Zycher, senior economist at the Rand Corporation and formerly a senior staff

economist with President Reagan's Council of Economic Advisers, and visiting professor of

economics at the University of California at Los Angeles submits that OPEC was formed in

response to the U.S. imposition of import quotas on oil under the Mandatory Oil Import Quota

Program (MOIP) in 1959, which restricted the amount of crude oil (and refined products) that

could be imported into the United States.

returning to OPEC. Like Ecuador, Gabon disregarded OPEC’s quotas and increased oil production in the 1990s.
This was, according to analysts, in order to generate more revenue. Gabon subsequently left OPEC in June 1996
and is currently producing around 400,000 barrels of oil per day. See

4
OPEC; Chapter I, Article 2 of The Statute of the Organization of the Petroleum Exporting Countries
5

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MOIP subjected the Persian Gulf states and Venezuela to discrimination in favor of

According to Professor Benjamin Zycher:

“This partial exclusion of the U.S. market to Persian Gulf producers depressed prices for
their oil. As a result oil prices "posted" (paid to the selling nations) by the major oil
companies were reduced in February 1959 and August 1960. In its early years the U.S.
import quota program also discriminated against oil from Venezuela.” 6

In spite of their stated mission during its formation, OPEC’s mission was not immediately

clearly understood or taken seriously by the world, especially as they were unsuccessful in their

first decade of existence. But in 1970, OPEC became a household name in western nations as

oil prices surged to unprecedented levels in the wake of the Arab oil embargo of industrialized

countries, following the October war between Israel and its Arab neighbors. OPEC’s punishment

of the US and other western nations that supported Israel with the oil embargo caused inflation

and destabilization in the oil-importing nations.7

In fact, many analysts submit that even to date, OPEC's influence on the market has not

always been a stabilizing one.

6
See Benjamin Zycher’s Library of Economics and Liberty at
http://www.econlib.org/library/ENC/OPEC.html#biography
7
According to Lauren Levy of the Jewish Virtual Library, OPEC has tried to use its economic clout for political
purposes, most notably during the Yom Kippur War of 1973 (also known as the October War). OPEC used oil to
pressure the United States not to aid Israel's war effort. Only two days into the war OPEC members (led by Iran and
Saudi Arabia) demanded a 100 percent increase in posted prices. President Nixon had received warning of a major
petroleum supply crisis that would occur if the U.S. government should increase military aid to Israel; nevertheless,
on October 19 Nixon requested \$2.2 billion to cover the cost of an enormous airlift to Israel. This move incensed King
Faisal of Saudi Arabia, who announced an embargo on oil shipments to both the U.S. and the Netherlands. The other
Arab producers soon followed his example. It was not until March 1974 that a proposal for an Israeli withdrawal from
captured Syrian territory gave the oil producers a justification for suspending the oil embargo. See
http://www.jewishvirtuallibrary.org/jsource/US-Israel/opec.html. However, Professor Zycher disputes the claim of oil
embargo. According to Zycher, “the 1973 price increase was not caused by the oil "embargo" (refusal to sell) directed
at the United States and the Netherlands that year by the Arab members of OPEC. Instead, OPEC reduced its
production of crude oil, thus raising world oil prices substantially. The embargo against the United States and the
Netherlands had no effect whatever: both nations were able to obtain oil at the same prices as all other nations.”

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According to them, OPEC has exhibited interest in using their economic clout to punish

nations that go against polices they support, or that have policies they don’t support.

However, oil production increases ensued from 1975 until1979, when the second oil

shock of the decade hit the world as a result of widespread disruption of the Iranian oil industry

after the Islamic revolution. In 1985/86, after rising steadily in the early years of the decade, oil

prices suddenly collapsed after widespread OPEC cheating on oil quotas forced Saudi Arabia to

slash exports from some 7 million barrels a day to 2.6 million barrels a day. Saudi efforts to

reclaim market share caused a deep slump in the price of oil globally.

In 1990/91, panic buying sent oil prices soaring after Iraq's invasion of Kuwait, but a

surge in Saudi output and the brief use of Western Strategic Oil stocks prevented a fourth oil

price crisis. In 1998/99, oil prices collapsed to under \$10 a barrel as a result of chronic OPEC

quota cheating and the economic collapse in Asia. In 1999/2000, OPEC responded with a

series of deep production cuts which reversed bearish sentiment and triggered a slow, steady

rise in oil prices. In 2000, fears that the world will be starved of sufficient oil supplies to maintain

the economic expansion and emerging bottlenecks throughout the world’s oil industry drove

prices to a series of fresh 10-year peaks. Three OPEC production increases failed to quell fears,

prompting the US to order the release of strategic petroleum stocks for only the second time.

OPEC's stunning success in the 1970s and 1980s instilled a tremendous amount of

confidence in its members. But, many analysts believe that the primary competitive advantage

enjoyed by OPEC nations was the extreme low cost of oil extraction from their fields. In Saudi

Arabia it cost less than a dollar a barrel to produce crude, compared to \$10 or more from fields

in Europe and America. While prices sat below \$15 nowhere else could compete with the OPEC

nations, but with prices at the levels of the early 1980s huge amounts of oil became

economically workable.

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From the North Sea to the Gulf of Mexico, off the coast of Brazil and in remote Soviet

mountains, vast production capabilities came online during the second half of the 1980s and

through the 1990s. OPEC's share of the global oil market fell steadily from its peak of 70% in

1980, plunging to 40% in 1998. The price of oil fell from more than \$50 back to range between

\$10 and \$15 by the late nineties.

OPEC’s internal cohesion crumbled as well. In 1992 Ecuador left, followed by Gabon in

1994. Faced with crumbling market share and declining prices member nations began to cheat

on quotas, increasing production in spite of continued OPEC resolutions for production cuts.

Many states had entered severe recessions as debts ran up during the go-go seventies turned

into high-interest burdens in the 1990s. They had no choice but to circumvent production

quotas. To these OPEC countries, some income was better than none at all as they faced a

By the end of the 1990s OPEC's ability to set oil prices had evaporated almost

completely. Fundamental changes in consumer behavior such as the increased adoption of

more efficient automobiles and an increasing deployment of natural gas and nuclear power

generators slowed the growth of demand even as the growth in supply picked back up. The

historical condition of the oil industry had been restored.

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Figure 1. Average price of crude oil per barrel since 1993

Source: OPEC.org

Since 2000, the demand for energy, especially by US and China has continued to

skyrocket. Panic and speculative trading have also artificially pushed the price of oil high. The

average price of crude oil has topped \$50 per barrel since 2005 and as of 2006; the average

price is over \$60, sometimes passing \$70 per barrel, as is the case as of August 2006, when it’s

selling for \$76 per barrel.

As of January 2006, many of the trends seen in 2003-2005 appeared to be continuing:

1) instability and attacks on oil infrastructure in Iraq; 2) continued strong Asian oil demand

growth; 3) high OPEC capacity utilization rates; 4) disruptions in oils supply in Nigeria due to

ethnic rivalries and insurgent attacks by disgruntled natives seeking their share of the oil wealth;

and 5) worries about political instability in the Middle East and elsewhere.

These have shot the price of oil sky-high, and given more power to OPEC to influence

world economies.

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Analysis

The LAMP Method consists of 12 steps that define how to analyze an issue of interest.

With it, most likely futures can be identified, but it cannot assign a quantifiable probability of

occurrence for each future, even though it has little allowance for ambiguity. The potential for

this analysis is to provide indications and warning to the US on the likelihood of OPEC switching

to the Euro, from the US dollar.

Step I: Determination of the Predictive Issue

As outlined above, OPEC is a powerful organization whose decisions affect the US and

world economies. One of the decisions they can make is to switch from the US dollar to the

Euro, as their currency of transaction. The analysis is limited to the most influential members of

OPEC, and only with regard to their petroleum product export. Moreover, this analysis will not

address the eventual success, failure or sustainability of the new system after they make such a

switch, if it happens. The goal is to elucidate the actions of the various actors and the most likely

outcome based on analysis of the action of the actors.

Step II: Specification of the Actors Bearing on the Problem

Three main actors can be identified:

a. Saudi Arabia (the leader of OPEC)

b. Venezuela (member of OPEC)

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c. Nigeria (member of OPEC)

Although OPEC comprises of eleven countries, only Saudi Arabia, Venezuela and

Nigeria are considered to be OPEC’s most influential members (major actors) in getting OPEC

countries to switch to the Euro or in preserving the acceptance of the dollar.

Whereas, the eleven OPEC countries could be bona fide actors for this analysis, having

too many actors (and consequently, courses of action), would cause “the number of alternate

futures to expand exponentially” (Lock wood, 1996, p.7).8 Thus, determination of the main

actors among the OPEC nations was based on the degree of influence of the individual

countries in the supply of oil (based on the quantity of their oil reserves), their production levels

among OPCE nations, and their total exports of oil to the US relative to other OPEC countries,

implying how dependent the US might be on them.

One point each was awarded to OPEC countries among the top ten biggest oil reserves.

Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates, Venezuela, Libya and Nigeria scored a

point each. See Table 1.

One point was also each awarded to OPEC countries that had the capacity to produce

and did actually produce 2,100 barrels of oil a day between July 1 2005 and June 30, 2006.

Iran, Kuwait, Nigeria, Saudi Arabia, United Arab Emirates and Venezuela scored one point

each. See Table 2.

One point was awarded for any OPEC country exporting more than 1 million barrels of

oil per day to the US. One point was also awarded to any OPEC country exporting more than I

million barrels of petroleum to the US per day. Only Saudi Arabia, Venezuela and Nigeria

scored points in these categories. See Table 3 a & b.

Table 4 illustrates point points allocation.
8
Lockwood, J.S., Lockwood Analytical Method for Prediction (LAMP) Book of Readings, Vol. 1, AMU Reprint L2,
Joint Military Intelligence College, June 1996

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Table 1: Greatest Oil Reserves by Country 2006

Proved Reserves
Rank             Country
(billion barrels)

1              SAUDI ARABIA                                          264.3
3              IRAN                                                  132.5
4              IRAQ                                                  115.0
5              KUWAIT                                                101.5
6              UNITED ARAB EMIRATES                                  97.8
7              VENEZUELA                                             79.7
8              RUSSIA                                                60.0
9              LIBYA                                                 39.1
10              NIGERIA                                               35.9
11              UNITED STATES OF AMERICA                              21.4
12              CHINA                                                 18.3
13              QATAR                                                 15.2
14              MEXICO                                                12.9
15              ALGERIA                                               11.4
16              BRAZIL                                                11.2
17              KAZAKHSTAN                                            9.0
18              NORWAY                                                7.7
19              AZERBAIJAN                                            7.0
20              INDIA                                                 5.8
THE REST OF THE WORLD                                  68.1

Notes:

OPEC countries are in bold letters. Proved reserves are estimated with reasonable certainty to be
recoverable with present technology and prices. One point each was awarded to OPEC countries among
the top ten biggest oil reserves. Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates, Venezuela, Libya
and Nigeria scored a point each.

Source of Table: Oil & Gas Journal, Vol. 102, No. 47 (Dec. 10, 2004). U.S. Energy Information

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Table 2: OPEC Oil Production
(Thousand Barrels Per Day)

07/01/2005        May 2006                      June 2006
OPEC 10         Production    Production    Capacity          Surplus Capacity
Quota

ALGERIA                            894            1,340        1,340              1,340                    0
INDONESIA                        1,451              900          900                900                    0
IRAN                             4,110            3,800        3,800              3,800                    0
KUWAIT                           2,247            2,525        2,525              2,525                    0
LIBYA                            1,500            1,690        1,690              1,690                    0
NIGERIA                          2,306            2,150        2,150              2,150                    0
QATAR                              726              800          800                800                    0
SAUDI ARABIA                     9,099            9,200        9,200    10,500 - 11,000        1,300 - 1,800
UNITED ARAB EMIRATES             2,444            2,500        2,500              2,500                    0
VENEZUELA                        3,223            2,500        2,500              2,500                    0
OPEC 10                        28,000           27,405       27,405    28,705 - 29,205        1,300 - 1,800
IRAQ                                             1,900        2,200              2,200                    0
CRUDE OIL TOTAL                                 29,305       29,605    30,905 - 31,405        1,300 - 1,800
OTHER LIQUIDS                                    4,038        4,143
TOTAL OPEC SUPPLY                               33,343       33,748

Notes:

Crude oil does not include lease condensate or natural gas liquids. OPEC Quotas are based on crude oil
production only. “Capacity” refers to maximum sustainable production capacity, defined as the maximum
amount of production that: 1) could be brought online within a period of 30 days; and 2) sustained for at
least 90 days. Kuwaiti and Saudi Arabian figures each include half of the production from the Neutral
Zone between the two countries. Saudi Arabian production also includes oil produced from its offshore
Abu Safa field produced on behalf of Bahrain. The amount of Saudi Arabian spare capacity that can be
brought online is shown as a range, because a short delay June be needed to achieve the higher level.
The United Arab Emirates (UAE) is a federation of seven emirates. The UAE ’s OPEC quota applies only
to the emirate of Abu Dhabi, which controls the vast majority of the UAE's economic and resource wealth.
Venezuelan capacity and production numbers exclude extra heavy crude oil used to make Orimulsion.
OPEC: Organization of Petroleum Exporting Countries: Algeria, Indonesia, Iran, Iraq, Kuwait, Libya,
Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC 10 refers to all OPEC less
Iraq. Iraqi production and exports have not been a part of any recent OPEC agreements. Iraq’s current
production number in this table is net of re-injection and water cut. Latest estimated gross production is
about 2 million barrels per day. Other liquids include lease condensate, natural gas liquids, and other
liquids including volume gains from refinery processing.

One point each was awarded to OPEC countries that had the capacity to produce and did actually
produce 2,100 barrels of oil a day between July 1 2005 and June 30, 2006. Iran, Kuwait, Nigeria, Saudi
Arabia, United Arab Emirates and Venezuela scored one point each.

Source: Energy Information Administration\Short-Term Energy Outlook -- July 2006; Energy Information

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US Crude Oil and Total Petroleum Imports Top 15 Countries

US Energy Information Administration’s monthly data on the origins of crude oil imports in

May 2006 was released by on July 28, 2006. It showed that three countries each exported more

than 1.45 million barrels per day to the United States. Including those countries, a total of five

countries exported over 1.00 million barrels per day of crude oil to the United States (see Tables

3a & 3b).

The top five exporting countries accounted for 70 percent of United States crude oil

imports in May 2006 while the top ten sources accounted for approximately 88 percent of all U.S.

crude oil imports. The top sources of US crude oil imports for May were non-OPEC Canada

(1.868 million barrels per day), non-OPEC Mexico (1.576 million barrels per day), Saudi Arabia

(1.457 million barrels per day), Venezuela (1.169 million barrels per day), and Nigeria (1.075

million barrels per day). The rest of the top ten sources, in order, were Iraq (0.666 million barrels

per day), non-OPEC Angola (0.379 million barrels per day), Algeria (0.350 million barrels per

day), non-OPEC Russia (0.255 million barrels per day), and Ecuador (0.239 million barrels per

day). Total crude oil imports averaged 10.247 million barrels per day in May, which is an

increase of 0.415 million barrels per day from April 2006.

Non-OPEC Canada remained the largest exporter of total petroleum products in May,

exporting 2.313 million barrels per day to the United States. The second largest exporter of total

petroleum products was non-OPEC Mexico (1.710 million barrels per day) which had a slight

decrease from last month of 0.040 million barrels per day.

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Table 3a. Crude Oil Imports (Top 15 Countries)
(Thousand Barrels per Day)
Country                     May-06       Apr-06      YTD 2006      May-05               Jan - May 2005

CANADA                        1,868       1,710         1,755       1,722                        1,586

MEXICO                        1,576       1,601         1,668       1,748                        1,559

SAUDI ARABIA                  1,457       1,582         1,422       1,430                        1,512

VENEZUELA                     1,169       1,171         1,186       1,273                        1,336

NIGERIA                       1,075       1,022         1,134       1,111                        1,046

IRAQ                           666         531            533         588                         536

ANGOLA                         379         389            432         341                         436

ALGERIA                        350         256            259         152                         175

RUSSIA                         255           0             67         185                         280

ECUADOR                        239         312            279         238                         289

KUWAIT                         220         225            156         213                         186

COLOMBIA                       185         149            160         116                         126

UNITED KINGDOM                 174         169            122         194                         219

NORWAY                          98          74             86         117                         128

BRAZIL                          96         111            110         115                             54

Notes;

OPEC countries are in bold letters. One point was awarded for any OPEC country exporting more than
1 million barrels of oil per day to the US.

Source of Tables: Energy Information Administration -
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/impor
t.html

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Table 3b: Total Imports of Petroleum (Top 15 Countries)
(Thousand Barrels per Day)

Country                 May-06   Apr-06     YTD 2006   May-05                           Jan - May 2005

CANADA                   2,313    2,238        2,276     2,188                                   2,123

MEXICO                   1,710    1,750        1,785     1,826                                   1,640

SAUDI ARABIA             1,492    1,595        1,453     1,526                                   1,573

VENEZUELA                1,470    1,393        1,482     1,574                                   1,582

NIGERIA                  1,189    1,098        1,207     1,214                                   1,134

IRAQ                       666      531          533       588                                    536

ALGERIA                    643      543          552       449                                    431

RUSSIA                     620      218          317       325                                    445

ANGOLA                     391      419          448       353                                    446

VIRGIN ISLANDS             373      239          301       367                                    327

UNITED KINGDOM             349      315          272       345                                    361

NETHERLANDS                259      161          178       178                                    109

ECUADOR                    246      319          285       238                                    294

KUWAIT                     226      225          160       219                                    196

COLOMBIA                   204      176          183       176                                    161

Notes:

OPEC countries are in bold letters. The data in the tables above exclude oil imports into the U.S.
territories. One point was also awarded to any OPEC country exporting more than I million barrels of
petroleum to the US per day. Only Saudi Arabia, Venezuela and Nigeria scored points in these categories

Source of Tables: Energy Information Administration -
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.ht
ml

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Table 4: Point Allocation to OPEC Countries
(Based on Tables 1, 2 and 3a & 3b)
Used in determining the influence of each member country on OPEC’s actions

OPEC Country         Oil Reserves      OPEC Production       Oil Exports          Petroleum       Total Points
(world’s top 10)   (over 2100 barrels     to the US       Exports to the US
per day)        (over 1 million     (over 1 million
barrels a day)      barrels a day)
ALGERIA                    0                   0                   0                  0                0
INDONESIA                  0                   0                   0                  0                0
IRAN                       1                   1                   0                  0                2
IRAQ                       1                   0                   0                  0                1
KUWAIT                     1                   1                   0                  0                2
LIBYA                      1                   0                   0                  0                1
NIGERIA                    1                   1                   1                  1                4
QATAR                      0                   0                   0                  0                0
SAUDI ARABIA               1                   1                   1                  1                4
UAE                        1                   0                   0                  0                1
VENEZUELA                  1                   1                   1                  1                4

Saudi Arabia, Venezuela and Nigeria (in bold letters) scored the highest point of 4 each,

indicating that among the OPEC nations, they had the greatest influence in the supply of oil

(based on the quantity of reserves), the production levels among OPCE nations, and the total

exports of oil to the US relative to other OPEC countries. This implies how dependent the US

might be on them.

Other Potential Actors

The US is a potential actor, but it is apparent that the US will like to, and work for, the

OPEC countries to retain the dollar as their currency of trade. US’s perceptions and intents will

be discussed later, but US will not be included in calculating the number of alternate futures.

Another actor that could have been considered was the European Union (EC). However,

it is recognized that the EU would be more than happy to have OPEC countries switch, as it

would be in their economic interest. In fact EU has been aggressively pursuing a policy of

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making the Euro the world’s most dominant currency, but their perceptions and intents will not

be discussed.

Other potential actors are non-OPEC oil exporting countries like Canada, Mexico,

Angola and Russia. Canada and Mexico are the largest exporters of petroleum products to the

US. Each of them also has the US as their largest trading partner, and with the US, are

members of the North American Free Trade Agreement (NAFTA). Canada and Mexico have

been considered US allies and are expected to remain so for a long time, because of the mutual

benefits they derive from the cooperation. Their perceptions and intents will not be discussed.

Suffice it to say that all three countries – the US, Canada and Mexico regard the EU as their

only worthy competitor.9 Accordingly, chances that they’d work to make sure the Euro is not

dominant in oil sells, or in world trade as a whole.

Angola and Russia are minor exporters of oil to the US (See Tables 3a & 3b). Moreover,

Russia’s economic growth has been very dependent of US investments. Thus, a switch to the

Euro for their oil exports would hurt Angola and Russia more than the US in other areas of

economic interest. However, their perceptions and intents will not be discussed

Step III: Perceptions and Intentions of Each Actor

The actors for this analysis differ tremendously in their history, cultures, systems of

government, national aspirations and level of economic development. Their views of the US as

well as their relationships with the US also differ considerably, and are important in their

decisions regarding the US dollar.

9
In January 1994, Canada, the United States and Mexico launched the North American Free Trade Agreement
(NAFTA) and formed the world's largest free trade area. The Agreement has brought economic growth and rising
standards of living for people in all three countries. In addition, NAFTA has established a strong foundation for future
growth and has set a valuable example of the benefits of trade liberalization.

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Furthermore, in doing business with the US (or any other country), the OPEC countries

are primarily motivated by their desire to improve their national economies – and not those of

their trading partners. Naturally, each of the actors would want the maximum possible revenue

from oil exports to the US or any other country within permissible conditions and market forces.

Therefore the aforementioned factors are believed to be important in assessing their perception

and intentions about whether or not to dump the dollar and adopt the Euro as their currency of

Yet, it is to be noted that sometimes, the decisions of OPEC countries, in cutting back on

or increasing production; in raising or decreasing oil prices, have been based not on economics,

but by a desire to hurt, or some other times, to help the US economy. For example, OPEC

countries (led by Saudi Arabia) used the oil embargo of 1973 as a punishment to the US (and

the rest of the West) for supporting Israel during the Arab-Israeli war. Conversely, Saudi Arabia

has at various times, increased its oil production specifically to boost oil supply to the US, and to

support the US economy.

Another example is that former Iraqi President Saddam Hussein’s decision to switch

from the dollar to the Euro was not based sole on economics, but on the hatred he had for the

US. He described the US dollar as enemy money, but was said to have stashed huge personal

wealth in US dollars.10 Iran recently started accepting the Euro as opposed to the dollar in

response to US’s calls for UN sanctions against it because of its nuclear programs.

10
According to Lt. Gen. Richardo Sanchez, US army spokesman in Iraq, Saddam Hussein, the former Iraqi president
had 750,000 US dollars in cash on him when he was captured by US forces in December, 2003. Saddam Hussein's
regime was also said to have raised over \$21.3 billion in illicit revenue by subverting the Oil-for-Food Program
(OFFP). This figure, though controversial, was initially provided on November 15, 2004 at a hearing of the Senate
Subcommittee on Permanent Investigations that is conducting one of the five congressional inquiries into the OFFP.

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Therefore, the perceptions and intentions of each of the three OPEC actors will be

analyzed form the standpoints of their national economic interests and their perceptions and

relationship with the United States.

Saudi Arabia

Saudi Arabia is a surprising land of contrasts, with jaw-dropping mountain scenery at Al-

Soudah and Habalah; and expanses of sand dunes near Sharurah (Ham et al, 2004, pp.133,

140, 146). It is a 100% Muslim country and is located in the Middle East, bordering the Persian

Gulf and the Red Sea. Saudi Arabia is north of Yemen and is slightly more than one-fifth the

size of the US. It comprises of 13 provinces; Al Bahah, Al Hudud ash Shamaliyah, Al Jawf, Al

Madinah, Al Qasim, Ar Riyad, Ash Sharqiyah (Eastern Province), 'Asir, Ha'il, Jizan, Makkah,

Najran and Tabuk.

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Figure 2: Map of Saudi Arabia

Source: CIA World Factbook, Updated August 8, 2006

The country is governed according to Shari'a law. The legal system is similarly based on

Shari'a law, but several secular codes have been introduced. For example, basic law that

articulates the government's rights and responsibilities was introduced in 1993. Commercial

disputes are handled by special committees. The country has not accepted compulsory ICJ

jurisdiction.

The executive branch has been headed by the chief of state: King and Prime Minister

Abdallah bin Abd al-Aziz Al Saud (since 1 August 2005); Heir Apparent Crown Prince Sultan bin

Abd al- Aziz Al Saud (half brother of the monarch, born 5 January 1928). The monarch is both

the chief of state and head of government

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The cabinet comprises the Council of Ministers, which is appointed by the monarch and

includes many royal family members. There are no elections as the monarch is hereditary. “The

stability of Saudi Arabia is largely determined by the nature of its political system, which is, in

large part, centered on the ruling Al Saud family” (Kechichian, 2001, p.1).

The legislative branch comprises the Consultative Council or Majlis al-Shura (120

members and a chairman appointed by the monarch for four-year terms). It’s worthy of noting

that in October 2003, the Council of Ministers announced its intent to introduce elections for half

of the members of local and provincial assemblies and a third of the members of the national

Consultative Council or Majlis al-Shura, incrementally over a period of four to five years; in

November 2004, the Ministry of Municipal and Rural Affairs initiated voter registration for partial

municipal council elections held nationwide from February through April 2005

Saudi Arabia is an oil-based economy with strong government controls over major

economic activities. The Kingdom possesses 25% of the world's proven petroleum reserves

(See Table 1), ranks as the world’s largest exporter of petroleum – the third largest exporter to

the US (See Table 3a & 3b), and plays a leading role in OPEC. The petroleum sector accounts

for roughly 75% of its budget revenues, 45% of GDP, and 90% of export earnings. About 40%

of GDP comes from the private sector. Roughly 5.5 million foreign workers, including many

Americans, play an important role in the Saudi economy, particularly, in the oil and service

sectors. A burgeoning population, aquifer depletion, and an economy largely dependent on

petroleum output and prices are all ongoing governmental concerns.

Since 2003, Saudi Arabia has also been “cautiously experimenting with the beginnings

of a tourist industry” (Tripp & North, 2003, p.9). The government has also been encouraging

private sector growth to lessen the kingdom's dependence on oil and to increase employment

opportunities for its swelling population. The government has begun to permit private sector and

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foreign investor participation in the power generation and telecom sectors. As part of its effort to

attract foreign investment and to diversify the economy, Saudi Arabia acceded to the WTO in

2005 after many years of negotiations. With high oil revenues enabling the government to post

large budget surpluses, Saudi Arabia has been able to substantially boost spending on job

training and education, infrastructure development, and government salaries.

As a regional economic superpower, Saudi Arabia pledged \$100 million in 1993 to fund

reconstruction of Lebanon; since 2000, Saudi Arabia has committed \$307 million for assistance

to the Palestinians; pledged \$230 million to development in Afghanistan; pledged \$1 billion in

export guarantees and soft loans to Iraq; pledged \$133 million in direct grant aid, \$187 million in

concessional loans, and \$153 million in export credits for Pakistan earthquake relief.

Following Iraq's invasion of Kuwait in 1990, Saudi Arabia accepted the Kuwaiti royal

family and 400,000 refugees while allowing US and Arab troops to deploy on its soil for the

liberation of Kuwait the following year. The continuing presence of US troops on Saudi soil after

Operation Desert Storm has remained a source of tension between the royal family and the

public until the US military's near-complete withdrawal to neighboring Qatar in 2003.

Jean-Francois Seznec, adjunct professor of political economy at Columbia University’s

School of International and Public Affairs makes a detailed narrative of events that have shaped

Saudi Arabia’s relationship with the US. In his account, terrorism and business have been the

most influential factors to drive the policies of each of the nations relative to the other.

The US and Saudi Arabia governments have traditionally had a relationship that have

been described as “an exchange of oil for security.” 11 Since 1944, when US President Franklin

11
Business as Usual, The Saudi-US Relationship from Energy, Vol. 26 (4) - Winter 2005 by Jean-Francois Seznec is
Adjunct Professor of Political Economy at Columbia University’s School of International and Public Affairs.

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Roosevelt and King Abdel Aziz met in Egypt, Saudi Arabia has used more US goods,

management systems, technology, medical facilities, and training than those from any other

country in the world. These views parallel those of Lippman (2004) that it was the discovery of

oil in Saudi Arabia that led to a relationship between the Saudis and Americans, which has

made all the sense in the world and, and at the same time, no sense at all.

Economically, the US-Saudi relationship was a dynamic and effective model. In fact, “the

story of America’s relationship with Saudi Arabia begins with oil, first established as a

strategically vital commodity in the days prior to World War I” (Bronson, 2006, p.17).

The Americans have been able to purchase more oil as car ownership in the United

States escalated throughout the 20th century, meanwhile the Saudis have been able to take

that money and use it to buy all the latest products and technology from the Americans and

transform their country from a pre-industrial kingdom a bustling modern civilization (complete,

today, with Starbucks, McDonalds, and shopping malls).

The US-Saudi relationship has been seen more like government-to-government

relationship and has survived many controversies; and sustained because of oil.

The American public and media criticizes the Kingdom for its human rights abuses, and

readily cites the massive involvement of Saudis in the terrorist attack of September 11, 2001,

which is explicit in Wells (2003), even though many assert that "the 9/11 Commission gave the

Saudis a free pass" (Posner, 2005, p3).

Saudi Arabian authorities are aghast that many Americans see the kingdom as using its

fabulous oil wealth to maintain a corrupt regime, and through its control of OPEC, blackmailing

the United States into overpaying for its oil. They are particularly offended by the numerous

articles on the corrupt and profligate ways of many of their princes, which have added to the

strong resentment of their beloved kingdom. For example, some US journalists who worked

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underground in Saudi Arabia have written about the “profligate spending habits of the royal

family” (MacKey, 2002, p6).

Saudi Arabia hindered FBI’s investigation of the Al-Khobar bombing, which killed many

US personnel. Further, after September 11, 2001, the Saudis did not adequately track terrorist

funding.

The financial links between the authorities of Saudi Arabia and the United States have

been quite strong, regardless. The Saudis have kept most of their oil income in US dollars,

invested in US government treasury bills, and have thereby financed part of the chronic US

deficit.

Saudi Arabia has perhaps the most successful modern Muslim nation to adapt their

traditions to engage with today's world? How they have met the challenges of capitalism, while

preserving a conservative culture is explicit in the erudite and incisive work of Tripp (2006).

All Aramco12 oil sales are in dollars and are paid in US banks who then pass on the

money to Saudi Arabia’s institutions’ accounts, which are held in the same US banks. Saudi

Arabian Monetary Agency has retained US-owned JP Morgan as a permanent adviser for a

number of years. The kingdom firmly links itself to the US in terms of finances.

On September 23, 2003, Tanya T. Hsu of the Saudi-American Forum said:

“Saudi Arabians have allocated an estimated 60% of their global investments to the
United States through passive and direct investments.“13

12
Saudi Aramco, the national oil company of Saudi Arabia (formerly just "Aramco", standing for the Arabian American
Oil Company), is the largest oil corporation in the world and the world's largest in terms of proven crude oil reserves
and production. Headquartered in Dhahran, Saudi Arabia, Saudi Aramco also operates the world's largest single
hydrocarbon network, the Master Gas System. Saudi Aramco's history dates back to May 29, 1933, when the
government of Saudi Arabia signed a concessionary agreement with Standard Oil of California (Socal) allowing them
to explore Saudi Arabia for oil. Standard Oil of California passed this concession to an affiliate called California-
Arabian Standard Oil Co. (Casoc). In 1936 with the company having no success at locating oil, the Texas Oil
Company purchased a 50 % stake of the concession.
13

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In February 2003, total worldwide Saudi investment, including investment in the United

States and Europe, was conservatively estimated at U.S. \$700 billion. Thirty percent of Saudi

global investments have gone to Europe and ten percent to the rest of the world.

Military cooperation is yet another area of extensive relations with the US.

Figure 3: Visit of US Defense Secretary to Saudi Arabia

Former Secretary of Defense William S. Cohen (left) traveled to the Royal Court, Jeddah, Kingdom of Saudi
Arabia on June 15, 1997, and met with First Deputy Prime Minister His Royal Highness Crown Prince
Abdullah bin Abd al-Aziz Al Saud (who is the current Monarch).

Source: US Dept of Defense Photo Archives, available publicly at
http://www.defenselink.mil/photos/Aug1997/970615-D-2987S-112.jpg. DoD Photo by Helene C. Stikkel.

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Saudi Arabia has bought extensive military hardware from the US, who has also trained

the Saudi National Guards, through Vinnell Corporation.14 After the 1990 Gulf War, Saudi Arabia

allowed the US to maintain a command center for the region together with a large number of

troops and airplanes in the Prince Sultan air base in Al-Kharj south of Riyadh.

Until recently, all these links translated into hundreds of billions of dollars in purchases

by the Saudis from the US. To this day, Saudi Arabia imports more than US\$4.5 billion per year

from the US. Even though the number has substantially declined from the US\$10.5 billion of

imports in 1998, it is still more than any other country. The links between the US and Saudi

Arabia involved tens of thousands of Saudis and US citizens working together, which many

observers believe, should have provided plenty of opportunity for broad cultural exchanges and

societal influence between the two countries.

Previously, the Saudis have helped the United States by increasing oil production in

times of oil supply stress. In 1982, when both Iran and Iraq were forced to reduce their

production, the Saudis increased oil exports from 4.5 million barrels per day to 7 million barrels

per day, bringing the spike in price to a rapid end. In 1990, when both Kuwait and Iraq stopped

exporting, Saudi Arabia increased production to 9 million barrels per day.

Seznec (2005) observes that after September 11, 2001, the Saudis increased production

by 500 million barrels per day to help the United States meet its needs at reduced prices. Albeit,

in October, 2001, Mayor Rudy Giuliani of New York rejected a \$10 million donation for disaster

relief from Saudi Prince Alwaleed bin Talal after the prince suggested U.S. policies in the Middle

East contributed to the September 11 attacks.

14
The Vinnell Corporation is a US-owned an international private military company specializing in military training,
logistics, and support in the form of personnel, maintenance and consultancy, whose most recent claim to fame is
their training of portions of the Saudi Arabian Military. They are a subsidiary of the Northrop Grumman Company. The
Vinnell Corporation was mentioned in Fahrenheit 9/11 for its connections to the Carlyle Group, George W. Bush, and
the Saudi Royal family. Vinnell was almost wholly owned by the Carlyle Group, until 1997.

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The Saudis enthusiastically point out that Aramco sells its oil in the United States and in

the process subsidizes US purchases by over one US dollar per barrel on the 1.5 million barrels

per day it sells to US firms. The Saudi Oil Minister repeatedly claims to want a stable price of oil

between US\$22 and US\$28 per OPEC barrel (corresponding to about US\$26 to US\$34 per US-

based barrel). The Saudis have provided the United States with the assurance that they will

remain the stabilizer of world oil prices.

During the Cold War, Saudi Arabia maintained common ground with the US. Both

countries were staunchly against the Soviet Union and Communism. The Saudis felt

comfortable developing with high-quality US technology. The Saudis also saw the United States

as a defender of last resort against the Soviet proxies in the region, primarily Egypt, Syria, and

South Yemen. The United States as the main opponent of what US President Reagan called the

“evil empire,” could provide security against the spread of “godless” anti-Saudi socialist ideology

and Arab nationalism.

Seznec (2005) continues, that when the Soviets got bogged down in their support of a

socialist regime in Afghanistan, the Saudis became the proxy of the United States. With full US

support, the Saudis, through the Saudi intelligence directorate, encouraged, armed, and

financed the resistance and, to a certain extent, “created” the Taliban.

The Saudis were assured by the US policy of dual containment that post-Khomeini Iran

and Iraq would be kept in check. In 1982, when Iraq attacked Iran, Saudi Arabia and the US15

15
During the Cold War, Iraq had been chiefly an ally of the Soviet Union. The U.S. was concerned with
Iraq’s belligerence toward Israel and disapproval of moves towards peace with other Arab states. It also
condemned Iraqi support for various Arab and Palestinian militant groups such as Abu Nidal, which led to
its inclusion on the incipient U.S. list of state sponsors of international terrorism on December 29, 1979.
The U.S. remained officially neutral during the outbreak of hostilities in the Iran-Iraq War, as it had
previously been humiliated by a 444 day long Iranian hostage crisis and expected that Iran was not likely
to win. In March 1982, however, Iran began a successful counteroffensive (Operation Undeniable
Victory). In a bid to open the possibility of relations to Iraq, the country was removed from the list of state
sponsors of terrorism. Ostensibly this was because of improvement in the regime’s record, although

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aligned to support Iraq, providing them with funds, safe harbor for their Soviet-made aircrafts,

and oil to make up for their loss of production due to Iranian attacks. The Saudis also allowed

Iraq to build a pipeline for the Iraqi southern fields to the Saudi harbor of Yanbu on the Red Sea.

This was done with the full support of the United States.

Security seems to periodically make Saudi Arabia to open up. According to Al-Rashhed

(2002), Saudi Arabia is a wealthy and powerful country which exerts influence in the West and

across the Islamic world. Yet it remains a closed society. And, it’s for good reasons. “By Middle

eastern standards, Saudi Arabia is a relatively peaceful country” (Tripp & North, 2003, p.12). So,

the kingdom tries to preserve the internal tranquility it enjoys, relative to its neighbors.

But, again in 1990, the Saudis allied with the US, and this time, it was against Iraq’s

invasion of Kuwait. The Saudi state provided the bases necessary for the US military, obtained

permission from religious institutions and religious segments of the Saudi population to allow the

presence of US troops in the land of the holy mosques, and also increased oil production to

make up for the loss of Kuwaiti and Iraqi production during the conflict.

Consequently for 60 years after World War II, Saudi Arabia has had an extensive and

intimate relationship with the US. This would seemingly remain resilient to minor adversity.

However, Saudi relations with the US are now at their lowest point and appear to be irreparable.

Saudi Arabia has used a large part of the about US\$2 trillion it has earned from oil to

develop its economy and infrastructure. The goal of the various Saudi five-year plans has been

to provide its citizens with modern infrastructure and to diversify the economy beyond oil

production. Saudi Arabia needs to import technology, protect its borders, and create jobs for its

former United States Assistant Secretary of Defense Noel Koch later stated, “No one had any doubts
about [the Iraqis'] continued involvement in terrorism...The real reason was to help them succeed in the
war against Iran” See “Inverse Engagement: Lessons from US-Iraq Relations, 1982-1990” at US Army
Professional Journals available at
http://www.army.mil/professionalwriting/volumes/volume1/july_2003/7_03_2v2.html

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citizens. In essence, the Saudi state wants to bring a highly conservative society into the 21st

century. However, Saudi internal politics meant that the state could strive for these goals only by

getting the assent of its most conservative supporters—the Salafis (the US press commonly

refers to them as Wahhabis).16 Saudi ruling family’s political partnership or cronyism with the

Wahhabis is unambiguous in Teitelbaum (2000). Bradley (2005) also observes events to explain

the political dynamics and historical roots of a strong authoritarian state, characterized

particularly by the close relation between the Al-Saud ruling family and the conservative

Wahhabis, conveying a sense of a country fraught with fear, hostility and suspicion while

remaining aloof from much of the drama of a Kingdom in crises.

The story of the first Saudi Kingdom being founded as an alliance between the Islamic

reformer Abdel Wahab and Mohamed al Saud in 1744 is still relevant today. The Salafis do not

oppose Saudi Arabia becoming a major economic power in the world. Indeed, oil wealth gives

them the means to promote their worldview of Islam. However, the Salafis do not wish to see

Saudi modernity create a morally corrupt, Westernized society that could turn people away from

the worship of Allah.

It seems that the Saudi state and the Salafis established a suitable agreement. In the

1960s, King Faysal was able to bring television and radio into Saudi Arabia and managed to

gain the Salafis’ approval by granting them a share of the broadcast, enabling nearly constant

promotion of piety over the airwaves. As the Saudi state pushed society to bring Saudi Arabia

into the 20th century, it embraced modern technology, but sought to avoid the inflow of

foreigners and the corrupting influence of modern living that often accompany modernization.

16
Wahhabism (Arabic: ‫ ,ةيبا ولا‬Wahabism, Wahabbism) is a Sunni fundamentalist Islamic movement, named after
Muhammad ibn Abd al Wahhab (1703–1792). It is the dominant form of Islam in Saudi Arabia and Qatar. Many
members of the movement object to the term "Wahhabism", preferring the term "Salafism".

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After King Faysal’s death, King Khaled increasingly co-opted the Salafis. This

arrangement with the Salafis tipped further in their favor after the 1979 take-over of the Holy

Mosque in Mecca. King Khaled and King Fahd gave the Salafis free rein to control society. Most

notably, they controlled women’s rights and education. The state allowed the Salafis to develop

access to the local mass media. They drastically limited the role of women in public life and the

types of jobs they could take. Furthermore, they enforced a severe segregation of men and

women.

The Saudi state influenced the Salafis by providing them with money to build mosques,

Islamic centers, and universities and to promote their causes worldwide. The state also allowed

the Salafi self-appointed, extra-judicial police, the Mutawa’in, to enforce public morality much

more stringently than before. As the Saudi economy expanded, shopping centers grew up and

satellite television brought the world to everyone’s home, the Salafis became more strident to

counter these influences. Foreigners were ghettoized in compounds and allowed minimal social

contacts with Saudis. The US has been criticized in the Saudi media and mosques for its moral

decay.

In Saudi Arabia, there have been efforts to limit the education of the citizens, especially

of women. Any effort by the US to advance the social standing of Saudi women is portrayed by

the Salafis as an effort to destroy Islamic society and a contemptible divergence from Allah’s

purpose. The Mutawa’in is more active in maintaining puritan standards, such as enforcing store

closing at prayer time, the veiling of women, and even the regulating of private behavior at

home.

After 1970, despite the huge growth of US brands and technology in Saudi Arabia and

the modern additions to life such as traffic jams, cell phones, personal computers, and satellite

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TVs, Saudi society evolved in a manner that had very little in common with US culture. As a

result, the staggering Saudi industrial and commercial development, based on US management

and technology, did not evolve into a more open, Westernized, liberal society. Instead the

Salafis hijacked US technology to establish hundreds of Internet sites and used computer disks,

videos, and audio cassettes to promote their puritan ideology and virulent opposition to US

politics and values

The Salafi effort to confront US societal influences meant that government and business

contacts become the only points of connection in Saudi-US relations. Unfortunately, even this

limited relationship is undermined, especially on the US side. The US is perceived in the Gulf as

having sided entirely with Israel in its struggle with the Palestinians. One cannot underestimate

the poisoning effect of the Israeli-Palestinian conflict on US relations in the Gulf (Saudi Arabia

and other Arab countries) place the failure of the 1991 Madrid process in the hands of the US.

The first intifada, and now the second, are viewed by the Gulf public and governments as

caused and then ruthlessly suppressed by the Israelis—backed by US encouragement and

military support.

The build-up to the war in Iraq became a point of contention between the Saudis and the

US government. The Saudis nervously expected the US invasion and occupation of Iraq to lead

to widespread violence and upheavals in the Gulf, including destabilization of the present Saudi

regime. The on-going violence in Iraq seems to give credence to Saudi’s earlier fears.

The rise of the neo-conservatives in Washington as well as the numerous anti-Saudi

statements in the US press and think tanks have convinced the Saudis that the US

administration is bent on bringing down the present regime, or may even be preparing an

invasion of the oil fields.

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For a long time, there was a common interest between the US and Saudi governments

that extended into economic, political, and military spheres. After September 11, 2001, however,

that mutual interest was blown away in both the US and Saudi Arabia. The old trust, which

prospered over a 60 year period, has now disappeared.

The business relationship between Saudi Arabia and the US, nevertheless, remains a

substantial asset to the overall relations between the two countries. The United States is still

Saudi Arabia’s main source of imports, though diminishingly so. Saudis are chagrinned that

Visas to the United States are now harder to get than visas to Saudi Arabia. Their merchant

families no longer travel to the United States for fear of humiliation at the border. Saudi students

prefer traveling to Europe, Asia, or Australia. Young Saudis, not prompted by the Salafis, have

started a boycott of US brands, resulting in a major increase of imports from China. Imports

from China constantly increased at the rate of over 40 percent per year and has now reached

the levels of the imports from the United States.

For many years, the United States relied on the Saudis to provide a long-term oil supply

to world markets, and the Saudis were able to use the United States as a shield to withstand

regional threats. The relationship grew beyond the oil-for-security paradigm to include, and

ultimately be dominated by, the exchange of technology for cash. With this transformation,

however, the Saudis have sacrificed the previous US influence for the Salafi’s control over

societal practices and institutions. The United States sacrificed its remaining credibility by

following what is largely viewed in the Gulf region as an anti-Arab agenda in Palestine and Iraq.

Of course, Saudi Arabia and the US still need to trade and maintain basic exchanges.

Saudi Arabia still finds it convenient to cooperate with the US to fight the jihadis, since they are

a threat to their own regime. Oil is still sold in US dollars and the Saudi government appreciates

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that it must cooperate with the US Treasury to ensure smooth commercial transactions and flow

of oil.

The Saudis are still the largest oil exporters and the only state with rapidly accessible

reserves. However, since the cultural and political links have been severely damaged, Saudi

Arabia’s relationship with the United States is now based on maximizing the financial benefits

from oil and minimizing the risk of US intervention in its oil fields. This creates a tenuous

balance for the countries to maintain.

The Saudis are careful not to preempt anger on the part of the present US administration

if only to avoid military confrontation. Indications are that they will not cancel the old military

contracts that they have with the US government, but may not establish new ones to assist the

US in its current war on terrorism or future military operations. The Saudis claim to be

committed to the plentiful production of relatively cheap oil, but they only increase production

when it is highly profitable. However, to minimize their dependence on the US, the Saudis

maintain a smooth relationship on the surface, but incessantly promote strong relations with the

countries most necessary to them in a future without the United States.

As Fandy (2001, p24) warns:

“Ambiguity is central to Saudi politics.”

There’s no doubt, the Saudi state aspires to remove their need for US protection. Saudi

Arabia has made an effort to limit regional threats. It has settled border disputes with the United

Arab Emirates, Qatar, and Yemen. It has worked diligently to improve relations with countries in

the region, especially Iran, Syria, Yemen, and even Iraq. It has also actively cultivated good

relations with other countries nearby, such as Pakistan, but outside the region as well, in

particular China. Saudi Arabia may not view China as an exact replacement of the United

States, but instead as a major piece of a puzzle that includes France, Germany, and India.

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Saudi Arabia is the most influential member of OPEC and while its leaders are officially

considered as friends of the United States, many observers regard them only giving lip service

to such friendship with the US. Others cite a crucial detachment of the Saudi populace from its

people. All but one of the 9/11 terrorists were Saudis. Osama bin Laden is a Saudi. Major riots

have occurred in Mecca, the Saudi city of the birth of the Islamic prophet Mohammed, as

Islamic fundamentalists seek to overthrow the government that they accuse of being a stooge

for the US.

If the Saudis toss their people and many OPEC countries the delectable bone of

switching to the Euro, explaining behind the scenes how this would injure the US economy, they

could do so with impunity. Moreover, if the new European central currency, the Euro, continues

to gain strength over the dollar, Saudi Arabia like other OPEC nations trying to earn more

money for their economies, and obtain the best price for their exports may be tempted to switch.

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Venezuela

Venezuela is located in northern South America, bordering the Caribbean Sea and the

North Atlantic Ocean, between Colombia and Guyana. It was one of three countries that

emerged from the collapse of Gran Colombia in 1830 (the others being Ecuador and New

Figure 4: Map of Venezuela

Source: CIA World Factbook, Updated August 8, 2006

Venezuela is comprised of 23 states, 1 capital district, and 1 federal dependency. They

are Amazonas, Anzoategui, Apure, Aragua, Barinas, Bolivar, Carabobo, Cojedes, Delta

Amacuro, Falcon, Guarico, Lara, Merida, Miranda, Monagas, Nueva Esparta, Portuguesa,

Sucre, Tachira, Trujillo, Vargas, Yaracuy and Zulia. The federal dependency and capital district

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are Dependencias Federales and Distrito Federal respectively. It’s noteworthy that the federal

dependency consists of 11 federally controlled island groups with a total of 72 individual islands.

For most of the first half of the 20th century, Venezuela was ruled by generally

benevolent military strongmen, who promoted the oil industry and allowed for some social

reforms. Democratically elected governments have held sway since 1959. Current concerns

include: a weakening of democratic institutions, political polarization, a politicized military, drug-

related violence along the Colombian border, increasing internal drug consumption,

overdependence on the petroleum industry with its price fluctuations, and irresponsible mining

operations that are endangering the rain forest and indigenous peoples.

The chief of state and head of government has been President Hugo Chávez Frias

(since 3 February 1999) with Vice President Jose Vicente Rangel Vale (since 28 April 2002).

The cabinet comprises of a Council of Ministers appointed by the president. The

president is elected by popular vote for a six-year term (eligible for a second term). The last

election was held 30 July 2000 because in 1999, a National Constituent Assembly drafted a

new constitution that increased the presidential term to six years. An election was subsequently

held on 30 July 2000 under the terms of this new constitution, during which Hugo Chávez Frias

was reelected president with 59.5%. Francisco Arias was second with 37.5%, and Claudio

Fermin 3%. A special presidential recall vote on 15 August 2004 resulted in a victory for

Chavez; percent of vote - 58% in favor of Chávez fulfilling the remaining two years of his term,

42% in favor of terminating his presidency immediately. The next would be held 3 December

2006.

The legislative branch is the unicameral National Assembly or Asamblea Nacional (167

seats; members elected by popular vote to serve five-year terms; three seats reserved for the

indigenous peoples of Venezuela). The last held elections were on 4 December 2005 (next to

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be held in 2010). In that election, the pro-government held all 167 seats (MVR 114, PODEMOS

15, PPT 11, indigenous 2, other 25), opposition 0.

The judicial branch comprises of the Supreme Tribunal of Justice or Tribuna Suprema

de Justicia (magistrates are elected by the National Assembly for a single 12-year term)

Venezuela’s political parties and leaders are Christian Democrats or COPEI, led by

Eduardo Fernandez; Democratic Action or AD, led by Jesus Mendez Quijada; Fatherland for All

or PPT, led by Jose Albornoz; Fifth Republic Movement or MVR, led by Hugo Chávez; Justice

First, led by Julio Borges; Movement Toward Socialism or MAS, led by Hector Mujica;

Venezuela Project or PV, led by Henrique Salas Romer; and We Can or PODEMOS, led by

Ismael Garcia.

Venezuela has a number of political pressure groups and leaders, including

FEDECAMARAS, a conservative business group; VECINOS groups; Venezuelan Confederation

of Workers or CTV (labor organization dominated by the Democratic Action).

Venezuela continues to be highly dependent on the petroleum sector, accounting for

roughly one-third of GDP, around 80% of export earnings, and over half of government

operating revenues. Government revenue also has been bolstered by increased tax collection,

which has surpassed its 2005 collection goal by almost 50%. Tax revenue is the primary source

of non-oil revenue, which accounts for 53% of the 2006 budget.

A disastrous two-month national oil strike, from December 2002 to February 2003,

temporarily halted economic activity. The economy remained in depression in 2003, declining by

9.2% after an 8.9% fall in 2002. Output recovered strongly in 2004-2005, aided by high oil prices

and strong consumption growth. Venezuela continues to be an important source of crude oil for

the US market. Both inflation and unemployment remain fundamental problems for Venezuela.

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Venezuela has traditionally maintained close relations with the US, characterized by an

important trade and investment relationship and cooperation in combating the production and

transit of illegal narcotics. Recently, there has been tension between the two countries since the

election of President Hugo Chávez, and the election of President George Walker Bush in the

US.

When the government under Cipriano Castro was no longer able to placate the demands

of European bankers in 1902, naval forces from Great Britain, Italy, and Germany erected a

blockade along the Venezuelan coast and even fired upon coastal fortifications. Though United

States then Secretary of State Elihu Root characterized Castro as a "a crazy brute," President

Roosevelt was concerned with the prospects of penetration into the region by the German

Empire. Roosevelt threatened military action against the European powers, who retreated and

later negotiated with Castro. This incident was a major stimulus behind the Roosevelt Corollary

and the subsequent U.S. policy of Dollar Diplomacy in Latin America.

During the presidency of Juan Vicente Gómez, petroleum was discovered under Lake

Maracaibo. Gómez managed to deflate Venezuela's staggering debt by granting concessions to

foreign oil companies, which won him the support of the US and the European powers. The

growth of the domestic oil industry strengthened the economic ties between the U.S. and

Venezuela.

Since Hugo Chávez was elected President of Venezuela, the long-standing close

diplomatic relationship between Venezuela and the US have progressively worsened Chávez's

public friendship and significant economic and social relationship with Cuba and Fidel Castro

have undermined the U.S. policy of isolating Cuba, and long-running ties between the U.S. and

Venezuelan militaries were severed on Chávez's initiative. Chávez's stance as an OPEC price

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hawk has raised the price of oil for the US, as Venezuela pushed OPEC producers towards a

higher price, around \$25 a barrel.

During Venezuela's presidency of OPEC in 2000, President Chávez made a ten-day tour

of OPEC countries, in the process becoming the first head of state to meet Saddam Hussein

since the Gulf War. The visit was controversial in Venezuela and in the US, although Chávez

did respect the ban on international flights to and from Iraq (he drove from Iran, his previous

stop).17

President Chávez has been intensely critical of U.S. economic and foreign policy in Iraq,

Haiti, regarding the Free Trade Area of the Americas and in numerous other areas. President

Chávez’s disdain for the US is further represented by his alignment with obvious US antagonists

such as Fidel Castro of Cuba, Mahmoud Ahmadinejad of Iran and Robert Mugabe of Zimbabwe.

17
See article “Chavez's tour of OPEC nations arrives in Baghdad” Venezuelan president first head of state to visit
Hussein in 10 years; August 10, 2000 Web posted at: 10:32 a.m. EDT (1432 GMT)
http://archives.cnn.com/2000/WORLD/meast/08/10/iraq.chavez.02/

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Figure 5: Hugo Chavez and Fidel Castro of Cuba

President Hugo Chávez's warm and public friendship with Cuban President Fidel Castro has markedly
compromised the U.S. policy of isolating Cuba diplomatically and economically.

Source: Public Web site of President Hugo Chávez (http://www.chavezhugo.com.ar/Fotografias-Hugo-
Chavez.htm).

President Chávez is also offended that the United States recognized the 2-day

government of Pedro Carmona during the 2002 coup attempt which briefly overthrew him. In

fact, on 20 February 2005, Chávez stated that he had reasons to believe that the U.S. had plans

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to have him assassinated. He said that any future attempt would mean that Venezuela would

cut off oil to the U.S.18

Venezuela expelled US naval commander John Correa in January 2006. The

Venezuelan government claimed Correa, an attaché at the US embassy, had been collecting

information from low-ranking Venezuelan military officers. President Chávez claimed he had

infiltrated the US embassy and found evidence of Correa's spying. The US declared these

claims "baseless" and responded by expelling Jeny Figueredo, the chief aid to the Venezuelan

ambassador to the US. President Chávez promoted Figueredo to deputy foreign minister to

Europe.19

President Chávez's anti-U.S. rhetoric has sometimes touched the personal. In response

to the ouster of Haitian President Jean-Bertrand Aristide in February 2004, President Chávez

called U.S. President George W. Bush a pendejo ("prick") and vowed to bring down his (Bush’s)

imperialistic government. President Chávez has also found friendship with staunch American

critics of President Bush – the most notable being Harry Belafonte, who once called President

Bush "the greatest terrorist in the world." In a later speech, he made personal offensive remarks

regarding Condoleezza Rice, US Secretary of State.

The U.S. has in turn, called President Chávez a "negative force" in the region, and

requested support from Venezuela's neighbors in isolating President Chávez (note, the Bush

President Chávez has likewise demonstrated his hatred for President George Bush and

his administration (not Americans) by once offering reduced gas prices at CITGO for innocent

Americans. Promoters of the gesture tabled President Chávez’s argument that instead of using

18
Chavez says US plans to kill him BBC News; Monday, 21 February, 2005, 00:59 GMT
http://news.bbc.co.uk/1/hi/world/americas/4282603.stm
19
See article “Chavez promotes expelled diplomat” in BBC News http://news.bbc.co.uk/2/hi/americas/4706588.stm

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government to help the rich and the corporate, as President Bush does, President Chávez was

using the resources and oil revenue of his government to help the poor in Venezuela. He also

offered to help the disenfranchised poor in the US.20 Many motorists and anti-Bush Americans

flooded CITGO gas stations, in spite of criticisms by US conservatives.

The Chávez government has also engaged in arms purchases opposed and lobbied

against by the US government. There has been numerous Venezuelan arms purchases,

including a purchase of 100,000 AK-103 rifles from Russia, which Donald Rumsfeld, US

Defense Secretary implied would be passed on to FARC21, the purchase of aircraft from Brazil,

and Warships from Spain.22

At the 2005 meeting of the Organization of American States, a United States resolution

to add a mechanism to monitor the nature of democracies was widely seen as a move to isolate

Venezuela. The failure of the resolution was seen as politically significant, expressing Latin

American support for President Chávez.

Venezuela’s oil minister Rafael Ramirez called for OPEC unity against 'American

hostilities.'23 Rafael Ramirez was visiting Tehran with gesture when he made the call. Following

20
Citgo is a U.S. refining and marketing firm that is a wholly owned subsidiary of Venezuela's state-owned oil
company. Money you pay to Citgo goes primarily to Venezuela -- not Saudi Arabia or the Middle East. There are
14,000 Citgo gas stations in the US
21
RARC is the acronym for Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de
Colombia). Established in 1964 as the military wing of the Colombian Communist Party, the FARC is Colombia’s
oldest, largest, most capable, and best-equipped Marxist insurgency. The FARC is governed by a secretariat, led by
septuagenarian Manuel Marulanda (a.k.a. “Tirofijo”) and six others, including senior military commander Jorge
Briceno (a.k.a. “Mono Jojoy”). The FARC is organized along military lines and includes several urban fronts. It has
about 9,000 to 12,000 armed combatants and several thousand more supporters, mostly in rural areas. The FARC
has received support from Cuba and has been implicated in some IRA controversies.
22
See or listen to “Venezuela's Chavez in Moscow for Arms Purchase” by NPR’s Gregory Feifer, July 26, 2006 -
http://www.npr.org/templates/story/story.php?storyId=5582906; and CNN’s “Venezuela's Chavez to sign Russia arms
deal” Associated Press available at http://www.cnn.com/2006/WORLD/americas/07/26/chavez.russia.ap/index.html
23
See https://www.platts.com/HOME/News/8561644.xml?S=printer&sub=HOME&p=HOME/News&

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his meeting with the Iranian oil minister on July 30, 2006, Ramirez said that the present status of

the oil market was the result of offensive American policies.

The official IRNA news agency, as monitored by the BBC, cited Ramirez as saying:

"America intends to take the important oil producing and exporting countries under its
control and will spare no effort in this respect."

Ramirez was also cited as saying that the 2002 coup in Venezuela was not incidental

and was in fact an oil coup. On the Iraq war and Iranian controversies, Ramirez continued:

"Iraq's situation is dreadful from every aspect. America's continuous hostility against Iran
and some crude oil producing and exporting countries has raised oil prices to the
present level."

Venezuelan President Chávez threatens to boycott oil exports to the US if “America

continues its hostile policies towards us.” Eliciting Iran’s concurrence, Ramirez said that he was

sure that Iran would have done the same if it had been under attack and added:

“We cannot constantly export our oil to America and be treated with hostility. We have to
take certain measures if American policies continue.”

Venezuela ended joint military operations and exchanges with the United States in April

of 2005, and reportedly arrested US citizens it suspected of spying.

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Figure 6: President Hugo Chavez at Arab-South America Summit

Predident Hugo Chavéz of Venezuela at the Arab-South America Summit held on May 5, 2005 in Brasília,
Brazil. He is flanked by Qatari Emir Hamad Bin Khalifa Al-Thani and Lebanese Prime Minister Nagib Mikati
Clearly, the current Venezuelan government sees the current US government as hostile.

Likewise, the current US government sees the current Venezuelan government as hostile. Like

the US administration has done, the Venezuelan government has made distinctions between

the government and the people.

Nonetheless, Venezuela is clearly interested in sustaining and improving its economy. It

would presently not see American interests as something they would consider in switching or

not switching to the Euro.

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Nigeria

Nigeria is located in Western Africa, bordering the Gulf of Guinea, between Benin and

Cameroon. It’s slightly more than twice the size of California.

Figure 7: Map of Nigeria

Source: CIA World Factbook, Updated August 8, 2006

With a population of over 130 million, Nigeria is the largest black nation on earth and is

composed of more than 250 ethnic groups. The most populous and politically influential ethic

groups are Hausa and Fulani 29%, Yoruba 21%, Igbo (Ibo) 18%, Ijaw 10%, Kanuri 4%, Ibibio

3.5%, Tiv 2.5%.

Nigeria has 36 states and 1 federal capital territory – Abuja. The states are Abia,

Adamawa, Akwa Ibom, Anambra, Bauchi, Bayelsa, Benue, Borno, Cross River, Delta, Ebonyi,

Edo, Ekiti, Enugu, Gombe, Imo, Jigawa, Kaduna, Kano, Katsina, Kebbi, Kogi, Kwara, Lagos,

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Nassarawa, Niger, Ogun, Ondo, Osun, Oyo, Plateau, Rivers, Sokoto, Taraba, Yobe and

Zamfara.

Nigeria’s religious make-up is Muslim 50% mostly located in the North; Christian 40%,

indigenous beliefs 10% mostly located in the South. Nigeria does not adopt any national

religion.

Following nearly 28 years of military rule, Nigeria adopted a new constitution was in

1999, and a peaceful transition to civilian government was completed.

Nigeria’s laws are based on English common law, Islamic Shari’a law (in 12 northern

predominantly Muslim states), and traditional law. It accepts compulsory ICJ jurisdiction, with

reservations.

The Executive branch has Olusegun Obasanjo (since 29 May 1999) as both the

president, the commander-in-chief of the armed forces and head of government

The cabinet comprises of the Federal Executive Council with ministers and other heads

of departments. The president is elected by popular vote for a four-year term (eligible for a

second term). The last elections were held 19 April 2003 (next to be held April 2007). In that

election, Olusegun Obasanjo was elected president and received 61.9% (under his PDP party),

Muhammadu Buhari – a former deposed military head of state (ANPP) 31.2%, Chukwuemeka

Odumegwu Ojukwu – a one-time Nigerian Army Colonel (and Biafran Army General). Ojukwu

was the leader of the failed secessionist Biafran state in the 1960s. His party APGA got 3.3%,

and others 3.6%

The legislative branch is made up of a bicameral National Assembly consisting of the

Senate (109 seats - 3 from each state plus 1 from Abuja – the federal capital territory, members

elected by popular vote to serve four-year terms) and House of Representatives (360 seats,

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members elected by popular vote to serve four-year terms). They are elected along with the

president.

The Judicial branch is made up of the Supreme Court (with judges appointed by the

President); Federal Court of Appeal (judges are appointed by the federal government on the

Nigeria is an oil-rich country, but it has long been hobbled by political instability,

corruption, inadequate infrastructure, and poor macroeconomic management. It has been

undertaking some reforms under a new reform-minded administration.

The president faces the daunting task of reforming a petroleum-based economy, whose

revenues have been squandered through corruption and mismanagement, and institutionalizing

democracy. In addition, the Obasanjo administration is focused on defusing longstanding ethnic

and religious tensions. It aspires to build a sound foundation for economic growth and political

stability. Although the April 2003 elections were marred by some irregularities, Nigeria is

currently experiencing its longest period of civilian rule since independence.

Nigeria's former military rulers failed to diversify the economy away from its

overdependence on the capital-intensive oil sector, which provides 20% of GDP, 95% of foreign

exchange earnings (predominantly through export of oil products to the US), and about 65% of

budgetary revenues. The largely subsistence agricultural sector has failed to keep up with rapid

population growth. As noted earlier, Nigeria is Africa's most populous country - and the country,

once a large net exporter of food, now must import food.

Following the signing of an IMF stand-by agreement in August 2000, Nigeria received a

debt-restructuring deal from the Paris Club and a \$1 billion credit from the IMF, both contingent

upon economic reforms. Nigeria pulled out of its IMF program in April 2002, after failing to meet

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spending and exchange rate targets, making it ineligible for additional debt forgiveness from the

Paris Club.

In the last year the government has begun showing the political will to implement the

market-oriented reforms urged by the IMF, such as to modernize the banking system, to curb

inflation by blocking excessive wage demands, and to resolve regional disputes over the

distribution of earnings from the oil industry. In 2003, the government began deregulating fuel

prices, announced the privatization of the country's four oil refineries, and instituted the National

Economic Empowerment Development Strategy, a domestically designed and run program

modeled on the IMF's Poverty Reduction and Growth Facility for fiscal and monetary

management.

GDP rose strongly in 2005, based largely on increased oil exports and high global crude

prices. In November 2005, Nigeria won Paris Club approval for a historic debt-relief deal that by

March 2006 eliminated \$30 billion worth of Nigeria's total \$37 billion external debt. The deal first

required that Nigeria repay roughly \$12 billion in arrears to its bilateral creditors. Nigeria did and

was then allowed to buy back its remaining debt stock at a discount. The deal also committed

Nigeria to more intensified IMF reviews.

But, the harshness of some of IMF’s and World Bank’s conditionalities on Nigeria has

been felt by the populace. Inflation soared. Nigeria’s once subsidized fuel prices skyrocketed in

the midst of ever rising unemployment rates. These have created a divide between the

government and its people. The Nigerian populace sees their government as being agents of

US (through IMF and the World Bank) economic imperialism, especially as the leaders (past

and present) are believed to have looted the nation’s treasury and have stashed hundreds of

billions of dollars in foreign banks.

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Notwithstanding, Nigeria has always been a friendly country to the United States.

However, this friendship has never been at the expense of Nigeria’s other legitimate interests.

For example, during the Gulf crisis that began with Iraq's invasion of Kuwait in the summer of

1990, and which marked the end of the Cold War and the beginning of a coalition, Nigeria kept

a low profile. While it didn’t condone Iraq’s invasion of Kuwait, it did not expressly support the

US and the coalition. It did not send troops to engage in the Persian Gulf War but continued to

be an active supporter of UN policy. .

Figure 8: US President Bush and Nigeria’s President Obasanjo

President George W. Bush talks with President Olusegun Obasanjo of Nigeria during a G8 Summit working session
in Evian, France, June 1, 2003. Source: Whitehouse Photos, publicly available at
http://www.whitehouse.gov/president/africa/09.html

Buying the bulk of Nigeria's crude oil, Nigeria sees the United States as its most

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significant relationship with the Soviet Union and Eastern Europe. Since then, ties with the

Soviet Union (and now Russia) had increased, although they remained minimal in comparison

with ties to the West, and especially the US. In the 1980s, Russia developed Nigeria’s steel

industry, although now in decay because of mismanagement. Nigeria has also maintained major

trading partnerships with Japan and the EEC, from which it continued to obtain loans and aid.

Nigerian government routinely awards huge contracts to EU companies, as well US, Chinese

and Lebanese corporations.

Although Nigeria has always leaned toward the US and the West, the closeness of the

relationship has varied. Nigeria's Western ties were originally strongest with Britain, its former

colonial ruler. The special relationship, which lasted until the 1966 coup, led Nigeria to side with

Britain on most issues. After the coup and the civil war, the new Nigerian leaders were less

favorable toward Britain, especially after Britain took a position of neutrality in the Nigerian civil

war, refused to sell arms to the federation and ignored the blockade against breakaway Biafra.

Nigerian leaders also were rankled by Britain's support of white-dominated governments

in southern Africa. Several Nigerian groups pressured the new government to weaken ties with

Britain as the only way to true independence. At times, more verbal and symbolic damage was

done to Nigerian-British relations for Nigerian popular consumption than was true in reality. The

US was not spared either.

The non-aligned position of Nigeria was clear. Throughout the Cold War, it cherished the

interest both the United States and the Soviet Union had in it because of its size, population,

economic and military potential. It particularly cherishes the interest the US has in it because of

its oil.

Albeit, as indicated above, from 1966 to 1977, Nigeria was very cool toward the United

States. The two countries took opposing positions over southern African liberation. Nigeria

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favored the end of apartheid, but saw the US as lukewarm and not strong against apartheid.

Nigerians were also angered by pro-Biafra propaganda in the United States and by America's

refusal to sell arms to the federation during the civil war. US involvement was even suspected

by Nigeria in the assassination of General Murtala Muhammad, a colorful Nigerian ruler, whom

the West believed leaned towards communism.

In 1977 when Jimmy Carter became US president, Nigerian relations with the US

suddenly changed. Nigeria felt it had gotten its due respect as the US recognized it as a

stabilizing force in Africa and was willing to consult with Nigeria on African issues. The two

governments appeared to have similar interests in southern Africa. The special relationship had

a weak basis, however, depending mostly upon continuing agreement and cooperation over

southern African issues.

Once Ronald Reagan replaced Carter as president (1981-89), the countries again had

divergent interests in southern Africa. In fact, the administration of President Ronald Reagan,

because Nigeria saw it as the highpoint of America’s lack of opposition to apartheid, backed by

tangible action, remains the most infamous in Nigeria. From that time, Nigeria saw the US as

agents of white imperialism. During this era, pro-communist groups were rife in university

campuses and in labor. The government looked the other way. Many Nigerians were

disappointed when the Soviet Union collapsed.

Unlike the Reagan era, Nigeria saw the US as a strong ally, a good friend and a

trustworthy partner during the Clinton era24. That was the golden age of US-Nigeria relations.

American could do no wrong in Nigeria’s eyes, and Nigeria would defend and not hurt the US in

any way. But, since the advent of the Bush (II) government, Nigeria has regarded their dealings

24
In Nigeria, President Clinton is regarded as the first black president of the US. Gloom beclouded Nigeria during the
Florida recount debacle leading to the election of Bush, whom they see an as an indirect extension of Ronald
Reagan, through George Bush (I), Reagan’s vice president.

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with the US as only strictly business – nothing more, except aid Africa can expect under a more

Just as the balance of trade was not expected to shift dramatically with the opening of

Eastern Europe, so too, Nigeria's political position is not expected to change greatly. In a time of

shifting world coalitions, a position of nonalignment with a leaning toward the US and the rest of

West provide more options for Nigeria than ever. Events in southern Africa, including Namibia's

independence and the elimination of apartheid in South Africa have removed the largest

obstacles to closer relations with the US without excluding the EU, Russia, China or other

The US as a “Major Actor” but not included in Calculating Alternate Futures

The US is discussed here only to put the perceptions of Saudi Arabia, Venezuela and

Nigeria in better perspective. The US is not included in calculating the number of alternate

futures, as this would lead to an exponential expansion of the number of alternate futures and

create extreme permutation difficulties.

The US is a world power – in fact the only remaining superpower. As presented by CIA

World Facts, the US is the largest and most technologically powerful economy in the world, with

a per capita GDP of \$42,000. It has a market-oriented economy, in which private individuals and

business firms make most of the decisions, and the federal and state governments buy needed

goods and services predominantly in the private marketplace.

US business firms enjoy greater flexibility than their counterparts in other developed

countries in decisions to expand capital plant, to lay off surplus workers, and to develop new

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products. At the same time, they face higher barriers to enter their rivals' home markets than

foreign firms face entering US markets.

US firms are at or near the forefront in technological advances, especially in computers

and in medical, aerospace, and military equipment, but their advantage has narrowed since the

end of World War II. The onrush of technology largely explains the gradual development of a

"two-tier labor market" in which those at the bottom lack the education and the

professional/technical skills of those at the top and, more and more, fail to get comparable pay

raises, health insurance coverage, and other benefits.

Since 1975, practically all the gains in household income have gone to the top 20% of

US households. The response to the terrorist attacks of 11 September 2001 showed the

remarkable resilience of the US economy. The war in March-April 2003 between a US-led

coalition and Iraq, and the subsequent occupation of Iraq, required major shifts in national

resources to the military. The rise in GDP in 2004 and 2005 was undergirded by substantial

gains in labor productivity. Hurricane Katrina caused extensive damage in the Gulf Coast region

in August 2005, but had a small impact on overall GDP growth for the year.

Soaring oil prices in 2005 and 2006 threatened inflation and unemployment, yet the

economy continued to grow through mid-2006. Imported oil accounts for about two-thirds of US

consumption. Long-term problems include inadequate investment in economic infrastructure,

rapidly rising medical and pension costs of an aging population, sizable trade and budget

deficits, and stagnation of family income in the lower economic groups.

Generally, the US has had a policy of investing in other nations, to encourage their

growth – politically and economically, knowing that such growth would increase the market for

US products and services. As such, many economies in the world today have benefited from

America’s policy of free economy and benevolence. America was instrumental in building Italy,

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France, Japan, the former West Germany, South Korea, not mention but the most well-known

countries. The US sends millions of aids to suffering nations. Its citizens break through the

jungles and war or disaster torn areas of Africa, Asia and South America to care for the hungry

and sick.

Albeit, the US also believes that their systems of doing things – government, morals,

business and worship are the best that any society can have, and are surprised when they are

challenged or rebuffed by another country or group of countries. This US attitude irritates most

countries of the world – the rich and poor, Muslim and non-Muslim, Christian and non-Christian,

friend and foe; as they see it as the “American arrogance.” Hence, many countries will not

hesitate to create problems for the US if they have an opportunity. The US was appalled by the

celebrations (especially in Arab nations) following the 9-11 attacks and the Katrina disaster,

even though some US evangelical preachers also made statements blaming Katrina on New

Orleans’s too much sin of idolatry and witchcraft (voodoo) .

Many influential Americans, including evangelicals, who have a very strong influence on

the government, also believe that any policy or action by a foreign government that goes against

American interest is of the Devil – or is associated with the antichrist. On their own part, many

secular Americans regard any opposition of the US as anti-civilization or anti-democracy.

America believes that the world should learn from them and that they don’t have much, if

anything, to learn from anyone. It’s only recently that US auto-makers have developed a cool

head and started to study Japanese business processes, as they continue to lose market share

to Japanese firms.

The former Soviet Union was once regarded by some American Christians as the

antichrist. With the demise of the Soviet Union, the EU is being currently preached by the same

group of Americans as the antichrist.

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Commenting on the possibility of OPEC adopting the Euro, Garner Ted Armstrong

explains that the rise of the EU and the powerful Euro is possible a fulfillment of Bible

prophesies on the coming beast:25

Garner Ted Armstrong submits:

“One of the major features of the coming BEAST power to arise in Europe is that of its
ECONOMY! It will be a gigantic TRADING bloc; a financial giant.”

Other US preachers have referred to Saddam Hussein as the great Babylon predicted in

the Bible to fall and never rise again, and that the US, through President George W. Bush, is

God’s agent – the chosen one to save the world.

Of course the US wants what’s best for her politics and national economy. And, oil is the

lifeblood of the US economy. Currently, OPEC supplies more than 40% of total US energy

demands and more than 99% of the fuel burnt in cars and trucks on American roads.

Many people in the US see oil however, as fuels for its foes as well. The Atlantic Review

once wrote that SUV drivers undermine US foreign policy by strengthening anti-American and

anti-democratic forces in oil rich countries.26 Many Americans have charged that US seems to

be addicted to oil and unable to pursue their national interests and moral principles in regard to

oil-rich countries. Many US citizens see their country as vulnerable to the whims and

manipulations of the oil suppliers.

Surging world oil prices are leading to increased tensions between the United States and

OPEC countries as concerns grow in the US over the impact of the price hikes on the American

25
Garner Ted Armstrong, an evangelical minister was referring to the Bible (Revelation 18:3) “For all nations have
drunk of the wine of the wrath of her fornication, and the kings of the earth have committed fornication with her, and
the merchants of the earth are waxed rich through the abundance of her delicacies” and explains that the visions
seen of John in the Apocalypse are of a church/state combine which grows vastly rich where false religious doctrine
and political propaganda will be used against God’s people – the US. See “Will OPEC Bankrupt The US?”
http://www.garnertedarmstrong.ws/GTA_Wordfroms/gtanews94.htm
26
US-OPEC tensions over rising oil prices, By Joe Lopez, 9 March 2000
http://www.wsws.org/articles/2000/mar2000/oil-m09.shtml

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economy. The rise in oil prices has been cited as one of the reasons for some falls in Wall

Street's Dow Jones Index.

But with the US economy increasingly dependent on falling raw material prices to hold

back inflation and sustain the stock market, the increase in oil prices—even if only to levels

which prevailed in the past—has sparked nervousness about the economic outlook.

Of major concern in the US is the effect current oil prices will have on economic growth

and its growing balance of payments gap. The stock market boom in the US, which has been

central to domestic growth and the growth of the world economy, has been sustained by low

inflation, made possible in part by falling oil prices.

While the value of the US dollar continues to remain high and the payments gap is still

being covered by the inflow of foreign capital, US financial authorities are aware that it cannot

expand indefinitely. They fear that at a certain point a shock, such as higher oil price increases,

could trigger an astronomical slide in the dollar, threatening interest rate rises and a recession.

This may provide and incentive for OPEC countries to consider switching from the dollar to the

Euro.

These considerations have led to increased tensions between the US and the oil

producing countries, OPEC and non-OPEC.

Many American see the US relationship with OPEC countries as a necessary evil. They

have often described OPEC as a cartel that would be prosecuted if it were a US organization,

and accused the organization of always trying to cripple her economy. The US also wants to

preserve the dominance of the dollar in world trade. To many Americans, a switch by OPEC to

the Euro would be the ultimate attack on America.

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Step IV: Possible Courses of Action for each Actor

There are three possible courses of action for Saudi Arabia.

1. Switch to the Euro in solidarity with other OPEC or anti-American countries (S)

2. Maintain status quo, and keep the dollar, irrespective of economic or political

pressure (Q)

Venezuela will likely follow one of three courses of action:

1. Switch to the Euro in solidarity with other OPEC or anti-American countries (S)

2. Maintain status quo, and keep the dollar, irrespective of economic or political

pressure (Q)

Nigeria will also have three possible causes of action

1. Switch to the Euro in solidarity with other OPEC or anti-American countries (S)

2. Maintain status quo, and keep the dollar, irrespective of economic or political

pressure (Q)

The foregoing indicates that there are (2) courses of action that can be taken by each of

the actors. Another possible course of action seriously considered for each of the actors to

switch to the Euro (for whatever reason) and use each of their respective influences on OPEC

to get other OPEC countries to switch. However, a computerized LAMP system would certainly

be helpful in encompassing all possible courses of action.

If the US was Counted

If the US was to be accounted for in the permutations, the following would have been

their three possible courses of action:

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1. Use economic or diplomatic pressure to persuade OPEC countries to maintain the

dollar

2. Use military action or covert operation on an OPEC country switching to the Euro, to

restore the acceptance of the dollar

3. Complain and do nothing else (fearing further damage to its economy through and oil

embargo).

Whereas, there is little (if any) doubt that the US will explore option 1, and that the

possibility of option 2 could deter some of the actors from switching to the Euro; and the option

both options 2 and 3 would depend on so many other scenarios and actors that are cannot fit

within the scope of this analysis.

Step V: Major Scenarios within which Alternate Futures are Compared

Two possible scenarios exist, which could significantly influence the actions of the actors

and eventual results:

a) Scenario I: While OPEC countries continue to accept the dollar, the Euro

significantly gains power over the dollar. Exchange rates reach or surpass 1 Euro to

1.5 dollars. Since changes in the value of the dollar against other major world

currencies affect OPEC's decisions on how much oil to produce, OPEC-member

states receive smaller revenues in other currencies for their oil, causing substantial

cuts in their purchasing power, because they continue to sell oil in the U.S. dollar.

This gives the EU some momentum in its campaign to make the Euro the dominant

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b) Scenario II: Anti-America sentiments escalate within OPEC countries, or within the

Arab world. Hostilities skyrocket or full scale war breaks out and Arab nations rally

against Israel and America.

Step VI: Calculation of the Number of Alternate Futures

There are 3 actors - Saudi Arabia, Venezuela and Nigeria. As indicated earlier, the US is

not counted.

The number of actors is assumed to be “y”.

There are 2 courses of action for each of the actors. This is assumed to be “x”. Normally,

the number of alternate futures would be “z” = xy:

In essence, “z” would be = 23 = 8.

The courses of action that the three actors can take. They are as follows in Table 5:

Table 5: Courses of Action of the Actors

SAUDI
COURSE OF ACTION                      KEY                    VENEZUELA       NIGERIA
ARABIA

Switch to the Euro due to economic or political
reasons, or in solidarity with other OPEC or anti-    S          YES             YES            YES
American countries

Maintain status quo, and keep the dollar,
Q          YES             YES            YES
irrespective of economic or political pressure

Counting the US would have produced a figure that’ll be more difficult to manage

manually. Moreover, US’s courses of action is not unavoidable in this analysis.

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Hence, since there are two scenarios, the number of permutations to be analyzed is 8 x

2 = 16.

Step VII: Pairwise Comparison of Alternate Futures

For each pair of alternate futures in a scenario, this section asks:

“Based on everything we know at this moment in time, which one of these futures is
more likely to happen?”

Determination is based on the assumption that the pair of futures being voted is the only

ones that exist at the moment. Each future chosen would receive one vote in the next step.

The following table (Table 6) depicts the possible futures. Although there are two

scenarios, the actions available and possible futures are the same for both scenarios:

Table 6: Pairwise Comparison of Alternate Futures

Actor                   Saudi Arabia               Venezuela                 Nigeria
Alternate Future 1                 S                         S                        S
Alternate Future 2                   S                        Q                       S
Alternate Future 3                   S                        Q                       Q
Alternate Future 4                   S                        S                       Q
Alternate Future 5                  Q                         S                       Q
Alternate Future 6                  Q                         Q                       S
Alternate Future 7                  Q                         S                       S
Alternate Future 8                  Q                         Q                       Q

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Step VIII: Rank Ordering of Alternate Futures

Each alternate future is given a certain number of votes, ranked form highest relative

probability to least relative probability, based on the number of votes received. Each future

(Scenario I)

The table below depicts the ranked futures for the first scenario, where the Euro

significantly gains power over the dollar. Exchange rates reach or surpass 1 Euro to 1.5 dollars.

In this scenario, since changes in the value of the dollar against other major world

currencies affect OPEC's decisions on how much oil to produce, OPEC-member states receive

smaller revenues in other currencies for their oil, causing substantial cuts in their purchasing

power, because they continue to sell oil in the U.S. dollar. EU gains momentum in its campaign

to make the Euro the dominant currency in world trade.

Table 7: Rank Ordering of Alternate Futures under Scenario I

Votes            Alt. Future         Saudi Arabia          Venezuela               Nigeria
8               Alt. Fut. 7             Q                    S                      S
7              Alt. Fut. 5              Q                    S                     Q
6              Alt. Fut. 8              Q                    Q                     Q
5              Alt. Fut. 4              S                    S                     Q
4              Alt. Fut. 6              Q                    Q                     S
3              Alt. Fut. 1              S                    S                     S
2              Alt. Fut. 3              S                    Q                     Q
1              Alt. Fut. 2              S                    Q                     S

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(Scenario II)

The table below depicts the ranked futures for the second scenario where anti-America

sentiments escalate within OPEC countries, or within the Arab world. Hostilities skyrocket or full

scale war breaks out and Arab nations rally against Israel and America. This could also be

caused by US action against an OPEC. Such countries may be Syria, Iran or Venezuela.

Table 8: Rank Ordering of Alternate Futures under Scenario II

Votes            Alt. Future         Saudi Arabia          Venezuela             Nigeria
8               Alt. Fut. 4             S                    S                    Q
7              Alt. Fut. 3              S                   Q                       Q
6              Alt. Fut. 2              S                   Q                       S
5              Alt. Fut. 8              Q                   Q                       Q
4              Alt. Fut. 1              S                   S                       S
3              Alt. Fut. 5              Q                   S                       Q
2              Alt. Fut. 7              Q                   S                       S
1              Alt. Fut. 6              Q                   Q                       S

Step IX: Analyses of Consequences Alternate Futures

Although all futures would normally be analyzed, most political, military and business

decision-makers are usually interested only in 3 – 5 most likely futures. The assumption here is

that each alternate future actually happens.

Scenario I - The Euro significantly gains power over the dollar. Exchange rates reach or

surpass 1 Euro to 1.5 dollars.

Alternate Future 7: Saudi Arabia maintains status quo and continues to demand and

accept the US dollar for its oil exports; both Venezuela and Nigeria switch to the Euro.

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This is the most likely future under Scenario I. Saudi Arabia will preserve its close ties

with the US, which is important to the kingdom for its own security purposes, since it is

surrounded by hostile neighbors like Iraq (after occupation), Iran and Muslim extremists eager to

bring down the ruling oligarchy, except for their knowledge of an obvious US summary military

intervention.

Having huge oil deposits (about 264.3 billion barrels, see Table 1) Saudi Arabia will

increase oil production to make up for the shortfall in earnings, or they’ll reduce the size of their

budget surpluses and investments. Saudi Arabia will regard the shortfall as the cost for security.

Venezuela and Nigeria, basically having more of business ties to the US than any other alliance

that they consider more of an interest to them than to the US, will cherish higher earnings with

the Euro. Moreover, Nigeria, which still owes billions of dollars in dollars to the World Bank and

IMF would earn more money in Euros and find it easier to pay in dollars. This would enhance

Nigeria’s ability to pay off its debts – a goal being aggressively pursed in the country.

Other OPEC countries such as Kuwait, Qatar and the United Arab Emirates, which like

Saudi Arabia, enjoy surplus economies and military protection (which also applies to present-

day Iraq) from the US, would also stick to the dollar. However some other OPEC countries like

Algeria, Indonesia and Libya, which have no strong ties (except business) either to the US or to

Saudi Arabia, would switch to the Euro. Iran would sustain its momentary switch. OPEC will be

divided. The discord will lead to widespread cheating on production quotas, and release more

oil to the market, driving down overall costs.

Alternate Future 5: Saudi Arabia and Nigeria maintain status quo and continue to

demand and accept the US dollar for their oil exports; but Venezuela switches to the Euro.

The consequences for Saudi Arabia and Venezuela would be the same as Alternate

Future 7, above. However, Nigeria, which has habitually been a debtor nation to the US-

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controlled IMF and World Bank, even though is working hard to pay off its current debts and

raise its credit rating, still keep on open window for future credit and will not unduly hamper any

such possibility in the future. Nigeria will attract greater US investments. Again, Nigeria, having

received enormous aid from the US would maintain the goodwill of the US and ask for, and very

likely receive (or even be offered) concessions and debt-relief.

Other OPEC countries such as Kuwait, Qatar and the United Arab Emirates, which like

Saudi Arabia, enjoy surplus economies and military protection (which also applies to present-

day Iraq) from the US, would also stick to the dollar. However some other OPEC countries like

Algeria, Indonesia and Libya, which have no strong ties (except business) either to the US or to

Saudi Arabia, would switch to the Euro. Iran would sustain its momentary switch. OPEC will be

divided. The discord will lead to widespread cheating on production quotas, and release more

oil to the market, driving down overall costs.

Alternate Future 8: Saudi Arabia, Venezuela and Nigeria all maintain status quo and

continue to demand and accept the US dollar for their oil exports.

The consequences for Saudi Arabia and Venezuela would be the same as Alternate

Futures 7 and 5, above. Because of the threat that will remain of Venezuela switching to the

Euro, the country would get less criticism from the US, and attempt to use its newly found

leverage to establish itself as a regional power in Latin America.

Other OPEC countries will also stick to the dollar. However, agitations by some OPEC

countries like Algeria, Indonesia and Libya, which have no strong ties (except business, when

inevitable) either to the US or Saudi Arabia, to switch to the Euro, will be strong. Iran would

sustain its momentary switch. OPEC will be volatile. The discord will lead to widespread

cheating on production quotas, and release more oil to the market, driving down overall costs.

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Alternate Future 4: Saudi Arabia and Venezuela switch to the Euro; but Nigeria

maintains status quo and continues to demand and accept the US dollar for its oil exports.

Saudi Arabia earns greater revenues from oil sells and pulls her investments from US

institutions. Security ties to the US are severely weakened as mutual distrust set in.

Consequently, Saudi Arabia cancels any existing defense contracts with the US and invests

more in military hardware and training and possibly nuclear weapons through cooperation with

China, Russia and Pakistan (or even North Korea). Furthermore, the Wahhabis gain more

influence and Saudi Arabia moves to more obvious and radical Islamization and establishes

closer ties with the EU as well as its radical and hostile neighbors, in order to reduce friction and

because of security threats.

Similarly, Venezuela earns enormous revenues from oil sales, boosts its military with

more weapons from China, Russia, Spain or any other country willing to sell; seriously

considers or starts a nuclear weapons program (citing their “fear of American aggression”) as

the reason; establishes closer ties with the EU and lends financial support to its neighbors or

allies such as the Dominican Republic, Columbia, Cuba and Zimbabwe.

However, Nigeria, which has habitually been a debtor nation to the US-controlled IMF

and World Bank, as well as received enormous aid from the US would maintain the goodwill of

the US and ask for, and very likely receive (or even be offered) concessions and debt-relief.

Notwithstanding Saudi influence in OPEC, other countries such as Kuwait, Iraq, Qatar

and the United Arab Emirates, which depend on military protection from the US, are torn

between seeking the goodwill of Saudi Arabia, which can flood the market with oil, and the

continued goodwill and military protection from the US. Because of the high price of security,

they would stick to the dollar, but will likely transfer some of their investments to EU institutions.

However some other OPEC countries like Algeria, Indonesia and Libya, which have no strong

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ties (except business, when inevitable) to the US would still join Saudi Arabia and Venezuela

and switch to the Euro. Iran would sustain its momentary switch. OPEC will be divided. The

discord will lead to widespread cheating on production quotas, and release more oil to the

market, driving down overall costs.

Alternate Future 6: Saudi Arabia and Venezuela maintain status quo and continue to

demand and accept the US dollar for their oil exports; but Nigeria switches to the Euro.

The consequences for Saudi Arabia and Venezuela would be the same as Alternate

Futures 7 and 5, above. Nigeria basically having more of business ties to the US than any other

alliance that they consider more of an interest to them than to the US, will cherish higher

earnings with Euro. Moreover, Nigeria, which owes billions of dollars in dollars to the World

Bank and IMF would earn more money in Euros and find it easier to pay in dollars.

Many OPEC countries will also stick to the dollar – some grudgingly. Agitations by some

OPEC countries like Algeria, Indonesia and Libya, which have no strong ties (except business,

when inevitable) to the US; to switch to the Euro will be strong. Iran would sustain its

momentary switch. OPEC will be divided and volatile. The discord will lead to widespread

cheating on production quotas, and release more oil to the market, driving down overall costs.

Alternate Future 1: Saudi Arabia, Venezuela and Nigeria all switch to the Euro.

The consequences for Saudi Arabia and Venezuela would be the same as Alternate

Future 4, and the same for Nigeria as in Alternate Future 6.

Every OPEC country, except Kuwait, Iraq, Qatar and the United Arab Emirates, which

depend on military protection from the US, will switch to the Euro. Kuwait, Iraq, Qatar and the

United Arab Emirates will stick with the dollar because of their need for the continued goodwill

and military protection from the US. They will still value the high price of security, but likely

transfer some of their investments to EU institutions.

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OPEC will be divided. The discord will lead to widespread cheating by Kuwait, Iraq,

Qatar and the United Arab Emirates on production quotas, and release more oil to the market,

driving down overall costs.

Alternate Future 3: Saudi Arabia switches to the Euro; but Venezuela and Nigeria

maintain status quo and continue to demand and accept the US dollar for their oil exports.

The consequences for Saudi Arabia will be the same as in Alternate Future 4, and the

same for Venezuela and Nigeria as in Alternate Future 8.

Other OPEC countries, except Kuwait, Iraq, Qatar and the United Arab Emirates, which

depend on military protection from the US, will switch to the Euro. Kuwait, Iraq, Qatar and the

United Arab Emirates will stick with the dollar because of their need for the continued goodwill

and military protection from the US. They will still value the high price of security, but likely

transfer some of their investments to EU institutions. However, Algeria, Indonesia and Libya will

join Saudi Arabia and switch to the Euro. Iran would sustain its momentary switch.

OPEC will be divided. The discord will lead to widespread cheating by Kuwait, Iraq,

Qatar and the United Arab Emirates on production quotas, and release more oil to the market,

driving down overall costs.

Alternate Future 2: Saudi Arabia and Nigeria switch to the Euro; but Venezuela

maintains status quo and continues to demand and accept the US dollar for its oil exports.

The consequences for Saudi Arabia and Venezuela would be the same as Alternate

Future 4, the same for Nigeria as in Alternate Future 6, and the same for Venezuela as in

Alternate Future 8.

Other OPEC countries, except Kuwait, Iraq, Qatar and the United Arab Emirates, which

depend on military protection from the US, will switch to the Euro. Kuwait, Iraq, Qatar and the

United Arab Emirates will stick with the dollar because of their need for the continued goodwill

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and military protection from the US. They will still value the high price of security, but will be

likely transfer some of their investments to EU institutions. However, Algeria, Indonesia and

Libya will join Saudi Arabia and Nigeria and switch to the Euro. Iran would sustain its

momentary switch.

OPEC will be divided. The discord will lead to widespread cheating by Kuwait, Iraq,

Qatar and the United Arab Emirates on production quotas, and release more oil to the market,

driving down overall costs.

This is the most unlikely future under Scenario I.

Scenario II - Anti-America sentiments escalate within OPEC countries, or within the

Arab world.

Alternate Future 4: Saudi Arabia and Venezuela switch to the Euro; but Nigeria

maintains status quo and continues to demand and accept the US dollar for its oil exports.

With anti-American sentiments high within OPEC (and obviously Arab and/or Islamic)

nations, Saudi Arabia will be under an excruciating pressure from the Wahibbis to demonstrate

their allegiance to “Islam” or to America, which will be more strongly portrayed as anti-Islam.

Fearing heightened internal revolt and destabilization by the now more radicalized Wahibbis and

their neighbors, Saudi Arabia will take actions to severe close relations with the US. Saudi

Arabia would drop the dollar.

Venezuela, already highly critical of what it has often described as “American

imperialism” would find emboldened allies in Saudi Arabia (and other OPEC countries) and

summarily drop the dollar – a clamor that has been heard from Venezuelan authorities over the

years.

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Although Nigeria is a 50% Muslim (non-Arab) country, the Nigerian government (military

or civilian; Muslim or non-Muslim) has traditionally not openly identified with Arab courses, or

acted in favor of the desires or Arab nations at the expense of any relationship it enjoys with the

US. Moreover, Nigeria, which has habitually been a debtor nation to the US-controlled IMF and

World Bank, as well as received enormous aid from the US would maintain the goodwill of the

US and ask for, and very likely receive (or even be offered) concessions and debt-relief.

Almost all OPEC countries, except Iraq, which depend on military protection from the

US, will switch to the Euro. This will include Kuwait, Qatar and the United Arab Emirates for fear

of Arab retribution or out of conviction. Algeria, Indonesia and Libya will also join Saudi Arabia.

Iran would sustain its momentary switch. Consequently, Saudi Arabia, Kuwait, Qatar and the

United Arab Emirates will invest more in military hardware and training and possibly nuclear

weapons (especially Saudi Arabia and Kuwait) through cooperation with China, Russia and

Pakistan (or even North Korea). These countries will move to more obvious and radical

Islamization and establish closer ties with the EU countries as well as its radical and hostile

neighbors, in order to reduce friction and because of security threats.

At OPEC, Nigeria will be seen as a “renegade member” and would be subject to

retributive measures. Encouraged by the US, Nigeria will pull out of, or be frustrated out of

OPEC. With Nigeria gone, OPEC will be united against the US. Oil embargo against the US will

follow. The US economy would suffer tremendously, but the US will mitigate the effects by

increasing alternative energy exploration, energy conservation and increased import from

Alternate Future 3: Saudi Arabia switches to the Euro; but Venezuela and Nigeria

maintain status quo and continue to demand and accept the US dollar for their oil exports.

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The consequences for Saudi Arabia and Nigeria are the same as in Future 4, above.

Although, antagonism remains between the US and Venezuela, Venezuela would maintain the

dollar because of economic considerations, and the hope of a new non-Bush administration.

Because of the threat that will remain of Venezuela switching to the Euro, the country

would get less criticism from the US, and attempt to use its newly found leverage to increase its

influence in Latin America.

Almost all OPEC countries, except Iraq, which depend on military protection from the

US, will switch to the Euro. This will include Kuwait, Qatar and the United Arab Emirates for fear

of Arab retribution or out of conviction. Algeria, Indonesia and Libya will also join Saudi Arabia.

Iran would sustain its momentary switch. Consequently, Saudi Arabia, Kuwait, Qatar and the

United Arab Emirates will invest more in military hardware and training and possibly nuclear

weapons (especially Saudi Arabia and Kuwait) through cooperation with China, Russia and

Pakistan (or even North Korea). These countries will move to more obvious and radical

Islamization and establish closer ties with the EU countries as well as its radical and hostile

neighbors, in order to reduce friction and because of security threats.

At OPEC, Nigeria and Venezuela will be seen as a “renegade members” and would be

subject to retributive measures. The US will encourage Nigeria to pull out of OPEC, but Nigeria

will sty put. Venezuela will also stay. OPEC will be volatile with the bulk of its members united

against the US. Clamor for oil embargo against the US will follow, but will not succeed because

of Nigeria and Venezuela. In recognition of the heightened threats, the US will increase

alternative energy exploration, energy conservation and increase import from Canada, Mexico,

Venezuela and Nigeria.

Alternate Future 2: Saudi Arabia and Nigeria switch to the Euro; but Venezuela

maintains status quo and continues to demand and accept the US dollar for its oil exports.

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The consequences for Saudi Arabia are the same as in Future 4 and the same for

Venezuela as in Future 3. Nigeria is rewarded by Saudi Arabia and other Muslim nations for its

solidarity with the Islamic world. More Islamic schools and hospitals are built in Nigeria in

compensation for its lost favor with the US. Consequently, Nigeria shifts dramatically from its

“secular” nature to more Islam. Radical Muslims in Nigeria are emboldened and move for

adoption of Islamic law across the nation (no more in the north alone) and there will be

increased confrontations with the Christian south, who will remain strongly against Islamization

and staunchly pro-American and pro-US dollar. Bloody clashes will erupt starting from the

Northern cities of Kaduna, Zaria, Maiduguri, and Sokoto (hotbeds for radical Islam), and quickly

spreading to other parts of the North. Many Christians living in the North are massacred.

Christians in the South respond by killing Muslims living in the South. Mayhem ensues.

The US and Israel support the oil-rich Southern Nigeria and encourages them to secede.

Threat of a civil escalates, and eventually, actual civil war breaks out. EU countries, China, and

Russia, seeing no advantage in supporting radical Islamic Northern Nigeria and letting the US

do the dirty work for the South remain neutral. Iran lends military support to Northern Nigeria.

Agitations and demonstrations increase in Pakistan and Egypt to support Northern Nigerian

Muslims. Many Islamic militants from Pakistan, Egypt, Yemen, Syria and other Muslim nations

volunteer to fight for the Muslim Northern Nigeria to defeat America, Israel and Christians. The

threat of Armageddon becomes real, but eventually, the Christian South breaks away after 3-10

years of a bloody (civil?) war. The US dollar is restored in the oil-producing victorious South.

The US promptly establishes military bases in the South, which prospers economically with their

oil and American goodwill.

At OPEC, almost every country, except Iraq, which depends on military protection from

the US, will switch to the Euro. This will include Kuwait, Qatar and the United Arab Emirates for

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fear of Arab retribution or out of conviction. Algeria, Indonesia and Libya will also join Saudi

Arabia and Nigeria. Iran would sustain its momentary switch. Consequently, Saudi Arabia,

Kuwait, Qatar and the United Arab Emirates will invest more in military hardware and training

and possibly nuclear weapons (especially Saudi Arabia and Kuwait) through cooperation with

China, Russia and Pakistan (or even North Korea). These countries will move to more obvious

and radical Islamization and establish closer ties with the EU countries as well as its radical and

hostile neighbors, in order to reduce friction and because of security threats.

Venezuela will be seen as a “renegade member” and would be subject to retributive

measures. Eventually, Venezuela will be frustrated out of OPEC. Oil embargo against the US

will follow. The US will minimize the effects by increasing alternative energy exploration, energy

conservation and increased import from Canada, Mexico and Venezuela.

OPEC will change its official language from English to Arabic or French. Incidentally, the

part of Nigeria remaining in OPEC will be Muslim-dominated Northern Nigeria with no natural oil

deposits. Now a country of its own, Northern Nigeria (or any other name they might be called)

will technically cease to be an OPEC country since they would no longer be an oil exporting

country. Or, OPEC will carve out the category of “honorary member” or “special member” as a

gesture to Northern Nigeria. Northern Nigeria will have a lot of goodwill from OPEC. For

example, OPEC may vote to devote certain percentages of each member’s oil sells to Northern

Nigeria (or any other name they’ll be called).

Alternate Future 8: Saudi Arabia, Venezuela and Nigeria all maintain status quo and

continue to demand and accept the US dollar for their oil exports.

The consequences for Saudi Arabia and Nigeria would be the same as in Alternate

Future 4, and the same for Venezuela as in Alternate Future 3.

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However, because of haywire activities of the Wahhabis and the heightened accusation

of the Saudi Arabian monarchy as being American stooges, strong internal dissensions will

ensue. Terrorist attacks within Saudi Arabia, against the riling class and US interests would

mount. Assassinations or assassination attempts will mount.

Most OPEC countries including Algeria, Kuwait, Qatar, Libya and the United Arab

Emirates will maintain trading in the dollar. However, Indonesia will switch to the Euro. Iran

would sustain its momentary switch. Thus, OPEC will be divided. The discord will lead to

widespread cheating by Iran and Indonesia on production quotas.

Alternate Future 1: Saudi Arabia, Venezuela and Nigeria all switch to the Euro.

The consequences for Saudi Arabia and Venezuela would be the same as in Alternate

Future 4, and the same for Nigeria as in Alternate Future 2, with the exception that neither

Venezuela nor Nigeria will be seen as a “renegade member” being that most other OPEC

countries including Algeria, Kuwait, Qatar, Libya and the United Arab Emirates will likewise,

maintain trading in the dollar. However, Indonesia will switch to the Euro. Iran would sustain its

momentary switch. Thus, OPEC will be somewhat divided. The discord will lead to widespread

cheating by Iran and Indonesia on production quotas.

Alternate Future 5: Saudi Arabia and Nigeria maintain status quo and continue to

demand and accept the US dollar for its oil exports; but Venezuela switches to the Euro.

The consequences for Saudi Arabia and Nigeria would be the same as in Alternate

Future 4, and the same for Venezuela as in Alternate Future 3.

At OPEC, most countries including Algeria, Kuwait, Qatar, Libya and the United Arab

Emirates will join Saudi Arabia and Nigeria in maintaining trading in the dollar. However,

Indonesia will switch to the Euro. Iran would sustain its momentary switch. Thus, OPEC will be

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somewhat divided. The discord will lead to widespread cheating by Iran and Indonesia on

production quotas.

Alternate Future 7: Saudi Arabia maintains status quo and continues to demand and

accept the US dollar for its oil exports; both Venezuela and Nigeria switch to the Euro.

The consequences for Saudi Arabia a would be the same as in Alternate Future 4; the

same for Venezuela as in Alternate Future 5; and the same for Nigeria as in Alternate Future 2.

Most OPEC countries including Algeria, Kuwait, Qatar, Libya and the United Arab

Emirates will join Saudi Arabia and maintain trading in the dollar. However, Indonesia will switch

to the Euro. Iran would sustain its momentary switch. Thus, OPEC will be divided. The discord

will lead to widespread cheating by Venezuela and Nigeria on production quotas.

Alternate Future 6: Saudi Arabia and Venezuela maintain status quo and continue to

demand and accept the US dollar for their oil exports; but Nigeria switches to the Euro.

This is the least likely future. The consequences for Saudi Arabia would be the same as

in Alternate Future 4, the same for Venezuela as in Alternate Future 3; and the same for Nigeria

as in Alternate Future 2.

Most OPEC countries including Algeria, Kuwait, Qatar, Libya and the United Arab

Emirates will join Saudi Arabia and maintain trading in the dollar. However, Indonesia will switch

to the Euro. Iran would sustain its momentary switch. Thus, OPEC will be divided. The discord

will lead to widespread cheating by Iran, Indonesia and Nigeria on production quotas.

Step X: Determination of Focal Events for Alternate Futures

Focal events are events which must occur in our present to create the alternate futures.

In essence, they’re occurrences that directly affect the relative probability of alternate futures.

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Two possible scenarios exist, which could significantly influence the actions of the actors

and eventual results:

Scenario I

While OPEC countries continue to accept the dollar, the Euro significantly gains power

over the dollar. Exchange rates reach or surpass 1 Euro to 1.5 dollars.

In this scenario, OPEC countries are left with a big economic decision. Since changes in

the value of the dollar against other major world currencies affect OPEC's decisions on how

much oil to produce, OPEC-member states receive smaller revenues in other currencies for

their oil, causing substantial cuts in their purchasing power, because they continue to sell oil in

the U.S. dollar.

This gives the EU some momentum in its campaign to make the Euro the dominant

Alternate Future 7: Saudi Arabia maintains status quo and continues to demand and

accept the US dollar for its oil exports; both Venezuela and Nigeria switch to the Euro.

There are no additional focal events necessary for this alternate future, as long as Saudi

Arabia and other OPEC countries continue to reap huge revenue for the high price of fuel.

Alternate Future 5: Saudi Arabia and Nigeria maintain status quo and continue to

demand and accept the US dollar for their oil exports; but Venezuela switches to the Euro.

OPEC countries continue to reap huge revenue for the high price of fuel, while both

Venezuela’s current administration under President Hugo Chavez, and America’s George Bush

stay in power and the animosity against each other stays or grows.

Alternate Future 8: Saudi Arabia, Venezuela and Nigeria all maintain status quo and

continue to demand and accept the US dollar for their oil exports.

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OPEC countries continue to reap huge revenue for the high price of fuel, and the

animosity between Venezuela’s current administration under President Hugo Chavez, and

America’s George Bush does not escalate.

Alternate Future 4: Saudi Arabia and Venezuela switch to the Euro; but Nigeria

maintains status quo and continues to demand and accept the US dollar for its oil exports.

Income for OPEC countries decline considerably and the animosity between

Venezuela’s current administration under President Hugo Chavez, and America’s George Bush

escalates. Nigeria gets substantial debt relief from both the World Bank and IMF, in addition to

massive aid from the US.

Alternate Future 6: Saudi Arabia and Venezuela maintain status quo and continue to

demand and accept the US dollar for their oil exports; but Nigeria switches to the Euro.

OPEC countries continue to reap huge revenue for the high price of fuel, and the

animosity between Venezuela’s current administration under President Hugo Chavez, and

America’s George Bush does not escalate. Nigeria gets substantial aid from the EU, enough to

offset its loan obligations to the World Bank and IMF, as well as spur accelerated economic

growth.

Alternate Future 1: Saudi Arabia, Venezuela and Nigeria all switch to the Euro.

Income for OPEC countries decline considerably and the animosity between

Venezuela’s current administration under President Hugo Chavez, and America’s George Bush

doesn’t subside or it escalates. Nigeria doesn’t get substantial debt relief from both the World

Bank and IMF, in addition to massive aid from the US, or gets substantial aid from the EU,

enough to offset its loan obligations to the World Bank and IMF, as well as spur accelerated

economic growth.

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Alternate Future 3: Saudi Arabia switches to the Euro; but Venezuela and Nigeria

maintain status quo and continue to demand and accept the US dollar for their oil exports.

Terrorist attacks occur in America and Saudi Arabia is implicated. The US seizes or

threatens to seize Saudi Assets in the US. The animosity between Venezuela’s current

administration under President Hugo Chavez and America’s George Bush does not escalate.

Nigeria gets substantial aid from the US, or is granted relief from its loan obligations to the

World Bank and IMF, as well as spur accelerated economic growth.

Alternate Future 2: Saudi Arabia and Nigeria switch to the Euro; but Venezuela

maintains status quo and continues to demand and accept the US dollar for its oil exports.

This is the most unlikely future under Scenario I. There is currently no conceivable focal

event for this future.

Scenario II

Anti-America sentiments escalate within OPEC countries, or within the Arab world.

Alternate Future 4: Saudi Arabia and Venezuela switch to the Euro; but Nigeria

maintains status quo and continues to demand and accept the US dollar for its oil exports.

There’s escalation in conflicts in the Middle East causing Israel, supported by the US, to

escalate military action or other security measures against Islamic nations. Hostilities skyrocket

or full scale war breaks out and Arab nations rally against Israel and America, or the US takes

military action against such OPEC and/or Muslim country as Syria, Iran or Venezuela.

Moreover, the animosity between Venezuela’s current administration under President Hugo

Chavez, and America’s George Bush escalates. Nothing needs to change with Nigeria.

Alternate Future 3: Saudi Arabia switches to the Euro; but Venezuela and Nigeria

maintain status quo and continue to demand and accept the US dollar for their oil exports.

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There’s escalation in conflicts in the Middle East causing Israel, supported by the US, to

escalate military action or other security measures against Islamic nations. Hostilities skyrocket

or full scale war breaks out and Arab nations rally against Israel and America, or the US takes

military action against such Muslim country as Syria or Iran.

The animosity between Venezuela’s current administration under President Hugo

Chavez, and America’s George Bush does not escalate and nothing changes with Nigeria.

Alternate Future 2: Saudi Arabia and Nigeria switch to the Euro; but Venezuela

maintains status quo and continues to demand and accept the US dollar for its oil exports.

There’s escalation in conflicts in the Middle East causing Israel, supported by the US, to

escalate military action or other security measures against Islamic nations. Hostilities skyrocket

or full scale war breaks out and Arab nations rally against Israel and America, or the US takes

military action against such Muslim country as Syria or Iran.

Very blood riots breakout in northern Nigeria, which is predominantly Muslim, and

Islamic fundamentalists cause untold mayhem. The government of President Olusegun

Obasanjo, a Christian, but already afraid of Muslim fundamentalists is threatened or intimidated,

or is assassinated or overthrown by militant Muslims.

Meanwhile, the animosity between Venezuela’s current administration under President

Hugo Chavez, and America’s George Bush does not escalate.

Alternate Future 8: Saudi Arabia, Venezuela and Nigeria all maintain status quo and

continue to demand and accept the US dollar for their oil exports.

There’s escalation in conflicts in the Middle East causing Israel, supported by the US, to

escalate military action or other security measures against Islamic nations. Hostilities skyrocket

or full scale war breaks out and Arab nations rally against Israel and America, or the US takes

military action against such Muslim country as Syria or Iran.

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However, the Saudi government doesn’t experience any increased threats from within

the Kingdom and surrounding Arab neighbors, and there are no serious riots in Nigeria. Income

for OPEC countries continues to grow considerably and the animosity between Venezuela’s

current administration under President Hugo Chavez, and America’s George Bush subsides or

doesn’t escalate. Nigeria isn’t specially wooed by the EU, with aids or grants enough to offset its

loan obligations to the World Bank and IMF, as well as spur accelerated economic growth.

Alternate Future 1: Saudi Arabia, Venezuela and Nigeria all switch to the Euro.

There’s escalation in conflicts in the Middle East causing Israel, supported by the US, to

escalate military action or other security measures against Islamic nations. Hostilities skyrocket

or full scale war breaks out and Arab nations rally against Israel and America, or the US takes

military action against such Muslim country as Syria or Iran.

Very blood riots breakout in northern Nigeria, which is predominantly Muslim, and

Islamic fundamentalists cause untold mayhem. The government of President Olusegun

Obasanjo, a Christian, but already afraid of Muslim fundamentalists is threatened or intimidated.

Meanwhile, the animosity between Venezuela’s current administration under President

Hugo Chavez, and America’s George Bush escalates.

Alternate Future 5: Saudi Arabia and Nigeria maintain status quo and continue to

demand and accept the US dollar for its oil exports; but Venezuela switches to the Euro.

There’s escalation in conflicts in the Middle East causing Israel, supported by the US, to

escalate military action or other security measures against Islamic nations. Hostilities skyrocket

or full scale war breaks out and Arab nations rally against Israel and America, or the US takes

military action against such OPEC country such as Syria, Iran or Venezuela.

However, neither the Saudi government not the Nigerian government experiences

increased threats from within their citizenry, or surrounding Muslim neighbors. Income for OPEC

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countries continues to grow considerably, but the animosity between Venezuela’s current

administration under President Hugo Chavez, and America’s George Bush escalates. Nigeria

isn’t specially wooed by the EU, with aids or grants enough to offset its loan obligations to the

World Bank and IMF, as well as spur accelerated economic growth.

Alternate Future 7: Saudi Arabia maintains status quo and continues to demand and

accept the US dollar for its oil exports; both Venezuela and Nigeria switch to the Euro.

There’s escalation in conflicts in the Middle East causing Israel, supported by the US, to

escalate military action or other security measures against Islamic nations. Hostilities skyrocket

or full scale war breaks out and Arab nations rally against Israel and America, or the US takes

military action against such OPEC country such as Syria, Iran or Venezuela.

Notwithstanding, the Saudi government does not experience increased threats from

within the Kingdom. But, in Nigeria, very blood riots breakout in the north, which is

predominantly Muslim, and Islamic fundamentalists cause untold mayhem. The government of

President Olusegun Obasanjo, a Christian, already afraid of Muslim fundamentalists is

threatened or intimidated, or is assassinated or overthrown by militant Muslims.

Meanwhile, the animosity between Venezuela’s current administration under President

Hugo Chavez, and America’s George Bush escalates

Alternate Future 6: Saudi Arabia and Venezuela maintain status quo and continue to

demand and accept the US dollar for their oil exports; but Nigeria switches to the Euro.

This is the least likely future. If there’s escalation in conflicts in the Middle East causing

Israel, supported by the US, to escalate military action or other security measures against

Islamic nations, and hostilities to skyrocket or if a full scale war breaks out and Arab nations

rally against Israel and America, it’s unlikely that the Saudi government will not experience

increased threats from within the Kingdom.

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It will be a miracle for the animosity between Venezuela’s current administration under

President Hugo Chavez, and America’s George Bush to subside, as there grows more anti-

American sentiments in the Muslim world and Iran, who with Cuba, is a close ally of

Venezuela’s President Chavez.

Step XI: Development of Indicators for each Focal Event

The key indicators are the dollars continuous slide over the Euro and the escalating

sentiments against the US within the Muslim world and eventually, OPEC community.

For Scenario I, where the Euro significantly gains power over the dollar, and exchange

rates reaching or surpassing 1 Euro to 1.5 dollars, the indicators are:

a. The dollar has continued to slide over the Euro. Between 1999 and 2000, the Euro

traded for between US\$1.00 and US\$1.03.27 In March 2006, 1 Euro traded for an

average of 1.17 US dollars. Between May and August 2006, the rate has changed to

1 Euro to 1.28 - 1.30 US dollars.

b. For what began on April 8, 1951 as the European Coal and Steel Community

(ECSC), when six countries: Belgium, France, Germany, Holland, Italy, Luxembourg,

signed the Treaty of Paris, the growth and expansion in the economic powers of the

EU has been impressive. The EU is now a highly populated, culturally diverse union

of 25 member states and is constantly expanding and developing. Over the next two

decades the total population of the EU25 is expected to increase by more than 13

million inhabitants, from 456.8 million on 1 January 2004 to 470.1 million on 1

27
Tiago Stock Consulting - http://www.x-rates.com/

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January 2025.28 This is against America’s projected 2025 population of about 335

million29. With a bigger consumer power, the EU can start to demand that oil

transactions be made in the Euro, or non-compliant exporters might face sanctions.

Such growth in economic power of EU presents a real competition for the US.

For Scenario II, where anti-America sentiments escalate within OPEC countries, or

within the Arab world, the indicators are:

a. There have always been strong anti-American sentiments in the Arab world.

However, this has been higher in the last 6 years than any other time in recent

history. The groups or individuals that the US associates with terrorism have grown

in popularity. This is demonstrated by the election of Hamas in Palestine and the

hard-line President Mahmoud Ahmadinejad of Iran, whose role in the 1979 Islamic

Revolution has remained in confusion. Several of the 52 Americans who were held

hostage in the US embassy in the months after the revolution say they are certain

b. Arab countries continue to be see the US as not only pro-Israel, but anti-Islam, and

running polices aimed at Americanizing and Christianizing the Muslim world. Muslim

countries continue to feel that their culture and religion are being threatened, even

when the US has the best of intentions. A major controversy erupted when the May 9

issue of Newsweek magazine reported an allegation that U.S. military guards had

flushed a Koran down a toilet in front of Muslim prisoners at Guantánamo. This led to

28
EU25 population projection, accessed July 10, 2006
http://intranet.icea.es/pensiones/documentacion/Proy_demog_2004_2050.pdf
29
Paul Campbell, US Census Bureau - http://www.census.gov/prod/2/pop/p25/p25-1131.pdf
30
Iranian President Ahmadinejab holds a PhD in traffic and transport from Tehran's University of Science and
Technology, where he was a lecturer before becoming Mayor of Tehran
31
BBC News, Friday April 28, 2006; http://news.bbc.co.uk/1/hi/world/middle_east/4107270.stm

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widespread anti-U.S. demonstrations and riots that broke out across Muslim

countries.32

c. Arab political figures continue to accuse the US of playing double-standard in Israel’s

treatment of Palestinian people, prompting constant demonstrations against the US

(and Israel) in Palestine and other Arab countries, where the US and Israeli flags,

and effigies of US and Israeli leaders are burnt or disfigured.

d. America's anger following the involvement of many Saudi citizens in the September

11, 2001 terrorist attacks tended to prompt rebukes even from normally pro-

American, reform-oriented Saudis, who recoiled and have continued to recoil at what

they consider unreasoned hostility against Saudi Arabia, and have been voicing

alarm at the treatment of foreign Arabs in the United States.

e. The Saudi state is no longer in need of US protection as much as before. Saudi

Arabia has made an effort to limit regional threats. It has settled border disputes with

the United Arab Emirates, Qatar, and Yemen. It has worked diligently to improve

relations with countries in the region, especially Iran, Syria, Yemen, and even pre-

invasion Iraq. It has also actively cultivated good relations with other countries

nearby, such as Pakistan, but outside the region as well, in particular China. Saudi

Arabia may not view China as an exact replacement of the United States, but instead

as a major piece of a puzzle that includes France, Germany, and India for its

protection when needed.

f.   The militant Wahhabi ideology33 continues to grow strong in Saudi Arabia through

heavily religious curriculum inculcated from kindergarten and through pervasive

32
Newsweek later said that it was retracting the report because of questions raised about its source.

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media broadcast. Although, Saudi government officially denies it, evidence suggests

Saudi Arabia’s continuous efforts to export the Wahhabi ideology throughout the

world to inflame anti-American sentiments.34 Faksh (1997) provides for an in-depth

understanding of the conflicts, challenges, and attraction of present-day Islamism-

Islamic fundamentalism in Saudi Arabia (as well as Egypt and Algeria).

g. Saudi media and mosques have intensified their criticism of the US for what they

describe as its moral decay and corruption of Muslim countries.

h. The war in Iraq, with all its controversies and tens of thousands of Muslim deaths,

has further galvanized anger against the US. Young Arabs are blowing themselves

up just to kill those they perceive as pro-America or anti-Islam. Before the Iraqi war,

Arabs nervously expected the US invasion and occupation of Iraq to lead to

widespread violence and upheavals in the Gulf, including destabilization of the

present Saudi regime. The on-going violence in Iraq seems to give credence to the

Arabs’ earlier fears. Thus, as elucidated by Hahn (2005), the projection of American

power of occupation into the region has had consequences that are forever changing

the United States and the Middle East.

i.   The currently expanding Israeli war with Hezbollah, though a ceasefire has been

imposed by the UN just about when this report was being finished, has also stirred

anger with the US for their support of Israel.

33
Wahhabism (Arabic: ‫ ,ةيبا ولا‬Wahabism, Wahabbism) is a Sunni fundamentalist Islamic movement, named after
Muhammad ibn Abd al Wahhab (1703–1792). It is the dominant form of Islam in Saudi Arabia and Qatar. Many
members of the movement object to the term "Wahhabism", preferring the term "Salafism".
34
In a bipartisan Letter Sent in Anticipation of March 15th Deadline for State Dept. to Act on Saudi Religious
Freedom Violations, Senators Charles Schumer (D-NY) and Susan Collins (R-ME) were joined by thirteen of their
colleagues from both sides of the aisle in sending a letter to Secretary Condoleezza Rice to express appreciation for
the Department of State’s 2004 designation of Saudi Arabia as a “country of particular concern” (CPC) for its
systematic, ongoing, and egregious violations of religious freedom.

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j.   Radical Islam is growing in Nigeria leading to several anti-US demonstrations in the

Muslim North.

k. Venezuelan President Hugo Chávez continues to engage in a war of words with the

Bush administration, and the US Congress continues to indirectly fund anti-Chávez

groups.35

Step XII: The Potential of a given Alternate Future “transposing” into another
Alternate Future

Scenario I

In Scenario I, where the Euro significantly gains power over the dollar, and exchange

rates reaching or surpassing 1 Euro to 1.5 dollars, the most likely transposition would be for

Alternate Future 7 (Saudi Arabia maintains status quo and continues to demand and accept the

US dollar for its oil exports; both Venezuela and Nigeria switch to the Euro) to transpose to

Alternate Future 1 (Saudi Arabia, Venezuela and Nigeria all switch to the Euro). This could be

caused by the rise of another military superpower to provide security for Saudi Arabia.

Scenario II

In Scenario II, where anti-America sentiments escalate within OPEC countries, or within

the Arab world, the most likely transposition would be for Alternate Future 7 (Saudi Arabia

maintains status quo and continues to demand and accept the US dollar for its oil exports; both

Venezuela and Nigeria switch to the Euro) to transpose to Alternate Future 1 (Saudi Arabia,

Venezuela and Nigeria all switch to the Euro). This could be caused by the overthrow of the

35
US plays both Venezuela sides, By Mike Ceaser, Correspondent of The Christian Science Monitor, August 10,
2005 edition - http://www.csmonitor.com/2005/0810/p01s04-woam.html

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Saudi royal family by the Wahhabis or other Muslim fundamentalists who will form pacts with

Alternate Future 4 (Saudi Arabia and Venezuela switch to the Euro; but Nigeria

maintains status quo and continues to demand and accept the US dollar for its oil exports) will

also transpose to Alternate Future 1 (Saudi Arabia, Venezuela and Nigeria all switch to the

Euro) if the present Nigerian government is overthrown by Muslim fundamentalists.

Alternate Future 5 (Saudi Arabia and Nigeria maintain status quo and continue to

demand and accept the US dollar for its oil exports; but Venezuela switches to the Euro) will

transpose to Alternate Future 8 (Saudi Arabia, Venezuela and Nigeria all maintain status quo

and continue to demand and accept the US dollar for their oil exports) if the regime of

Venezuelan President Hugo Chávez is overthrown by FEDECAMARAS, a conservative

business group, or any group that they support, or by leftist opposition groups supported by the

Bush administration, or if the US elects a new president more in sync with international

diplomacy.

Conclusions

As indicated earlier, the potential for this analysis, which used the LAMP Method, is to

provide indications and warning to the US on the likelihood of OPEC switching from the US

dollar to the Euro as their currency of transaction. Such a move by OPEC would be devastating

to the US economy. The intent of this work was not to deliver prophesy or to assign a

quantifiable probability of such occurrence (or non-occurrence), but to examine situations that

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might lead to the switch and to encourage the US to devise possible ways of preventing or

coping with such a change.

Unlike many other organizations, OPEC has been very successful working as a bloc in

furtherance of their economic interests. For example, they have placed an oil embargo on the

US and the West in the past as punishment (following the Arab-Israeli war), causing major

disruptions in the US and other Western economies. They have increased the price of oil for

extended periods. Many people in the US call OPEC a “cartel.” Much of their success can be

attributed to Saudi Arabia's influence and flexibility. Regardless of whom OPEC elects as its

Secretary General, Saudi Arabia is the most influential member, with its vast oil reserves (25%

of the world’s total reserves), and is the de facto and de jure leader.

Some lessons can be learned from OPEC’s price policies, which might be relevant in

extrapolating their behavior regarding other monetary issues, like switching to the Euro. OPEC

has tolerated cheating on the part of other members, and cuts its own production to compensate

for other members having exceeded their production quotas. This actually gives them good

leverage, because with most members at full production, Saudi Arabia is the only member with

spare capacity, and the ability to increase supply, if needed.

The policy has been successful, causing the price of crude oil to rise to levels that had,

at one time, been reached only by refined products. However, OPEC's ability to raise prices

does have some practical limits. An increase in oil price decreases consumption and this could

cause a decrease in their net revenue. Even for EU countries, paying for oil in a more powerful

Euro rather than US dollar would effectively increase the price of oil for them. Consequently, a

switch to the Euro would cause decrease in worldwide oil consumption. Furthermore, an

extended rise in effective price (or costs) of oil will encourage systematic behavior change. This

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might include accelerated alternative energy utilization, or increased conservation in the US and

even in developed EU countries, who obviously posses the technological abilities.

A cut in import by the US alone would ultimately affect net revenue for Saudi Arabia,

Venezuela and Nigeria (the 3rd, 4th and 5th largest suppliers of oil to the US respectively). So, a

switch to the Euro might actually backfire on OPEC.

The more some OPEC member states prosper, the more threatened some member

states become. Leading up to the 1990-91 Gulf War, former Iraqi President Saddam Hussein

advocated that OPEC push world oil prices up, thereby helping Iraq, and other member states,

service debts. This was attractive to the member states on face value, but there have always

been divisions in OPEC. The Iraq-Iran War and the Iraqi invasion of Kuwait marked a low point

in the cohesion of OPEC. Although Saudi Arabia has been working diligently to improve

relations with countries in the region, including OPEC members like Iran, Yemen, and even pre-

invasion Iraq, apprehension still exists especially because of the political instability of those

countries. Saudi Arabia and Kuwait understand that an economically and militarily stronger Iran

or Iraq might mean bigger threats to their kingdoms. So, coherence in OPEC should not be

assumed automatically in all cases.

Although it might become economically logical or culturally pressing for Saudi Arabia to

switch to the Euro, Saudi Arabia remains unable to defend itself despite its high military

spending. This is principally because of its small population and large territory. Saudi Arabia has

only about 7 million citizens, while there are 21 million people in Iraq and 66 million in Iran –

highly unstable nations that threaten the stability of the Kingdom.

Saudi Arabia’s relations with its other neighbors have been difficult - even with its fellow

monarchies of the Gulf Cooperation Council (GCC). Qataris and Saudis have clashed over a

disputed border post in September 1992, leaving two dead. Qatar boycotted several GCC

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meetings after the skirmish. Qatar and Saudi Arabia were also at odds over the civil war in

Yemen in 1994 (Jane's Intelligence Review, August 1994).36

In Yemen, victorious northern forces have accused the Saudis of sending arms, money

and mercenaries to breakaway southern forces. Saudi Arabia tried, and failed, to conquer

Yemen, which lies on its southern border, during its consolidation of the Kingdom in the 1930s.

Such histories are hard to forget.

So, even if anti-American sentiments skyrocket in the Arab world or within OPEC

countries, Saudi Arabia understands that it faces strong foes all around it. There remain serious

doubts that the Saudis would be able to counter serious threats, for example, from Iran and Iraq.

The United States, or a coalition, would have to be called upon again to provide protection or to

repel aggression. Many prominent Saudi officials have said that as demonstrated by the Gulf

War, Saudi Arabia can't replace the U.S., and that the U.S. is their protector. Safran (1988)

analyzes the national security policy of the Kingdom of Saudi Arabia from the perspective of its

rulers since the creation of the Kingdom and provides insight into the rulers' modus operandi

and the country's behavior in the international arena. Currently, Saudi Arabia’s courtship with

China, France, Germany and India does not provide for a reliable, sustainable and cohesive

security mechanism, without the US.

Venezuela is the sixth-most populous country in Latin America, after Brazil, Mexico,

Colombia, Argentina and Peru. Venezuela’s 2005 petroleum export (\$47.1billion) was to the US,

which is 55% of its major markets - overall. The US imported 1,470,000 barrels of petroleum per

day from Venezuela in May 2006 alone. In turn, Venezuela imports about two-thirds of its food

needs from the US. In 2005, U.S. firms exported \$419 million worth of agricultural products,

including wheat, corn, soybeans, soybean meal, cotton, animal fats, vegetable oils, and other
36
Federation of American Scientists, Country Profile – Saudi Arabia -
http://www.fas.org/asmp/profiles/saudi_arabia.htm

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items to make Venezuela one of the top two U.S. markets in South America. The United States

supplies roughly one-quarter of Venezuela's food imports.

So, both Venezuela and the US derive economic benefits from each other. A bad

economy for any one hurts the other. It is expected that common sense would prevail and that

the current leaders of both countries will not let differences in personal ideologies to trump the

economic health of their countries. Venezuela well remembers that when its government under

Cipriano Castro was no longer able to placate the demands of European bankers in 1902, naval

forces from Great Britain, Italy, and Germany erected a blockade along the Venezuelan coast

and fired upon its coastal fortifications. Though US then Secretary of State Elihu Root

characterized Cipriano Castro as a "a crazy brute," (it was another era of war of words), but

President Roosevelt was concerned with the prospects of penetration into the region by the

German Empire. Roosevelt threatened military action against the European powers, who

retreated and later negotiated with Cipriano Castro. This incident was a major stimulus behind

the Roosevelt Corollary and the subsequent U.S. policy of Dollar Diplomacy in Latin America.

While it can be argued that Cuba’s Fidel Castro, in whom President Hugo Chavez has

found friendship, let the Soviets into the hemisphere in defiance of the US, and that he (Hugo

Chavez) might not think twice about working outside of America’s approval or to stir up a feeling

of insecurity or challenge in America, President Chavez well understands the long run economic

implications for Cuba. The Soviet Union collapsed and American still stands. Venezuela has

enormous economic investments and relations with the US and has derived tremendous

benefits for its economic cooperation with the US.

In recent times, Nigeria has maintained good relations with the US, in spite of the

disagreements during Ronald Reagan’s eight-year administration. Nigeria is one of the world's

biggest oil exporters. It exports about 1,190,000 barrels of petroleum per day to the US alone,

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but still remains one of the world's poorest countries. It has the majority of its population living

on less than \$1 per day. But recently, it has paid \$4.6bn payment to the Paris Club.37 However it

still will owes about \$5bn to other lenders, including the World Bank and the private sector,

mostly American.

The country has been benefiting from high oil prices, despite production problems and

unrest in its Niger Delta region. The US should understand and appreciate the aspirations and

need of the impoverished nation to repay all its debts, necessary for sustained removal from an

international credit blacklist, and to maintain credit ratings similar to other emerging market

countries such as Turkey and Ukraine. That means the government will be able to borrow

money on international capital markets on favorable terms, and grow its economy. The US

ought to understand that Nigeria, which is neither an Arab nor a predominantly Muslim nation

(and which fervently maintained a non-aligned posture during the Cold War), might not hesitate

to switch to the Euro and form new alliances, if such moves will help it achieve its economic

objectives, and especially if Saudi Arabia does so. However, Nigeria would not like to fall out of

favor with the world’s remaining superpower.

While the US must continue to be strong militarily, it needs to strive to maintain the

goodwill of OPEC and other nations (including Arab nations) by eschewing a policy that may be

perceived as confrontational or arrogant. This analysis demonstrates that OPEC switch to the

Euro is a possibility, though unlikely in the near future.

The US must never see itself as a have-it-all or as indispensable. OPEC countries and

Arabs must be respected (not necessarily loved) for what they are. America’s foreign policy

makers should understand that there’s no denying that to a great extent, “oil stability is linked to

events in the Middle east” (Yetiv, 2004, p.4). The nations, amongst them OPEC countries,

37
The Paris Club is a group of 19 lenders including the UK, Russia, and Germany

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consider their values and national interests first, and not America’s or that of any other country.

The EU countries seem to understand this, better than the US. Accordingly, they show greater

sensitivity and issue fewer threats to OPEC, disparage OPEC a little less and OPEC feels more

at ease to work with them. OPEC’s capabilities should never be underestimated – or

discounted.

The US also needs to continue to increase its productivity levels and continue to keep

inflation in check. The burgeoning national debt, budget and trade deficits are increasingly

putting the US dollar at a disadvantage relative to other major currencies, including the Euro.

These are necessary in order to curb the rate of the decline of the dollar over the Euro.

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Description: An analysis of the likelihood of OPEC Countries switching to the Euro from the US dollar as the currency of petroleum products transaction using the Lockwood Analytical Method of Prediction (LAMP); by Nwankama Nwankama