The petrodollar recycling scheme has been propping up the US economy for decades by assuring that all oil sold anywhere must be paid for in dollars that are then invested back into the US. This arrangement has secured the use of the US dollar as the global reserve currency, endowing it with exorbitant privilige at the expense of the rest of the world. The US can print dollars that other countries must have in order to buy oil, and commodities in general. The US has increasingly weaponised the dollar, which has led to pressure to dedollarise. Trump has repeatedly threatened other countries with economic destruction if they try to move away from the dollar. Tariffs are one way, but currency manipulation as they recently did to destroy the Iranian rial (and then bragged about it) would be another.
Without the exorbitant privilege, the US interest rates would rise on trillions of already unrepayable debt. The cost of interest already exceeds the trillion dollar (set to increase to 1.5 trillion) military budget. Interest is set by the market, not by the central bank, which must simply follow the market. US treasuries have long been considered top-tier collateral, but gold is now taking their place.
The petrodollar system is now ending. China has said that it already dominates the US in every way except financially, and that now it intends for the yuan to become the global reserve currency. This intention is now being reinforced, using oil transport as a weapon. The Straits of Hormuz are closed, affecting delivery of a large percentage of the global oil supply. It will remain under Iranian control, as they can defend it easily, having prepared for this scenario for about thirty years. Iran has said that ‘friendly ships’ may pass, but their oil cargo must be sold in yuan.
Iran also intends to drive the US out of the Gulf region entirely. All the US bases there have already been damaged or destroyed, including critical radar systems costing hundreds of millions of dollars that were taken out by cheap drones ( demonstrating the ineffectiveness if air defence). The US is now blind in this region. Iran has said it will begin to target US corporations in the region, and also Trump’s family assets. US embassies hosting major intelligence operations are also being targeted. There is no way to stop them from doing this. They haven’t yet used their most advanced weaponry, having used the older classes of missiles to overwhelm the existing poor air defence. Interceptors costing multimillions were fired two at a time, or more, to intercept drones costing $50K. A substantial fraction of all the interceptors that have ever been produced has been used up in Ukraine and the Gulf, and there is no surge capacity to produce more quickly.
Iran’s closure of fhe Straits of Hormuz is very likely to be joined by an effective closure by Ansar Allah (the Houthis) of the Bab-al-Mandab – the southern entrance to the Red Sea. This would render the Suez canal useless, and if sustained would mean the proposed construction of the Ben Gurion canal through Gaza would be pointless. The US failed to prevent the closure if the Bab-al-Mandab when it was previously closed in response to the Gaza genocide, despite sending carrier strike groups. The US simply declared victory and left, as is their pattern. The impact on global trade as a whole of the closure of both the Persian Gulf and the Red Sea would be incalculable.
Iran’s military assets are highly dispersed, and very well dug in in a mountainous region. They cannot realistically be taken out. There are multiple underground missile cities, some 500m below ground. The command structure is decentralised, and Iran has a ‘dead hand’ system like that in Russia, meaning that missiles can continue to be fired even if the leadership has been wiped out. Iran has mass produced inflatable replicas of military hardware, and drawn images of aircraft on runways. These are what the US had been bombing, while the critical infrastructure is not exposed. Launchers are invisible under the desert sand, with their crews safe underground. Iran is extremely well prepared, despite soending less than one percent of the US defence budget. The population is more dispersed and less urbanised than most, so even trying to nuke them into submission would not work. These are people who regard martyrdom as a great honor, and who don’t run when their street protests are bombed.
This is what Iran has to say:
The American regime has absolutely failed to understand the situation it has thrust itself into, or the scale of its vulnerabilities. The failure encompasses several past presidencies, but the current one is by far the most ignorant and hubristic, which is a fatal combination. Trump has no understanding of geopolitics, only mafia tactics of bribery, extortion, and threats, learned from his extensive New York mafia connections over decades (see testimony from Sammy ‘The Bull’ Gravano at his trial), and from corrupt mob lawyer Roy Cohn. He makes ‘deals’, but repudiates them a week later. His deals are ‘negotiated’ by two unqualified real eatate developers who are also ardent zionists, so they are uninformed, out of their depth, utterly biased, and set to benefit personally from the conflict (see Kushner’s plans for turning Gaza into a resort for the super-rich) .
Deals are ephemeral. They can be changed on a whim, and Trump is prone to changing his mind multiple times a day. Geopolitics requires binding treaties, painstakingly negotiated by well-informed serious people. Trump’s entire cabinet was chosen on the basis of personal loyalty to him, with a side emphasis on appearance (see Trump’s frequent comments on ‘central casting’) and moral ‘flexibility’. Some of them were chosen to destroy the departments they lead (see Lynda McMahon at the department of education). Most others are both incompetent and corrupt. Pete Hegseth, his Secretary of Defence (now secretary of War), is one of the worst. The man is covered in crusader tattoos and is emersed in end times theology, where the Middle East must go up in flames in order to secure the return of Jesus and the Rapture. No rational thought can break through the religious conviction. To call this a disaster in the making would the understatement of the century, if not considerably longer.
