A Century of War by William Engdahl - Excerpts

A Century of War: Anglo-American Oil Politics and the New World Order. William Engdahl. 2004 (rev ed). ISBN 978-0745323091

EXCERPTS

The power of the dollar and the power of the U.S. military had been uniquely intertwined with one commodity, the basis of the world economic growth engine, since before the First World War. That commodity was petroleum, and in its service British, American, German, French, Italian, and other nations called their soldiers to war. As Henry Kissinger once expressed this importance: ‘control energy and you control the nations.’

No other element has shaped the history of the past 100 years so much as the fight to secure and control the world’s reserves of petroleum. Too little is understood of how political and economic power around the raw material, petroleum, has been shaped by interests principally under the control of two nations, the United Kingdom and, later, the United States of America.

British control of the seas, and with it control of world shipping trade, was thus to emerge after Waterloo as one of the three pillars of a new British Empire … Britain’s unquestioned domination of international banking was the second pillar of English Imperial power following 1815. The third pillar, more and more crucial as the century wore on, was British geopolitical domination of the world’s major raw materials – cotton, metals, coffee, coal, and by the century’s end, the new ‘black gold’, petroleum.

Under the hegemony of free trade, British merchant banks reaped enormous profits on the India-Turkey-China opium trade, while the British Foreign Ministry furthered their banking interests by publicly demanding China open its ports to ‘free trade’, during the British Opium Wars.

… increasingly after the 1846 Corn Laws repeal, the dominant faction in British economic policy was not industry or agriculture, but finance and international trade. In order to insure the supremacy of British international banking, those bankers were willing to sacrifice domestic industry and investment, much as happened in the United States after the Kennedy assassination in the 1960s.

For more than two decades [~1888-1910], the question of the construction of a modern railway linking Continental Europe with Baghdad was a point of friction at the center of German-English relations. By the estimation of Deutsche Bank director Karl Helfferich, the person responsible at the time for the Baghdad rail project negotiations, no other issue led to greater tension between London and Berlin in the decade and a half before 1914, with the possible exception of the issue of Germany’s growing naval fleet.

By early 1913, acting secretly, again at Churchill’s urging, the British government bought up majority share ownership of Anglo-Persian Oil (today British Petroleum). From this point, oil was at the core of British strategic interest.

Many in the British establishment had determined well before 1914 that war was the only course suitable to bring the European situation under control. British interests dictated, according to her balance of power logic, a shift from the traditional ‘pro-Ottoman and anti-Russian’ alliance strategy of the nineteenth century, to a ‘pro-Russian and anti-German alliance strategy.

… then the infamous Dreyfus affair erupted in the French press. Its direct aim was to rupture the delicate efforts of Hanotaux to stabilize relations with Germany. A French army captain named Dreyfus was prosecuted on charges of spying for the Germans. Hanotaux intervened in the initial process in 1894, correctly warning that the Dreyfus affair would lead to ‘a diplomatic rupture with Germany, even war.’ Dreyfus was exonerated years later, and it was revealed that Count Ferdinand Walsin-Esterhazy, in the pay of the Rothschild banking family, had manufactured the evidence against Dreyfus. By 1898, Hanotaux was out of office and had been succeeded by the malleable Anglophile, Theophile Delcasse.

Thus, a British-French-Russian Triple Entente in effect had been fully established by 1907. Britain had created a web of secret alliances encircling Germany, and had laid the foundations for the coming military showdown with the Kaiser’s Reich. The next seven years were ones of preparation for the final elimination of the German threat.

One of the better kept secrets of the 1914-18 world war was that on the eve of August 1914, when Britain declared war against the German Reich, the British Treasury and the finances of the British Empire were in effect bankrupt. An examination of the actual financial relations of the principal parties to the war reveals an extraordinary background of secret credits, coupled with detailed plans to reallocate the raw materials and physical wealth of the entire world after the war, especially those areas of the Ottoman Empire believed to hold significant petroleum reserves.

Romania during the course of the war was the only secure German petroleum supply for her entire air force, tank forces, and U-boat fleet. The British campaign in the Dardanelles, the disastrous defeat at Gallipoli, was undertaken to secure the oil supplies of the Russian Baku for the Anglo-French war effort. The Ottoman sultan had embargoed the shipping out of Russian oil via the Dardanelles. By 1918, the rich Russian oil fields of Baku on the Caspian Sea were the object of intense military and political effort on the part of Germany, and also of Britain, which pre-emptively occupied them for a critical period of weeks in August 1918, denying the German General Staff vital oil supplies. Denial of Baku was a decisive last blow against Germany, which sued for peace some weeks later, only months after it had seemed that Germany had defeated the Allied forces. Oil had proved to be at the center of geopolitics.

Britain emerged from the deliberations of the 1919 Versailles conference in the most apparent respects the dominant superpower in the world. One small detail, pushed to the background during the actual conduct of the war between 1914 and 1918, however, was that this victory was secured on borrowed money.

By January 1915, four months into the Great War, the British government had named a private New York banking house, J.P. Morgan & Co., to be its sole purchasing agent for all war supplies from the United States. Morgan was designated Britain’s exclusive financial agent for all British war lending from private U.S. banks as well. In a short time, Britain in turn became the guarantor for all such war purchases and loans by the French, Italians and Russians in the war against the German-Austrian Continental powers. It was a giant credit pyramid on top of which sat the influential American house of Morgan. Never had a single banking house gambled on such high and risky global stakes … Morgan, with its franchise as sole purchasing agent for the entire Entente group, became virtual arbiter over the future of the U.S. industrial and agricultural export economy. Morgan decided who would, or would not, be favored with very sizable and highly profitable export orders for the European war effort against Germany.

By the eve of the American entry into the war in 1917 on the side of Britain, the Entente powers had raised some $1,250,000,000 through the private efforts of Morgan, Citibank, and the other major New York investment houses, a staggering sum in that day. Morgan’s relation to the financial powers of the newly created New York Federal Reserve Bank, under the control of former J.P. Morgan banker Governor Benjamin Strong, was essential to the success of the private financial mobilization.

… it became clear [1917] that nothing else but American entry into the war would turn the looming disaster in Europe facing J.P. Morgan and Morgan’s European clients. They organized that America would enter the European war on the ‘right’ side – in support of British interests. Morgan & Co., and Britain as well, faced complete financial ruin by early 1917 if they did not succeed.

Had Woodrow Wilson not been persuaded to sign the Federal Reserve Act into law on December 23, 1913, it is questionable whether the United States would ever have committed the resources it did to a war in Europe. Without the new law, it is also doubtful whether Britain would have launched her bold designs against the rival empires of the Continent in August 1914. The house of Morgan and the powerful international financial interests of the City of London played the critical role in shaping a U.S. Federal Reserve System in the months just before the outbreak of the European war.

Morgan & Co. had quietly shifted their private British government loans over to the general debt of the U.S. Treasury as soon as the United States officially entered the war, in effect making the British debts the burden of the American taxpayers after the war.

During the course of the Versailles talks, a new institution of Anglo-American coordination in strategic affairs was formed. Lionel Curtis, a longtime member of the secretive Round Table or ‘new empire’ circle of Balfour, Milner and others, proposed organizing a Royal Institute of International Affairs. The proposal was made on May 30, 1919, in the midst of the Versailles deliberations, at a private gathering at the Hotel Majestic. Philip Kerr (Lord Lothian), Lord Robert Cecil and other members of the Round Table circle attended that formative meeting. The first nominal mission of the new institute would be to write the ‘official’ history of the Versailles peace conference. The Royal Institute received an initial endowment of £2,000 from Thomas Lamont of J.P. Morgan. Historian Arnold J. Toynbee was the institute’s first paid staff member. The same circle at Versailles also decided to establish an American branch of the London Institute, to be named the New York Council on Foreign Relations, so as to obscure its close British ties. The New York Council was initially composed almost entirely of the Morgan men, financed by Morgan money.

The combined burden of the Versailles German reparations debt, as well as the inter-Allied debts of the respective ‘victors’ – the war debts of France, Italy and Belgium to Britain, and in turn, of Britain to the United States – overwhelmed world finance and monetary policy from 1919 through to the October 1929 Wall Street crash … The scale of the combined war debt burden of Europe was so large that its annual debt service demands on the world financial system were greater than the entire annual foreign trade of the United States during the 1920. New York’s international banking community redirected world capital flows to the service of this staggering debt burden.

The oil wars, which had shaken the world for more than a decade, were finally resolved in a ‘ceasefire’, which resulted in the creation of an enormously powerful Anglo-American oil cartel, later dubbed the ‘Seven Sisters’. The peace agreement was formalized in 1927 at Achnacarry, the Scottish castle of Shell’s Sir Henri Deterding. John Cadman, representing the British government’s Anglo-Persian Oil Co. (British Petroleum), and Walter Teagle, president of Rockefeller’s Standard Oil of New Jersey (Exxon), gathered under the cover of a grouse shoot to conclude the most powerful economic cartel in modern history. The Seven Sisters were effectively one. Their secret pact was formalized as the ‘As Is’ agreement of 1928, or the Achnacarry agreement. British and American oil majors agreed to accept the existing market divisions and shares, to set a secret world cartel price, and to end the destructive competition and price wars of the previous decade. The respective governments merely ratified this private accord the same year in what became the Red Line agreement. Since this time, with minor interruption, the Anglo-American grip over the world’s oil reserves has been hegemonic … By 1932, all seven major companies in the Anglo-American sphere – Esso (Standard of N.J.), Mobil (Standard of N.Y.) Gulf Oil, Texaco, Standard of California (Chevron), as well as Royal Dutch Shell and Anglo-Persian Oil Co. (British Petroleum) – were part of the Achnacarry cartel.

The unstable international monetary order imposed after Versailles by London and New York bankers on a defeated central Europe came to an abrupt, if predictable, end in 1929. Montagu Norman, then the world’s most influential central banker as governor of the Bank of England, precipitated the crash of the Wall Street stock market in October 1929. Norman had asked the governor of the New York Federal Reserve Bank, George Harrison, to raise U.S. interest rate levels. Harrison complied, and the most dramatic financial and economic collapse in U.S. history ensued in the following months.

In November 1925, Italian Finance Minister Volpi di Misurata announced that the Mussolini government had reached an agreement on repaying the Versailles war debts of Italy to Britain and the United States. One week later, J.P. Morgan & Co., financial agents of the Mussolini government in the United States, announced a crucial $100 million loan to Italy to ‘stabilize the lira’. In reality, Morgan had decided to stabilize Mussolini’s fascist regime. On the urging of J.P. Morgan & Co. and Montagu Norman, governor of the Bank of England, Volpi di Misurata established in 1926 a single Italian central bank, the Bank of Italy, to control national monetary policy and further ensure repayment of foreign debts.

Since 1926 [Hjalmar] Schacht had secretly been a backer of the radical National Socialist German worker’s Party (NSDAP) or Nazi party of Adolf Hitler. After resigning his Reichsbank post, Schacht acted as a key liaison between powerful, but skeptical, German industrial leaders, the so-called ‘Schlotbarone’ of the Ruhr, and foreign financial leaders, especially Britain’s Lord Norman. British policy at this juncture was to create the ‘Hitler Project’, knowing full well what its ultimate geopolitical and military direction would be. As Colonel David Stirling, the founder of Britain’s elite Special Air Services, related in a private discussion almost half a century later, ‘The greatest mistake we British did was to think we could play the German Empire against the Russian Empire, and have them bleed one another to death.’

While Norman and the Bank of England had adamantly refused to advance a pfennig of credit to Germany at the critical period in 1931 (thus precipitating the banking and unemployment crisis which made desperate alternatives such as Hitler even thinkable to leading circles in Germany), as soon as Hitler had consolidated power, in early 1933, the same Montagu Norman moved with indecent haste to reward the Hitler government with vital Bank of England credit. Norman made a special visit to Berlin in May 1934 to arrange further secret financial stabilization for the new regime. Hitler had responded by making Norman’s dear friend Schacht his minister of economics as well as president of the Reichsbank. The latter post Schacht held until 1939.

Little attention has been paid to the role of oil in the postwar European Recovery Program (ERP), better known as the Marshall Plan, named after its architect, Secretary of State George C. Marshall. From its inception in 1947, the largest single expenditure by ERP recipient countries in Western Europe was to use Marshall Plan dollars to purchase oil, oil supplied primarily by American oil companies. According to official records of the State Department, more than 10 per cent of all U.S. Marshall aid went to buy American oil … Further, the U.S. companies, with support of the Washington government, refused to allow Marshall Plan dollars to be used to build indigenous European refining capacity, further tightening the stranglehold of American Big Oil on postwar Europe.

In his first days in office, under guidance from his advisors, President Lyndon Baines Johnson, a small-town Texas politician with little knowledge of international politics, let alone monetary policy, reversed the earlier decision of John Kennedy. President Johnson was led to believe that a full-scale military war in southeast Asia would solve many problems of the stagnant U.S. economy and show the world that American was still resolute … More and more during the 1960s, the heart of the U.S. economy was being transformed into a kind of military economy, in which the cold war against communist danger was used to justify tens of billions of dollars of spending. The military spending became the backup for the global economic interests of the New York financial and oil interests, another echo of nineteenth-century British Empire, dressed in the garb of twentieth-century anticommunism.

To finance the enormous deficits of his Great Society program and the Vietnam buildup during the 1960s, Johnson, fearful of losing votes if he raised taxes, simply printed dollars, by selling more U.S. Treasury bonds to finance the deficits. In the early 1960s, the U.S. federal budget deficit averaged approximately $3 billion annually. It hit an alarming $9 billion 1967 as the war costs soared, and by 1968 it reached a staggering $25 billion.

The Bank of England and London’s Sir Siegmund Warburg, with the assistance of his friends in Washington, especially Undersecretary of State George Ball, had cleverly lured the [expatriate U.S.] dollars into what was to become the largest concentration of dollar credit outside of the United States itself – the London Eurodollar market, by the 1970s an estimated $1.3 trillion pool of ‘hot money’, all of it ‘offshore’, that is, beyond the control of any nation or central bank.

After August 1971, the dominant U.S. policy under the White House national security advisor, Henry A. Kissinger, was to control, not to develop, economies throughout the world. U.S. policy officials began proudly calling themselves ‘neo-Malthusians’. Population reduction in developing nations, rather than technology transfer and industrial growth strategies, became the dominating priority in the 1970s, yet another throwback to nineteenth-century British colonial thinking.

In May 1973, with the dramatic fall of the dollar still vivid, a group of 84 of the world’s top financial and political insiders met at Saltsjobaden, Sweden, the secluded island resort of the Swedish Wallenberg family. This gathering of Prince Bernhard’s Bilderberg group heard an American participant, Walter Levy, outline a ‘scenario’ for an imminent 400 percent increase in OPEC petroleum revenues. The purpose of the secret Saltsjobaden meeting was not to prevent the expected oil price shock, but rather to plan how to manage the about-to-be-created flood of oil dollars, a process U.S. Secretary of State Kissinger later called ‘recycling the petrodollar flows’.

The most severe impact of the oil crisis was on the United States largest city, New York. In December 1974, nine of the world’s most powerful bankers, led by David Rockefeller’s Chase Manhattan Citibank, and the London-New York investment bank, Lazard Freres, told New York Mayor Abraham Beame, and old-line machine politician, that unless he turned over control of the city’s huge pension funds to a committee of the banks, the Municipal Assistance Corporation , the banks and their influential friends in the media would ensure the financial ruin of the city. Not surprisingly, the overpowered mayor capitulated and New York City was forced to slash spending for roadways, bridges, hospitals and schools in order to service their bank debt, and to lay off tens of thousands of city workers. The nation’s greatest city had begun its descent into a scrap heap. Felix Rohatyn of Lazard Freres became head of the new bankers’ collection agency, dubbed ‘Big MAC’ by the press.

But while Kissinger’s 1973 oil shock had a devastating impact on world industrial growth, it had an enormous benefit for certain established interests – the major New York and London banks, and the Seven Sisters oil multinationals of the United States and Britain. By 1974 Exxon had overtaken General Motors as the largest American corporation in gross revenues. Her sisters, including Mobil, Texaco, Chevron and Gulf, were not far behind. The bulk of the OPEC dollar revenues, Kissinger’s ‘recycled petrodollars’, was deposited with the leading banks of London and New York, the banks which dealt in dollars as well as international oil trade. Chase Manhattan, Citibank, Manufacturers Hanover, Bank of America, Barclays, Lloyds, Midland Bank – all enjoyed the windfall profits of the oil crisis.

The American oilman present at the May 1973 Saltsjobaden meeting of the Bilderberg group, Robert O. Anderson, was a central figure in the implementation of the ensuing Anglo-American ecology agenda. It was to become one of the most successful frauds in history. Anderson and his Atlantic Richfield Oil Co. funneled millions of dollars through their Atlantic Richfield Foundation into select organization to target nuclear energy. One of the prime beneficiaries of Anderson’s largesse was a group called Friends of the Earth, which was organized in this time with a $200,00 grand from Anderson. One of the earliest actions of Anderson’s Friends of the Earth was an assault on the German nuclear industry, through such antinuclear actions as the anti-Brockdorf demonstrations in 1976, led by Friends of the Earth leader Holger Strohm. The director of Friends of the Earth in France, Brice Lalonde, was the Paris partner of the Rockefeller family law firm Coudert Brothers, and became Mitterand’s environment minister in 1989. It was Friends of the Earth which was used to block a major Japanese-Australian uranium supply agreement. In November 1974, Japanese Prime Minister Tanaka went to Canberra to meet Australian Prime Minister Gough Whitlam. The two made a commitment, potentially worth billions of dollars, for Australia to supply Japan’s needs for future uranium ore and enter a joint project to develop uranium enrichment technology. British uranium mining giant Rio Tinto Zinc secretly deployed Friends of the Earth in Australia to mobilize opposition to the pending Japanese agreement, resulting some months later in the fall of Whitham’s government. Friends of the Earth had ‘friends’ in very high places in London and Washington. But Robert O. Anderson’s major vehicle for spreading the new ‘limits to growth’ ideology among American and European establishment circles was his Aspen Institute for Humanistic Studies. With Anderson as chairman and Atlantic Richfield head Thornton Bradshaw as vice-chairman, the Aspen Institute in the early 1970s was a major financial conduit for the creation of the establishment’s new antinuclear agenda. Among the better-known trustees of Aspen at this time was World Bank president and the man who ran the Vietnam war, Robert S. McNamara. Other carefully selected Aspen trustees included Lord Bullock of Oxford University, Richard Gardner, an Anglophile American economist who was later U.S. ambassador to Italy, Wall Street banker Russell Peterson of Lehman Brothers Kuhn Loeb Inc., as well as Exxon board member Jack G. Clarke, Gulf Oil’s Jerry McAfee and Mobil Oil director George C. McGhee, the former State Department official who was present in 1954 at the founding meeting of the Bilderberg group.

In October 1979, a devastating new Anglo-American financial shock was unleashed on top of the second oil crisis of that year. That August, on the advice of David Rockefeller and other influential voices of the Wall Street banking establishment, President Carter appointed Paul A. Volcker, the man who, back in August 1971, had been a key architect of the policy of taking the dollar off the gold standard, to head the Federal Reserve. Volcker, a former official at Rockefeller’s Chase Manhattan Bank, and, of course, a member of David Rockefeller’s Trilateral Commission, was president of the New York Federal Reserve at the time of his appointment as head of the world’s most powerful central bank … In October 1979, Volcker unveiled a radical new Federal Reserve monetary policy. He deceived a shocked Congress and a desperate White House by insisting that his radical monetarist cure was aimed at ‘squeezing inflation out of the system’. It was aimed at making the U.S. dollar the most eagerly sought currency in the world and to stop industrial growth dead in its tracks, in order that political and financial power flow back to the dollar imperium … The oil crisis and the Volcker shock were further strengthened by a decision of the leading circles of the establishment to ‘take the bloom off the nuclear rose’ once and for all, in order to ensure that the alarming trend of developing worldwide nuclear energy resources to replace reliance on Anglo-American oil was decisively ended.

Prophetically, as he signed the new Garn-St. Germain Act into law, President Reagan enthusiastically told an audience of invited S&L bankers, ‘I think we’ve hit the jackpot.’ This ‘jackpot’ was the beginning of the collapse of the $1.3 trillion savings and loan banking system. The new law opened the doors of the S&Ls to wholesale financial abuses and wild speculative risks as never before. Moreover, it made S&L banks an ideal vehicle for organized crime to launder billions of dollars from the growing narcotics business in 1980s America. Few noticed that it was the former firm of Donald Regan, Merrill Lynch, whose Lugano office was implicated in laundering billions of dollars of Mafia heroin profits in the so-called ‘pizza connection’. The wild and woolly climate of deregulation created an ambience in which normal, well-run savings banks were surpassed by fast-track banks which catered to dubious monies with no questions asked. Banks laundered funds for covert operations of the CIA, as well as covert operations of the Bonano or other organized crime families. The son of the vice president, Neil Bush, was a director of the Silverado Savings and Loan in Colorado, later indicted by the government for illegal practices. Son Neil had the good taste to ‘resign’ the week his father received the Republican nomination for president in 1988.

… as the largest military buildup since the Vietnam War took place in Saudi Arabia, in preparation for offensive saturation bombing in Iraq in the early days of January 1991, more than a few informed voices inside the Washington establishment began to express grave doubts as to the ultimate wisdom of Bush’s clear military intent. In a November 12, 1990 television interview, a former Reagan administration navy secretary, James H. Webb declared, ‘The purpose of our presence in the Persian Gulf is to further the Bush Administration’s New World Order, and I don’t like it.’

With the collapse of the Soviet Union at the beginning of the 1990s, hopes were high in many quarters that the world might see a new era of peace and prosperity. The decade that followed disappointed, to put it mildly. Far from an end to geopolitics and cold war, the stage merely shifted. As sole surviving superpower, Washington set about shaping its New World Order, though the term was quickly dropped by George H.W. Bush after it drew critical attention in his 1991 State of the Union speech. It provoked too many questions as to whose order it was and what priorities it might have.

By the start of the new century, powerful circles in the U.S. establishment had decided it was time for a change in emphasis. If the Treasury had been the symbol of power in the Clinton era, the Defense Department was to become the focal point of the Bush era. And, as during most of the cold war, its agenda was directly tied to oil geopolitics.

With undeveloped oil reserves perhaps even larger than those of Saudi Arabia, Iraq had become an object of intense interest to Cheney and the Bush Administration very early on. Paul O’Neill, a Bush cabinet member who had been fired in late 2002 for not being a good team player, later revealed that, as president, Bush had decided to make Iraqi regime-change a top goal well before the September 11, 2001 terror attacks.

The Taliban fell out of favor in Washington in July 2001, when U.S. negotiators proposed conditions for their pipeline, reportedly telling the Taliban leaders, ‘Either you accept our offer on a carpet of gold, or we bury you under a carpet of bombs.’ The Taliban was demanding U.S. aid to rebuild the Afghan infrastructure. They wanted the pipeline not only to be a transit line to India and beyond, but also to serve Afghan needs for energy. Washington rejected the demands. September 11, 2001, gave Washington the excuse to deliver its carpet of bombs to Kabul.

The military attack on Afghanistan, the first strike in the new war on terror gave Washington many things. It gave it the pretext for a huge Pentagon budget increase to nearly $400 billion a year, and for building a ring of permanent U.S. military bases from Uzbekistan to Afghanistan and Kyrgyzstan, places deep inside the former Soviet Union territory. (The latter point was not lost on Russian thinkers around President Putin.) The U.S. removal of the Taliban also gave the world a flood of heroin, as old warlords suppressed by the Taliban were able to resume poppy cultivation.