You may remember when Iraq said “Americans must remove all troops from Iraq” and the US said “who cares what you think?”
Well, right now the Iraq resistance is removing all American troops from Iraq. They can’t defend their bases and even had to beg for a truce to remove troops.
But the real problem isn’t American troops in Iraq, it’s financial:
The U.S. control over Iraq’s oil revenues primarily stems from the management of Iraq’s oil income through the Federal Reserve Bank of New York. After the 2003 invasion, the Coalition Provisional Authority (CPA), led by the U.S., established the Development Fund for Iraq (DFI), which was held at the New York Fed. The DFI was designed to collect Iraq’s oil revenues and use them for the country’s reconstruction and development. It was also set up to protect the Iraqi oil revenues from lawsuits and claims relating to Saddam Hussein’s rule. Then-president George W. Bush signed an executive order, which has been renewed by every president since, that set up the arrangement. The DFI eventually became an account of the Central Bank of Iraq at the New York Federal Reserve, which remains the case today.What leverage does this give the U.S. over Iraq?Oil is Iraq’s most important revenue source, accounting for some 90% of the state budget. This gives Washington significant sway over the country’s economic and political stability. When the Iraqi government asked U.S. troops to leave the country in 2020, Washington reportedly threatened to cut Iraq’s access to the New York Federal Reserve funds, with Baghdad ultimately backing down. While the Iraqi government has gained more control over its financial affairs since the early years of the U.S. occupation, the ongoing relationship highlights the enduring influence of the U.S. on Iraq’s economic landscape, even as the country seeks to assert its sovereignty and independence.
This is the time to end the arrangement. Go to China. Ask them for an account and for a credit equal to the amount now held in American hands. It’s hard to get an accurate figure, but it’s not that large, perhaps a hundred billion or so (that may seem like real money, it isn’t.)
Switch to selling oil in Yuan, the Chinese have a banking system which completely routes around SWIFT. Then just sell their oil to China and other countries who use the system: there’s more than enough demand, especially right now. Iran will let Iraqi oil out, especially under these circumstances. And who needs dollars any more? Anything Iraq needs it can buy from China in Yuan.
Now, Saddam’s revenge.
If you’re old enough you remember the first Gulf War. Iraq invaded Kuwait. Saddam had asked for permission from the US and the response was one Saddam believed was positive. And, after all, Saddam had fought an entire very destructive war against Iran for the US: he was an American proxy. Kuwait was created explicitly over a huge oil reserve as a way of keeping it from Iraq, which it really should be part of: it’s a colonial era legacy state.
Well, the US didn’t approve and the Iraqis got slaughtered, their power, sewage and water infrastructure was systematically destroyed, then Clinton subjected them to savage sanctions which killed million. Estimates of child casualties were over 500,000, based on population studies. Clinton’s secretary of state, Madeline Albright, when asked about this, infamously replied that the deaths were “worth it.”
Anyway, Kuwait’s military is a joke, it’s right next to Iraq and conquering it would be trivial, since there’s no easy way for the US to get troops there. So, switch to China and the Yuan, finish kicking the Americans out, and conquer Kuwait. (No one will cry, Kuwait’s rulers are absolute scum.)
This is a historic opportunity for Iraq, and they should take it.
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Feral Finster
The problem will be to find a buyer willing challenge American wrath by buying that oil.
Ian Welsh
Not an issue. You’ll have noticed that Iran is still sending freighters to China and that the US military is not intercepting them, even though it could. America is no longer the world’s greatest power.
In addition some countries are already running out. If it’s a choice between food riots and having residents kill their elites (yes, it will come to that, it’s already starting in the Phillipines and Australia is desperately vulnerable) they’ll take their chances.
Plus after the Iran war, US weapons stockpiles will be desperately reduced and they won’t be properly restocked, ever. The US doesn’t have the capacity and can’t build it.
spud
when you don’t produce, you will not stay a power anymore. steve keen called out clinton as nuts for his free trade polices, and his beliefs that paper asset shuffling, was the real power.
it was really clinton that started the forever wars.
what no clintonite understands, and why we are in such trouble. you gotta wonder if tony blair is looking for another rat hole.
https://www.youtube.com/watch?v=np6gPEoyqWI
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Purple Library Guy
I don’t think they have the guts.
spud
more super snicker. peace may come to the sudan and others soon, with the fall of another parasite.
https://www.youtube.com/watch?v=Kk7T2siD4J0
Empty Malls, Millions of Tourists Gone — Dubai on the Brink of Collapse
Bob
Love the tone of this.
Yeah, I hope they go for it.
Oakchair
Iraq decided to invade Kuwait to pay for the war they waged on behalf of America against Iran. Since Iraq was a US proxy they asked America and the US ambassador gave them to green light to take Kuwait.
The Bush administration decided to change their minds and Iraq immediately tried to negotiate a way out. But the first Bush (who is in the Epstein files) really really wanted to kill a bunch of people so he went with war.
That’s what the Epstein empire does to it’s own proxies. Kills them for fun. Though given they torture, rape and eat children in the Epstein files it’s about what you’d expect.
mago
Saddam went through channels and requested permission to strike Kuwait. He was granted permission and received subsequent butchery.
White man speak with forked tongue. Yeah, no shit Kemosabe.
Whether contemporary Iraqi military actors have the cojones to take out Kuwait or not is an open question soon to be answered.
Mark Level
Great post as usual Ian. I was unaware of the Philippines being already on the brink, looked into it, yep, thanks for the heads up. Japan screwed too. European Oligarchs doing nothing to postpone the day of reckoning. If the plebs start killing the worthless Aristocrat classes that doomed them, I hope Mark Rutte and Kaja Callous (real way to spell her name) are at the top of the list as well as “Sir” Keir Starmer.
Thank you to spud for links once again. Thesis of the likes of Dubai’s implosion obvious. I never watched the series “Westworld,” about rich folks disporting with sex robots and other decadent indulgences. Dubai a center for expensive prostitutes and sex slavery. It has to go, they’re all fleeing. A “society” built on Luxury Trade with a majority of poor practically slave workers, including from the Philippines. Good riddance!!
The Media part of MICIMATT keeps lying big. Right before writing this post, my Pocket had a story (ignored it) headlined “Why Iran Thinks It Is Winning!!” Not just the White House Upper Echelons are Baghdad Bobs now. They didn’t even put “Thinks” in Air or Scare quotes where it belongs.
Guess I was wrong that Admin would be talked off the Ledge by Financial Sectors or the Military. They are dead-enders. Major changes will be here by late April if they launch disastrous Boots In the Ground (the result) Missions. They’ve raised draft age to 42 as previously mentioned, and all those guys & gals who thought smoking pot would get them a Get Out of War Free Ticket have been disappointed, the rule changed.
Coincidence: Got to the end of a long Due Dissidence episode just now and they covered Vietnam, Thailand and Philippines explosions. Woman in Philippines asked who she blames for doubled rice prices and no petrol, she said straight out “The American Imperialists.” Reporter said, “But the US was your ally. Don’t you want that?” She responded Hell NO.
Speaking of attempted Copium, Zionist scumbag and former fake Lefty Bernie lieutenant Matt Duss wrote a whiny Tweet, Matt Duss was “wrong” to blame Israel for Trump’s Blunder, they had nothing to do with it!! That ups “anti-Semitism”, can’t do that just because a little genocide across Gaza, the West Bank, southern Lebanon, Iraq, Iran, etc.
Suck it up, Duss-Mote!! You sowed the Wind, your Bossman Bibi did for 40 years, boasts of it, what did you expect to reap?
Mark Level
Matt Duss said Joe Kent was “wrong” & promoting anti-Semitism to say Israel pushed Trump. Also kind of sneered that Kent felt bad his wife, another intel agent, killed in Syria. Despicable. Long day here, lotta work on a major project.
KT Chong
Feral Finster: “The problem will be to find a buyer willing challenge American wrath by buying that oil.”
For years China has been buying lots and lots of US-sanctioned Iran, Russian and Venezuelan oil because China is a honey badger:
https://www.youtube.com/watch?v=4r7wHMg5Yjg
The reason why the US has not slapped full-scale secondary sanctions onto China for buying Iran and Russian oil is because China controls the global supply chains for critical elements, intermediary components, and rare earths elements.
That and China holds lots of US treasuries.
i.e., China has real leverages and can hit back hard at the US.
Adam Eran
JFYI, Saddam’s anger at Kuwait stemmed from the Kuwaitis slant drilling into Iraqi oil formations, stealing Iraq’s oil. Saddam himself was funded by the CIA when he lived in exile in Egypt.
StewartM
Guess I was wrong that Admin would be talked off the Ledge by Financial Sectors or the Military. They are dead-enders.
Which is again, completely consistent with Trump being blackmailed. TACO backed off quickly from his tariff stupidity because due to blowback from the financial sectors and industry (yes, it’s hurting US manufacturing, not helping it) but with tariffs there was no blackmail threat.
So it’s getting down to either Trump has to be deposed or die for this to stop. If he doesn’t, he won’t leave the White House in 2028 because as long as he’s there, he’s dictator.
In other news, the Palestinians are still being genocided, prices really ARE skyrocketing, and unemployment is creeping up despite the immigrants being put into camps. And the “peace president” is apparently in a contest to see how many conflicts he can get his country into!
bruce wilder
There are normally around 15,000 U.S. military in Kuwait and I would guess private support by U.S. and non-Arab nationals might run up to a similar or greater number.
No one has done anything in the last 10 years to make Iraq an operationally competent military power.
It is conceivable to me that Iran might eventually be able to evict the U.S. military from Kuwait and other Persian Gulf statelets. The vulnerabilities have been widely discussed.
But, Iraqi military intervention is a fantasy.
Ian Welsh
The 15K troops are currently mostly hiding in hotels and don’t include a lot of actual combat troops. Iraq won’t use it’s army as much as it will use the various militias. Kuwait’s own army is a joke. And it’s easy enough, given the geography) for Iran to send a few brigades, and that’s all it’ll take. American air power won’t be enough to stop it, given how low their sortie rate is.
Jan Wiklund
Trouble here that there are different versions. Some say the USD is already done for, others say that it for the moment is technically impossible to round it because the Americans control too much of the technical infrastructure.
To the later belongs Cory Doctorow, who seems to be as angry at the US as Ian. See https://pluralistic.net/2025/11/26/difficult-multipolarism/#eurostack.
So how to reconcile? Or is one right and the other wrong, or for what reason?
Carborundum
As of mid-January, the only places US troops are in Iraq is up in Kurdistan – which will do whatever it wants, Baghdad’s pronouncements be damned. Given the withdrawal of US forces out of Syria, also into Kurdistan, starting in February I wouldn’t actually be surprised to find that there’s been a net increase in US force levels in “Iraq” over the past couple of months.
My recollection is that there’s a heavy brigade’s plus worth of equipment pre-positioned primarily in Kuwait, with some other stuff in Qatar. That, along with force generation for the missions in Iraq and Syria, is the primary reason for an enduring presence in Kuwait (along with some sigs, an airhead / airpower basing, and a quiet SOF launchpad capability).
Reading the Reuters article, it sounds to me like Iraq finds aspects of the financial arrangement useful – anything that insulates them against Iranian attempts to undercut their sovereignty is going to sound attractive. It isn’t Iraq using “Iraqi” militias here – it’s Iran.
Mark Pontin
@ Jan Wiklund (and others)
Doctorow is broadly correct, from scanning his piece (not reading it in detail).
So what’s likely to happen in the real world is that states’ central banks will hold less reserves in actual dollars and treasuries, but the bulk of international trade transactions will continue to be denominated in dollars –“eurodollars” — beyond the Fed’s jurisdiction.
So it might effectively, therefore, seem not much different from the system we have now where the overwhelming majority of global dollar activity—well over 70% of all dollars used outside the U.S.—and possibly higher than 90 % — is already eurodollar-based.
For a while, anyway. Because one presumes that one difference over time increasingly will be that the Fed-created “base dollar” will LOSE VALUE as debt, depression, and the loss of ‘petrocapital’ — the current recycling of the GCC countries’ profits back into the US market by those countries’ rulers investing in US banks, funds and companies like Microsoft, Amazon, etc. a setup which Iran will likely end — take their effects.
And who wants to hold onto money that’s steadily diminishing in value?
You may reasonably ask, though: what if there’s a general depression and crash in the US by the end of this year?
Because the latest Treasury data shows the US national debt is roughly $39 trillion, and the best available rollover estimates indicate that $8–10 trillion of existing treasuries will mature and need refinancing across 2026.
In other words, if the US dollar suddenly crashes, how’s the US going to get anybody to buy treasuries? Does the US suddenly enter Hemingway’s ‘Slowly, then all at once’ territory? Except how can that happen when the bulk of global wealth and global transactions are denominated in dollars?
What happens — what the answer is — to all that is the hundred-trillion dollar question. But to be clear, it’s not just the US’s wealth structure that will crash but the wealth structures of much of the world. One can presume, though, that because it’s also the wealth structures of the worlds’ elites that the whole system will be kept running for as long as possible and the inevitable losses will be dumped on the proles as much as possible, as with the GFC in 2008.
** Ian should correct me if he knows I’m wrong about any of this. It’s very difficult to get a clear picture because (a) financial professionals often suffer from normalcy bias, and are incredibly parochial and ignorant of anything outside their specialty; and (c) these things are deliberately kept on the downlow, so that, for instance, about the first three decade after the City of London created the eurodollar market in the 1950s, anybody asking would be told .”Quiet, we don’t talk about this because we don’t want people (principally, the US)to know what we’re doing.”
Mark Pontin
This is not a bad resource for thinking about this if you want a deeper dive–
‘The evolution of the Offshore US-Dollar System: past, present and four possible futures’
Published online by Cambridge University Press, 2020
https://www.cambridge.org/core/journals/journal-of-institutional-economics/article/evolution-of-the-offshore-usdollar-system-past-present-and-four-possible-futures/B36ED9082CECE54F3F5B8E8F40D15148
Feral Finster
@Ian: The US Navy isn’t even needed. Secondary sanctions will do just fine.
spud
Mark Pontin:
“Because the latest Treasury data shows the US national debt is roughly $39 trillion, and the best available rollover estimates indicate that $8–10 trillion of existing treasuries will mature and need refinancing across 2026. ”
what makes up that 39 trillion dollars of debt? if you mean accumulated budget deficits, that debt does not exist, its a hoax perpetrated by those who would starve americans. if its medicare/social security, that debt does not exist, they are self funded, the money is there, and when its not, like any other private sector insurance scheme, you raise policy rates.
if you mean treasuries? that debt can simply be purchased by the fed, and retired. wiped right off the books. its be done as far as i have researched, way back to FDR, who did it as he watched with glee the howls of rage from deficit morons.
at the push of a button money is created, at the push of a button, it can disappear.
the real debt is the balance of payments., which includes the massive trade deficits that have been destroying america since 1993, and military bases and operations to ensure free trade, amongst other international obligations.
Mark Pontin
spud: ‘the real debt is the balance of payments….’
And that’s the point.
And it’s why that $39 trillion matters ultimately. Because, sure, dollars can be and are created at the push of a button. But sooner or later other countries are going to stop accepting dollars created like that as payments for real goods.
And then what does the US do?
In fact, it tries what it’s doing now under Trump, come to think of it, with various shakedowns via tariffs, threats of seizure, and outright smash-and-grab moves with military force as it in Venezuela and Iran.
Thing is, US military force isn’t actually very good, even by the metric of ‘if you can destroy a thing, you can control it.’ As we’re seeing — again — with Iran.
spud
Mark Pontin;
if we are speaking of the balance of payments being the 39 trillion, sure, its real money. and if we paid it back all at once, inflation would be like 1923 weimar germany.
much of the inflation can be tracked to free trade. bill Mitchell wrote a good one about that.
the inflation from imports has been building for sometime now,
https://tradingeconomics.com/united-states/import-prices
https://www.ineteconomics.org/perspectives/blog/inflation-in-a-time-of-corona-and-war
” The paper takes a close look at the current inflation in the US, showing that it is not due to a generalized co-movement of (all) prices, but to a number of sector-specific price increases in industries strongly affected by global commodity-chain disruptions (Section 2).
The corona crisis has been seriously stress-testing the resilience of the global supply chains that have developed during three decades of neoliberal globalization—and the system has been found wanting.
Section 3 considers the global supply side of US inflation in more detail and investigates how global supply chain disruptions and higher global commodity prices have raised US import prices; I find that higher import inflation has been directly responsible for almost one-third of the increase in the PCE inflation rate during 2021-2022. ”
also mitchells fine four part series on free trade.
https://billmitchell.org/blog/?p=34677
as well as the destruction of the new deal/fair deal and Gatt, and anti monpolistic reforms, gutted by bill clinton.
so the real debt trap is what the fighting is all about today. paying it back is almost impossible. but the powers that be from 1993 on wards were towering intellectual mental midgets.
Jan Wiklund
@Mark Pontin:
According to some, one can use CIPS to send money without having it to be nominated in RMB, it can be nominated in Rand or Rupees or whatever. But perhaps it is incredibly complicated bureaucratically because the banks have been used to SWIFT for decades, or perhaps risk punishment for not using it? I don’t know. It seems rather confused.