President Trump’s actions in the Middle East are becoming increasingly unhinged.
A week ago, he nearly triggered a catastrophic war between Iran and the US when, acting seemingly on a whim or in response to the advice of two of his nuttier advisors, fundamentalist Christian “Rapture” believers Mike Pence and Mike Pompeo, he ordered the assassination by drone of the commander of Iran’s military, Qassem Suleimani.
Fortunately for American troops, sailors and pilots, and for all of us and the people of Iran, saner heads in the administration seem to have gotten to Trump, and also fortunately,Iran’s military responded in measured fashion. As a result, the threat of a major war between the two countries seems to have receded a bit, at least for now.
Then today, Trump, in response for a call by Iraq’s parliament and its Prime Minister Adel Abdul-Mahdi for the US to withdraw all of its 5100 troops currently stationed in Iraq, declared he would not remove them. He added that if forced to pull them out of the country by Iraq, would freeze a deposit account of Iraq’s Central Bank at the US Federal Reserve, preventing Iraq from accessing what the Wall Street Journal reports amounted to a deposited balance of some $3 billion at the end of 2018.
The Wall Street Journal article reports that some 250 foreign central banks and other state entities have such accounts with the US Federal Reserve containing untold billions of dollars. There was no discussion in the Journal article of what impact the US’s arbitrary freezing of Iraq’s Central Bank account simply over a dispute about America’s troops in Iraq might have on the willingness of all those other foreign countries’ banks and agencies to continue letting the Fed hold their money.
It has not been unusual for the US to freeze foreign countries’ assets, in both the Federal Reserve Bank, and in the electronic vaults of US commercial banks, but typically this has been done when a country has engaged in illegal activity, or when a revolution has occurred. This was the case after the overthrow of the US-backed Shah of Iran in 1979, and was the reason that the Obama administration, as part of the nuclear deal it and five other nations negotiated with Iran, unfroze some $150 billion in Iranian assets that the US had been blocking Iran from accessing. (That’s the nuclear agreement that Trump tore up earlier this year.)
Iraq, a weak nation with a fragile economy, is taking the US threat to freeze its central bank account assets at the Fed seriously, since such an action would crash the value of the local currency, the Dinar, and cause huge misery and political instability in the already unstable country.
It would also, of course, completely end any friendly relationship between the US and Iraq, which would be forced into closer banking and commercial relationships, as well as military and political ones, with Iran, Russia and especially China, the one country with the financial clout to rescue it from a US-caused financial disaster.
Meanwhile, it must be stated that Trump’s latest threat is simply another blatant example — this time a fiscal bomb rather than an actual one — of American imperialism and rogue nation behavior.
There is a kind of desperation apparent here. The question is, is this desperation President Trump’s, or is it a reflection of a deeper desperation on the part of the US government and ruling elite as the era of US omnipotence through the dollar’s role as the dominant global currency heads into a terminal decline?
Trump’s act of war in assassinating Suleimani, as well as the more recently disclosed unsuccessful Special Forces attempt on his orders to “terminate” another key Iranian military leader in Yemen that same night, are almost certain, on their own, to drive Iraq fully into the arms of neighboring Iran, which would ultimately drive US forces in Iraq out. The US refusal to leave, and the accompanying Trump threat to freeze Iraq’s Central Bank account at the Fed, may simply be a way of staving off that inevitable final chapter of America’s lost Iraq War.
But Trump’s financial threat comes with a host of other likely consequences, which, just as he ignored the consequences of killing Suleimani, he hasn’t considered either. For example, if other countries begin pulling their funds out of Fed accounts, for fear that they too could find their accounts closed for spurious political reasons, what would the impact be on the Fed’s balance sheet, and its global importance?
Might Trump order the Fed to freeze the accounts of the Bundesbank or Banque de France if those two nations continue to complete the Nordstream gas pipeline from Russia and begin buying Russian natural gas instead of costlier natural gas shipped over from fracking wells in the US? Could he order the Reserve Bank of India’s Fed account frozen if India refuses to buy dud US F-16 fighter planes instead of the more advanced 5th-generation fighter plane that is being jointly developed and produced by Russia and India? The list of outrages that could be perpetrated by this increasingly unstable whack job of a president is almost endless.
It will be interesting to watch how this latest threat is responded to both by Iraq and by other nations of the world. Will it be viewed as bluster by our White House flim-flam man, or will they take it seriously and start pulling funds out of their Fed accounts?
Long term it certainly bodes poorly for the dollar, which nations around the world are increasingly beginning to decouple themselves from. Trump surely has given that trend another big boost with this latest threat to Iraq.
Meanwhile, the American troops in Iraq, who have never been that popular with the natives, have to know that they are about to become a whole lot less popular in a country awash in militant groups with ready access to guns and explosives. They can thank their commander in chief for that.