The period in question began with the 1814-15 Congress of Vienna, during which Continental Europe was shuffled around in the wake of Napoleon's final defeat at Waterloo. The Congress divided Europe sufficiently to prevent a significant threat to British power, whilst giving Britain “rights to dominate the seas.”

Engdahl sees British power as being centred in three elements: firstly, total naval superiority. This acted as a tacit subsidy for British shipping – the Merchant Navy could expect protection in transit, whereas foreign shipping had to purchase expensive insurance against loss. The second pillar was domination of world finance. Most shipping finance relied on London. London financial houses were able to dump massive British exports on foreign markets through manipulation of the money market (although he doesn't explain how). Thirdly, and of increasing importance, Britain's domination of natural resources: especially cotton, metals, coffee, coal and increasingly oil.

In 1820 the British government issued a 'declaration of principle': absolute free trade. This provided the moral justification to intervene by whatever means necessary to open reluctant markets.

Britain's long-range strategy for maintaining its world position was to perpetually oppose the greatest power in Continental Europe by supporting weaker nations, building temporary alliances and fermenting conflict. That power had often been France. But with the Great Depression beginning in 1873 (until 1896) in England, Britain's manufactures became progressively less able to compete with Germany, who had abandoned free-trade ideas in favour of state investment in infrastructure and education combined with protectionist policies against imports. A German bank panic in 1890 linked to losses in Argentina and Uruguay lead to a massive restructuring to ensure future stability (moving towards banks investing in companies in the long term rather than a volatile stock exchange). Germany invested heavily in its shipping, beginning to rival British technologies after the turn of the century, and began construction of a rail link from Berlin to northern Turkey in 1889 (aiming for Baghdad, so called the Berlin-Baghdad railway).

In the late Nineteenth Century, Britain had seen Russia as the Eastern threat, and had supported the Ottoman Empire against Russia. With the new railway and increasing economic links between Germany and the Ottoman Empire, Britain turned to supporting Russia against Germany, a shift “evident from the late 1890s”. Links with Russia were cemented after the 1905 revolution and the Russo-Japanese war (in which Britain had supported Japan). Russia signed over rights to Afghanistan and parts of Persia. By 1907, a secret military alliance with both France and Russia was in place.

The first realisations that oil could provide a much more efficient fuel for shipping than coal came in the early 1880s (Lord Fisher in Britain). Britain secured all rights to Persian oil in 1905 (for a 16% royalty).

Berlin-Baghdad concerned Britain for various reasons. Firstly, simply the potential for economic development was worrying, in the context of Britain's decline and Germany's rapid advances. Secondly, it seemed Germany would gain a secure source of oil, increasingly important as the German navy expanded and modernised. But it also increased the capacity of Germany and Turkey to move large troop numbers quickly, via a route that was beyond the reach of the British Navy. German troops could rapidly threaten the Egyptian colony, and therefore Britain's link with India, Suez. German-Ottoman cooperation also meant Alexandretta and control of the Dardanelles could give Germany substantial naval power in the Mediterranean.

The weak link in a chain of allies (German empire, Austro-Hungarian empire, Bulgaria and Turkey) was Serbia. Serbia was seen as Britain's first line of defence, to prevent the emergence of a Berlin-Baghdad system. Hence, argues Engdahl, the wars in this region prior to 1914: the Turkish War, Bulgarian War and “continuous unrest in the region”.

In 1901 with the support of the Sheik of Kuwait, Britain declared that Kuwait (formerly Ottoman) was now a British protectorate.

In 1912, Deutsch Bank (main financer of Berlin-Baghdad) received concessions from the Ottoman emperor for a large portion of Mesopotamian (later Iraqi) oil. Until this point, Germany had been 90% reliant on Standard Oil. Attempts to incorporate a state company to exploit this oil stalled until the outbreak of war.

The plan became a European war to undermine German development, and to take Ottoman lands to prevent Germany gaining its own access to oil, or too much power in currently Ottoman lands.

On the eve of the Great War, the British government was more or less bankrupt. The first means of dealing with this, planned in advance, was to invoke the Bank Act of 1844, allowing them to halt conversion of Sterling into Specie. This made all gold deposits at the Bank of England available for use to buy materiel internationally. The second was credit extended privately by the New York Morgan interests throughout the course of the war, nationalised when the US government entered (on the urging of the Morgan-controlled newspapers when the possibility emerged that Britain might not win, and therefore default on her loans).

It was during the Great War that oil came to be understood to be the key to military success, as warfare came to be dominated by aircraft, tanks and a much faster class of naval vessel powered by oil. The main British interests in precipitating war were twofold: check the rise of Germany as an industrial power and broad-spectrum rival and to secure extensive control of middle-eastern oil reserves.

The German campaign in Romania was designed to bring Romanian oil production under German control; Romania remained Germany's only secure source of petrol. The British campaign for the Dardanelles (defeat at Gallipoli) was designed to open up a shipping route out of the Russian Baku fields (the Ottoman empire had blocked shipping). Germany and Britain both made a late play for the Russian Baku, Britain preemptively occupying them before a German invasion, successfully defending them weeks before Germany sued for peace. Rockefeller supplied France's oil needs as these were becoming her primary concern by late 1917.

The Sykes-Picot agreement, signed in 1916 by the UK, France, Russia and Italy, carved up the Middle East. The agreement, which granted France control of Lebanon, Syria and Mosul (northern Iraq) persuaded France to allow Britain to move 1.4 million troops into the eastern theatre whilst France was pouring all of its resources into the Maginot line. Official explanation: to support Russia's eastern war and to free the Dardanelles to allow Russian grain to Western Europe. However, after 1918, a million British troops remained in the Middle East. Britain's push to set up the League of Nations was largely designed to grant legitimacy to Britain's annexation of Middle-Eastern oilfields.

In the aftermath of the Russian revolution, the Bolsheviks made Sykes-Picot public. The main embarrassment for Britain being that she had promised these lands independence in exchange for Arab support in British campaigns early in the war against the Turks, in which 100,000 Arabs had died.

Sykes-Picot granted:

The Balfour declaration was a private letter from Balfour, Britain's foreign secretary to Lord Rothschild, a member of the British Federation of Zionists in November 1917. It committed Britain to supporting a Jewish homeland in Palestine after the war. It is significant that this declaration was made to a representative of a British Jewish organisation that was already involved in financing the emigration of European (primarily Polish and Russian) Jews to Palestine. The concept was to establish a European community in the heart of an area in which Britain had few natural allies, which required British power projection due to its oil reserves, and also due to its commanding position for dominating the Mediterranean, overlooking Suez, still crucial to British economic interests as the link between the UK and India. A Jewish settlement in Palestine would provide a long-term excuse for a British protectionary force, and would clearly permanently back British interests against the Arabs. It fitted very much into the Round Table vision of a British Empire extending uninterrupted from the Cape of Good Hope to Suez and from Palestine to British India, alongside the annexation of German possessions in Southern Africa which helped to complete the picture. The Round Table had instigated the Boer War of 1899-1902 to unite South Africa and its massive gold reserves under British control.

Britain emerged from the War in debt to the US by a staggering $4.7bn. The loans had originally been extended privately by J P Morgan, and then nationalised when the US government entered the war. Morgan was also the British government's sole purchasing agent in the US, earning commissions by sourcing a vast array or materiel. American economic development was skewed by this power: firms linked to Morgan such as DuPont Chemicals grew into multinational giants. It also created a powerful caucus in favour of American intervention by January 1917, when the imminent threat of an Anglo-French collapse following the departure of Russia put these massive debts at risk of default. Luckily in February 1917 Germany decided to target all ships supplying Britain, including those sailing under the American flag, providing a pretext for US involvement. War was declared on 2nd April. It's doubtful that this would have been possible without the establishment of the Fed in 1913: this provided the government far easier access to finance with which to fund its intervention. Morgan had been active in lobbying for the introduction of the Fed. The Fed sold mass quantities of liberty bonds through (amongst other) Morgan, raising more than $21.5bn by 1919 (although Galbraith argues that this process was no more useful than printing money, as individuals were encouraged to use these bonds as collateral for consumption loans). Still, profitable for the banking houses involved. Globally, total national debt had increased by $210bn, or 475 per cent.

During Versailles, the Royal Institute of International Affairs was created to further Round Table interests, with initial financial backing from a member Thomas Lamont of Morgan. The American branch was called the New York Council on Foreign Relations, to hide its London connections. The aim was to bring closer cooperation between the two countries, an aim that was not achieved for some time.

At the end of the War, the allies collectively owed the US $12.5bn; Germany in turn owed the allies $33bn. The huge British debt created a new opportunity for the New York banking houses to penetrate the European market. US interest rates were low; risk premia in Europe made it an attractive investment opportunity.

The Sykes-Picot agreement was formalised at San Remo in April 1920, without American participation – the US was excluded entirely. Standard Oil was excluded quite curtly by the British, setting up a competition for control of oil reserves between the UK and US that would last through the twenties. Britain's control of the Middle East raised the stakes in competition over reserves in Russia and Mexico for American firms.

In 1910 massive oil reserves were discovered at Tampico, Mexico. Shortly afterwards Wilson sent troops to take the port at Vera Cruz. Britain had had a 50 per cent stake of Mexican oil through the Mexican Eagle Petroleum Company, but tactfully backed off seeing an European war on the horizon. Standard Oil switched allegiance against Carranza when he developed aspirations of national development, supporting the rebel Pancho Villa in 1916. Carranza fought off further US military intervention which was suspended when the US joined WWI. Carranza was assassinated in 1920, leaving a constitution which forbade foreign ownership of any mineral rights. Britain and America continued to compete for these reserves through the 20s; Mexican oil was finally nationalised in the late 1930s leading to a 40-year Anglo-American boycott.

By this time, there were four major British oil companies, all controlled more-or-less directly by the British government/intelligence community: Mexican Eagle, Royal Dutch/Shell, Anglo-Persian and BCO (British Controlled Oilfields, notionally Canadian). BCO was ousted from Costa Rica in 1921 when a border dispute with Panama lead to an American intervention that installed a new client which refused to recognise any contracts with the British. BCO and Royal Dutch/Shell moved into Venezuela in 1922, albeit continually contested by Standard.

British and American Oil interests (particularly, Royal Dutch/Shell and a front for Standard Oil) were competing bitterly for the rights to develop Russian oil by the time of the Genoa conference in 1922, when the Rapollo treaty was announced, under which Bolshevik Russia agreed to forgive all German war debts in exchange for a German pledge to sell them industrial technology. It caused panic in London and Paris. German attempts to sign trade deals with France and Britain had been rejected, forcing Foreign Minister Walther Rathenau to seek a deal with Russia to save Germany's failing economy. Included in this industrial technology would be equipment for developing the Baku oil fields, and Germany would assist in building pipeline infrastructure in a joint German-Russian partnership. This would have the extra benefit for Germany of breaking the Anglo-American monopoly on oil supply to Germany that had existed since Versailles. Rathenau was soon assassinated, and the German economy reacted badly to the increasing political instability. In December 1922, France claimed that as Germany had violated the terms of the London Ultimatum (under which Germany agreed to repay 132 billion marks in return for the Allies not occupying Germany), France would exercise her right to occupy the industrial Ruhr valley. Britain distanced herself from the action formerly voting against (with France, Belgium, Italy in favour), although it had secretly been agreed as part of Sykes-Picot. The Germany government ordered passive resistance to the invasion, and industrial production in the region ground to a halt. The region accounted for 80 per cent of German production of coal, iron and steel, despite having only ten per cent of its population. The German government printed money to sustain idle workers. 150,000 Germans were deported, but a year later production was still only a third the pre-occupation level. The reichsmark went into freefall.

This laid the ground for acceptance of a Standard Oil-Morgan proposal: the Dawes Plan. Schacht, fried of Morgan interests and Bank of England chief Morgantu Norman was installed to replace the reichsmark with the rentenmark, tenuously backed by German real estate. Then, under the Dawes Plan, Germany paid 10.5bn marks in reparations up until 1929, in the same period borrowing 18.6bn marks from abroad and ending up more indebted than when the plan was initiated. All reparations and new debt were managed by the New York and London banks. The German economic recovery was under the control of Norman and Schacht, and no further cooperation with Russia emerged. In 1929, the London-New York banks refused to roll over the German debt.

In 1927, competition between British and American oil interests ceased with the Achnacarry agreements between Royal Dutch/Shell and Standard Oil, later ratified by the US and UK governments as the Red Line agreement. These agreements established a cartel which agreed to respect the current division of world oil, set a target world price of oil and cut American interests in on Middle Eastern Oil. By 1932, all seven major firms belonged to this agreement: Standard of New Jersey (Esso), Standard of New York (Mobil), Gulf Oil, Texaco, Standard of California (Chevron), along with Royal Dutch/Shell and Anglo-Persian (BP).

In 1925, Mussolini's finance minister reached agreement on paying Anglo-American war debts. One week later, JP Morgan extended a crucial $100m in loans to the regime.

After 1929, with the US stock market crash (sparked, apparently, by Norman's request to the Fed to reduce the US base rate) withdrawal of US-UK finance from continental Europe lead to a banking collapse that began in Austria, spreading through Germany. Schacht resigned rather than accept loans from Swedish industrialist Ivar Kreuger; Kreuger was assassinated. Schacht had been supporting the Nazi party since 1926 and stepped up work on their behalf, becoming a liason between German industry and the Bank of England – German industry's first question about the Hitler project was, would Norman support it? Schacht, as a close friend of Norman was in a position to convince them that he would. Deterding and Royal Dutch/Shell extended finance to the Hitler project in its critical early phases. As soon as Hitler took power, Norman extended credit to the new regime, having refused to do so to prevent a banking crash only a few years earlier, following up with a visit to Berlin in 1934 to discuss further financial stabilisation. Hitler immediately returned Schacht to the German government as minister of economics and President of the Reichsbank.

British and American oil came out of the second world war in a tight cartel rather than in any degree of competition, which reflected an era of close cooperation more generally – it was acutely recognised that only America had the economic and military power to establish and maintain an informal empire, whilst London had unique assets in intelligence and international expertise – an imperial project could only be conducted jointly, therefore. The CFR's time had come. In the 1950s the New York banks cartelised in a spate of mergers, their business increasingly involved in big oil (note Rockefeller connections through Chase National and National City) but also dominating international finance to an extent not seen since the height of London's dominance. The Marshall Plan (ERP) had an important relation to oil. Oil was the single greatest expense of ERP money – around ten per cent of total American aid. Oil was purchased at “grossly inflated” prices. Recipients were forbade using ERP money to develop domestic refinery capacity – this was the exclusive realm of big oil. There was significant discrimination in the prices European countries paid for oil (eg Britain paid less than half Greece's price).

Britain and the USSR invaded Iran in 1941 despite its neutrality, on the pretext that the presence of German engineers posed a threat. It was an obvious strategic target to protect during the war. 100,000 Russian troops and 70,000 Anglo-Indian troops were stationed there. Russia ransacked the north for food, and much American Lend-Lease were redirected north where they were doubtless badly needed in Russia. Anyway, treatment of the Iranians under occupation was not good.

British forces were forced out after a long struggle at the UN in 1948, oil concessions intact. Mossadegh gradually rose to premiership in Iran purely on the basis of arguing for a renegotiation of oil concessions. Iran was getting something on the order of ten per cent (Engdahl's figures are vague) of oil revenues, whereas Venezuela was getting 50. Despite increasingly insistent demands for renegotiation they were ignored by Britain until March 1951 – Mossadegh became prime minister and Iran's oilfields were nationalised. Britain was furious. An economic blockade followed, supported by Washington; no oil companies would accept Iranian oil and the economy collapsed. Iran was fully within her legal rights to nationalise, provided fair compensation was granted – which Engdahl claims was the case (what is “fair”? Surely not adequate to cover net present value of future profits, because those would be far beyond the means of Iran). Britain went to the World Court, who in July 1952 declared that the case was rightfully under Iranian jurisdiction. Mossadegh lasted 28 months, after which time he was overthrown by an August 1953 coup contrived by Anglo-American intelligence, with the help of Norman Schwarzkopf Snr, who had previously trained police forces in Iran and had made friends with high-ranking military officers and the Shah. The issue was blamed on Mossedegh's (fabricated) Soviet leanings. Result: 40 per cent Anglo-Persian (which now became BP), 14% Royal Dutch Shell, 40% American big oil and 6% CFP (France state oil).

Mattei was the leader of the largest non-Communist resistance organisation in Italy during the war. In its aftermath, he was placed in charge of the northern branch of the Italian state oil company, with instructions to privatise as rapidly as possible. Instead he set about finding new reserves in Italy, with rapid success. He was an ardent nationalist, and progressively built up a large state infrastructure around the Italian gas and oil discoveries, extending through refining and pipelines to a tanker fleet. He began seeking new sources of oil in the developing world, hoping to break the seven sisters' monopoly (it was him that coined the phrase). He did so by approaching countries with small reserves overlooked by the majors, who were at that time trying to inflate prices partly by constraining production (also by fraudulently inflating the cost of shipping). He began by buying Sinai oil from Nasser in 1955, later negotiating new exploration in Iran in areas not covered by the Anglo-American arrangements. He then raised the stakes, negotiating with Moscow to supply large-gauge steel pipelines to connect Russia with Czechoslovakia, Poland and Hungary in exchange for Russian oil, expanding the Italian steelworking industry substantially. The deal he offered developing countries broke the Anglo-American model: Iran took 75 per cent of oil revenues, compared to the 50-50 split negotiated in Venezuela. He developed agreements with Tanzania, Ghana, Sudan, Morocco, India and Argentina. He was killed in an air accident in 1962. American involvement cannot be confirmed or denies. Engdahl claims there exists a substantial intelligence report from the Rome CIA station shortly after the accident. He was due to meet Kennedy to discuss a Kennedy's proposal for a detente with the seven sisters; Engdahl also claims oil's involvement in the Kennedy assassination the following year.

What. A. Mess.

This chapter is the history of European reconstruction, the deterioration of Bretton Woods and the American economy through the 1950s and 60s, but it doesn't make a lot of sense to me. Explanations are often scant, moral judgements are obtuse, and some very strong statements are made with little supporting argument.

An independent European threat was emerging under the coalition between de Gaulle and West Germany's Adenauer, until his electoral loss to a pro-American successor. De Gaulle had been removing French military policy from NATO, taking the French Mediterranean fleet out of NATO's control and, after seeking a French veto on the American use of nuclear weapons, developing an independent arsenal in 1958. He blocked British entrance into the European common market, sensing that Anglo-American involvement would be a malign influence. After liberalising capital movements from the Franc zone, an attack on the Franc by the Anglo-American banks exploited the May 1968 riots resulted in de Gaulle's removal the following year.

By the end of the 1950s, American manufacturing capital and education was lagging that of Continental Europe, whose productivity was still soaring in a continued post-war boom. The New York banks were central in channelling investment abroad rather than into American manufacturing, sealing America's industrial fate over the following two decades. New York earned far higher profits investing abroad, particularly in Western European firms. The stagnation of the American industrial base, coupled with a realignment of higher education away from sciences and engineering towards softer subjects and the intervention in Vietnam created a massive US deficit, large dollar accounts were accumulating in European banks and American gold reserves, which had been almost total at the end of the war, were continually being drained. The dollar was, apparently, overvalued compared to gold; France called for a 50 per cent devaluation. Kennedy attempted to stem the outflow of investment by taxing American investment abroad, but by exempting Canada and loans to US citizens, the result was to force all US foreign investment to be channelled through British banks in Toronto, Montreal and London.

The UK was undergoing a similar lack of investment, coupled with high interest rates designed to draw money into the Sterling area to support London's continued bid to be a financial capital. However, the pound was even weaker than the dollar, and Britain was forced to devalue from $2.80 to $2.40 in 1967. Afterwhich all attention switched to the dollar, clearly in an unmaintainable position with a war-deficit ballooning out of control as Tet approached and no productivity recovery in sight. In the beginning Vietnam had provided a boost to the American economy, but apart from narrow sections of military industry and the financial elite who managed the war bonds, the overall effect was to weaken America's position relative to her trading partners. The government backed insurgents to create riots across the US in an attempt to fuel racist division between the predominantly white unionised northern cities (Detroit, Chicago, Pittsburgh, New York) against cheap, nonunionised black labour in the south. King's assassination was designed to prevent his support for a drive to unionise black labour in the south. Kennedy's assassination was intended to prevent a range of anti-financial-elite policies, including his plans to withdraw from Vietnam and to force US investment capital into domestic projects.

The American economy was in recession by the end of 1969. Nixon expanded the money supply and capital fled the US. Vietnam put the US in a weak position fiscally and in terms of trade balance. Wall Street refused to allow a substantial devaluation of the dollar to prevent a further collapse. The devaluation would be good for American industry, but would have reduced the value of Wall Street's overseas assets in real terms, since most of these were denominated in dollars.

Instead, Wall Street's solution, organised through the Bilderberg group, was to create an artificial permanent hike in the price of oil, in order to greatly expand the global demand for dollars, since the American-dominated oil market was denominated in dollars. Oil-importers which for the first time had suffered terribly under the quadrupling price of oil would see the value in holding a sizeable dollar reserve against future uncertainty, and the oil companies were in a position to take a sizeable cut of the increased revenues.

The shock was principally carried out by Kissinger. He fostered the October 1973 Yom Kippur War with the aid of British and American intelligence by misleading both sides of the conflict about the true situation in order to avert a peaceful outcome. US intelligence on the buildup were suppressed by Kissinger. America diplomatically attempted to line up Europe in blaming the Arab states for the war, creating a standoff and embargo, allowing only the UK to remain neutral (thereby retaining good relations with the Arab states). North Sea oil began to turn a profit after the 400 per cent rise, which Engdahl believes was a highly unlikely outcome without foreknowledge of the embargo, thus raising questions about what was known when decisions to invest heavily in North Sea oil were being made in London (although arguably the North Sea could be seen as a valuable strategic resource even if never profitable?).

Saudi, Kuwait, Iraq, Libya, Abu Dhabi, Qatar and Algeria announced on 17th October 1973 that they would cut production by five per cent per month until Israel withdrew from territories occupied in 1967, and restored the legal rights of the Palestinians. Watergate hit in late 1973, leaving Kissinger in unfettered control of policy.

A 1975 US-Saudi agreement committed Saudi to invest a sizeable chunk of its windfalls in financing US deficits.

After personal assurances from Kissinger, the Shah of Iran pushed for further price hikes rather than calling for restraint in January 1974. He had been previously concerned about angering the US – who were, of course, officially supporting Israel which further angered the Arab states and fuelled their desire to force up prices – until Kissinger had revealed otherwise. From 1949 to 1970, oil prices averaged $1.90 a barrel. In early 1973, around the time of the Bilderberg meeting, they rose to $3.01. When Iran supported further rises on 1st January 1974, the OPEC benchmark rose to $11.65.

Oil stocks in the US had been artificially lowered in the run up to the crisis, to exacerbate the degree of panic and price fluctuation in the US. The shock wiped out many developing countries' trade surpluses, such as India's. The developing world's collective trade deficit rose 400 per cent to $35 billion between 1973 and 1974. The drop in global output between 74 and 75 was the largest since the war. Most of the oil revenues were invested through London and New York banks, setting the stage for the 1980s debt crisis.

In the aftermath of the crisis, there was an understandable surge in global interest in nuclear power as a means of insulating countries from the economic and strategic danger of this reliance on the international oil market. Big oil became very interested in subsidising environmental anti-nuclear groups worldwide, particularly Friends of the Earth (received $200k from Anderson, an oil-connected member of the Bilderberg group) and they managed to secure a UN conference in Stockholm in 1972 to advance their version of the new 'ecological' (ie anti-nuclear) ideology.

At the same time, Kissinger was pushing a population-control agenda within Washington, seeking to use US government power to control population expansion in the developing world, particularly Kissinger's target thirteen: Brazil, Pakistan, India, Bangladesh, Egypt, Nigeria, Mexico, Indonesia, the Philippines, Thailand, Turkey, Ethiopia and Colombia (named in National Security Council Study Memorandum 200 (NSSM 200)). The concern was that the US was dependent on natural resources sourced from these areas and a rapidly expanding population would create a competing demand for these resources which the US might not be able to combat (or at least, that it might be cheaper to combat through preventative population control).

The 1974 oil shock created a global depression, felt most acutely in the developing sector. LDCs faced an instant and unbridgeable current account deficit, having to cut development expenditure sharply and borrow internationally in order to meet their energy requirements. In 1974-75 there followed “the worst global drought in decades” which saw many developing countries rely on large-scale import of basic foodstuffs from Europe, at prices inflated by the shortage. The shortfall in global liquidity was met primarily by the London and New York banks, lending recycled petrodollars under exclusive arrangements actively supported by Kissinger, particularly with Saudi. All payments for oil to OPEC remained denominated in dollars, despite the increasingly irrationality of this position – large European powers would find it far easier to pay for oil imports in their own or other European currencies, which were at that time more stable than the dollar, providing benefits to oil suppliers. The power of the Anglo-American banks increased substantially, as they brokered a massive international debt between OPEC and the developing world.

Engdahl claims that the US could easily have intervened in order to bring down oil prices in the aftermath of 1974 and that it is essentially unthinkable that the American government could have disapproved of, but tolerated, the move. He believes the the US had sufficient control of OPEC to create the hike, intending that OPEC take the blame for it internationally.

As noted, North Sea oil came online at the same time as the hikes, increasing the international standing of Sterling as a secondary petrocurrency.

With the vast expansion of lending to LDCs, the lenders inherited more and more power to dictate economic policy to the recipients of loans: development expenditure was slashed and government revenues and loans were directed only to meeting the deficit.

The Colombo gathering of the non-aligned movement lead to a significant attempt to challenge Anglo-American domination of energy and international finance. Lead by Sirimavo Bandaranaike of Sri Lanka (the conference's host), Indira Gandhi of India and Frederick Wills (minister of foreign affairs) of Guyana, the movement called for

• the IMF to be replaced by a raft of International Development Banks who would aim at “the just division of the gains from an unequal global economic system”
• a fundamental reorganisation of international trade to improve the terms of trade
• a worldwide reorganisation of industrial production which would incorporate improved access by the LDCs to industrial products and technology transfer
• the initiation of negotiations as to the terms of current international debt, with a view to debt restructuring or moritoria: “The time for a debt moratorium has arrived.”

The strength of the movement lay in their numbers: 85 non-aligned states were calling for a debt moratorium simultaneously. Their potential success depended on being able to fight together, and not being separated. There is a substantial explanation by Wills in letters to Engdahl on pp158-160.

There was an immediate crisis of confidence on Wall Street, share prices in New York banks involved in international lending fell and so did the dollar, having to be supported by the Fed. The European Community, lead by Italy and West Germany, met in December 1976 to consider the proposals, and possible increased cooperation between the EC, OPEC and the NAM much to Kissinger's irritation.

Gandhi was forced into elections, in the midst of which several key members of her party defected over IMF-imposed austerity; she was out of office by March 1977. Sri Lanka was paralysed by strikes in January 1977 organised by 'Trotskyites' who were reportedly linked to UK-US intelligence. Bandaranaike was out by May. Wills was “forced to resign” in February 1978 under “repeated external pressures.” According to “diplomatic sources”, Kissinger was involved in all three cases, with British support. Engdahl cites Kissinger's effusive praise of the Foreign Office, in which he says that he often kept the Foreign Office better informed and more involved in his international dealings than the State Department.

The second prong of the global attempt to escape the banking-big oil stranglehold was to secure greater energy independence, and the obvious means of doing this at the time was through massive nuclear programmes. Brazil signed a $5bn contract with Germany to provide nuclear facilities and a further $2.5bn with France. Mexico announced plans to build 15 reactors in 20 years with the help of Germany and Japan. The Bhutto government in Pakistan entered agreements with France, becoming a lobby throughout the Middle East for nuclear energy. Kissinger puts pressure on both France and Pakistan to abandon the agreements and is alleged to have made various threats against Bhutto. Bhutto was overthrown in a military coup in 1977 by General Zia ul-Haq and hanged. During his legal defence he claimed Kissinger was responsible for the coup. The ul-Haq government abandoned the nuclear programme and returned to the American fold, receiving large military assistance from the US. In Iran, the Shah was also committed to using part of the proceeds of the oil price rises to develop a massive nuclear-based energy infrastructure in Iran (rather than invest it in American banks). By 1978, Iran had the fourth largest nuclear programme in the world. Its main partners were France and Germany, in whom Iran became involved in joint ventures for research and development (extending massive loans), and bought shares in firms involved in the manufacture of nuclear technology. The US refused involvement in all of these programmes.

By 1975, Kissinger's heavy-handed 'divide and rule' approach to international relations was viewed as thuggish by the New York establishment; opposition was mounting and the threat of other power centres organising against Washington was perceived to be rising. The newly formed Trilateral Commission created the Carter administration as their planned change of course. The administration was packed with Trilateralists (a group which grew out of Rockefeller and Bilderberg interests); Carter himself was unveiled as “the next president of the US” by David Rockefeller in April 1975, 18 months before the US elections. He was portrayed as an outsider of the US establishment, although there was little substantive content to this purported 'new approach'. Having said that, it seems at least partially true: it seems that Carter was not even told about many important interventions of his presidency.

Immediately in the wake of the 1974 crisis, various groups around the world moved to bring gold back into international trade to displace the dollar, particularly between Europe, the USSR (a major gold producer) and South Africa. Planning became more elaborate, tying gold-based trade to a broader development plan which would extend from the more developed African centres of South Africa, Ivory Coast and Algeria through the entire southern African region, with European involvement. In 1976, riots erupted in Soweto (SA), coinciding with a visit by Kissinger, which promoted the image of SA as a pariah apartheid state increasing pressure on Europe to avoid close economic cooperation. Jurgen Ponto, Dresden bank chairman and one of the key figures in these plans was assassinated in July 1977. A few weeks later, Hanns-Martin Schleyer of the German employers' federation was kidnapped and murdered by the same group. The assassinations ended prospects of the project continuing. However, instead of relying on gold, Europe initiated the first phase of European monetary union in June 1978.

In 1978, negotiations between the Shah and BP for the continuation of oil exploitation broke down. The nuclear issue was still not resolved. A British Islamic expert, Bernard Lewis, proposed an 'arc of crisis', beginning with the overthrow of the Shah by Islamic Fundamentalists lead by Ayatollah Khomeini, followed by US-UK support for tribal groups throughout the middle east and along the Soviet border, hoping to make the region more malleable and create unrest in the Muslim regions of the USSR.

Britain reduced its oil purchases from Iran, placing revenue pressures on Iran. Trained agitators inserted by British and US intelligence fostered religious objections to the Shah. BP organised capital flight from the country. American security advisers within the Shah's police forces increased domestic repression and torture, hoping to stir a backlash. Carter began bleating about the human rights abuses of the Shah. The BBC initiated a propaganda campaign within Iran in favour of Khomeini and against the Shah. The Shah fled in January 1978, replaced by Khomeini. The Shah blamed Washington for his removal. It seems unlikely that Carter was aware of any of this (except the human rights stuff written on the autocue). Khomeini cancelled the nuclear programme and reduced oil output. Inexplicably, Saudi did the same. Again, unusually low reserve stocks held by big oil exacerbated the crisis. Existing Saudi and Kuwaiti production capacities could have covered existing demand – it was at their discretion that the crisis occurred. The 'arc of crisis' was implemented, along with a simultaneous recognition of China, granting them a Security Council veto and beginning arms supplies – an obvious further threat to the Soviet Union.

Volcker, one of the architects of the abandonment of Bretton Woods, was brought in to head the Federal Reserve in October 1979. In order to 'control inflation' (caused by the two oil shocks) he hiked US interest rates from 10 to 20 per cent, stemming the fall of the dollar and Arab investor's increasing preference for gold over dollar investments that resulted from the oil shock and general lack of faith in the Carter presidency. LDCs' debts became unrepayable overnight. The global economy went into recession. The dollar began a five-year-long ascent.

The final push to head off the threat of a nuclear alternative was the Three Mile Island incident, a nuclear accident engineered by Washington, and accompanied by strategic control of the way it was covered in the media in order to induce panic in nuclear technology. It came a day after FEMA came into operation – an organisation given total control of press coverage of such emergencies which prevented any real information about the incident to be given to the press for three days after it had happened, leading to wild speculation in the absence of any real information. Later government investigations tried everything they could think of to avoid concluding that the incident had been caused by sabotage, even though they were forced to dismiss all other possible causes.

The Thatcher-Reagan economic model was to enable rapid speculative gain at the expense of broad economic development. Their professed motivation of “controlling inflation” was a cover: the main source of inflation on their arrival into power were the 1970s oil shocks; in 1979 the price of oil had risen a further 140 per cent. They raised interest rates sharply: in the UK from 12 to 17 per cent and in America from 10 to 20 per cent supposedly to control inflation. The real result was to drastically change the terms on which international debt had to be paid: these debts were linked to US and UK base rates. Capital flooded into New York and London to take advantage of these rates; the dollar and pound rose, further increasing the real value of Southern debt. Deregulation provided an outlet for the money flooding into the financial centres in speculation – medium-term industrial investment was impossible due to the prohibitive interest rates which made borrowing viable only for speculation, just as in the 1920s. A broad assault on the unions ensured stagnating and declining standards of living which enabled huge tax cuts and increases in military spending in the US without pressure on inflation, as the purchasing power of the poor collapsed. The original monetary shock was created by Paul Volcker at the Fed, which in part lead to Carter's loss of the 1980 election; Reagan adopted Volcker and his Freidmanite policies far more fervently than Carter.

Third world debt spiralled out of control. The debts massive borrowing that had been required to maintain basic energy needs became unrepayable in the wake of interest rate hikes and the rapid strengthening of the currencies in which the debts were denominated. From 1976, Mexico had been using its oil revenues to pursue a broad developmental programme, investing in ports, roads, petrochemical pants, irrigated agriculture and nuclear power, under president José López Portillo. By 1981 the Mexican threat was becoming an increasing concern to Washington. A run on the peso was organised, initiated by William Colby (previously CIA head, now consultant on “political risk” to various multinationals) who predicted a devaluation of the peso before the coming elections in a NYT interview. Articles were planted throughout the American press fostering the rumour by the same agency behind the Iranian flight, Probe International. By early 1982, Mexico was forced into implementing austerity programmes, a thirty per cent devaluation, cutting its industrial programmes. López Portillo appealed to the UN general assembly, warning that countries such as Mexico would be forced into unilateral default if efforts to negotiate a moratorium were blocked.

Engdahl claims that Thatcher, with the support of Casey and Bush (then VP) prepared an “example” highly indebted LDC in order to prove that Britain would be prepared to use military force to punish any potential default. He claims the Falklands was an attempt to unite NATO around expanding their own perception of their mandate to include out-of-area deployment of forces to settle debt disputes. Argentina was then the third most indebted LDC.

There followed what Engdahl considers a close parallel of the 1920s Versailles experience, with the Anglo-American banks acting through the IMF using the leverage of unrepayable debt to strip the South of all available assets. Currencies collapsed, then state assets were sold off cheaply to Western corporations. Industrialisation collapsed under chronic lack of investment as fiscal resources poured into debt finance. Engdahl describes a “neo-Malthusian” ideology, prevailing in some Washington circles, that the answer to Third-World poverty lay in controlling and reducing population rather than in growth in industrial output; this policy seemed aimed towards these ends. IMF conditionalities replayed the Dawes and Young plans.

One component of conditionality was to slash imports, to free up forex for debt repayments: clearly, this was highly damaging to Western industry – a direct diversion of finance from the broad industrial economy (those industries exporting to LDCs) to the financial centres. The “restructuring” of debt that was granted developing countries following adoption of conditionalities was negligible – it provided almost no real reduction in the debt burden, and largely destroyed LDCs' long-term capacity to develop an industrial base which could ever repay the debt.

The US economy weakened in 1985. Fearful for Bush's election chances, Washington persuaded Saudi to provide a reverse oil shock, bringing oil down from $26 to $10 in a matter of months in early 1986, to stabilise at around $15. Wall Street claimed a “victory over inflation”. The economy began a further climb based on massive real estate speculation, as a result of very low interest rates. A fashion for leveraged buyouts burdened the industrial core of America's economy with large extra debts. But by the end of the 1980s everything began to unravel, and Thatcher left office with inflation at the same level as on her arrival.

The fall of the Berlin Wall came as a complete surprise to London and Washington, and was obviously viewed with horror. Not only was Germany planning to invest substantially in once again developing a united Germany into the economic powerhouse of Europe, but as part of the agreement under which the Soviet Union agreed to German reunification, Germany committed to supporting Soviet industrial development. A united Europe based on the close cooperation of France, Germany and Russia seemed to be developing before their eyes. Nightmare.

The Anglo-American planned response was to create a pretence under which military forces could once more take tight control of Middle Eastern oil, to resecure the “veto power” that control of these supplies granted America over continental Europe, Russia and Japan. Iraq seemed like the obvious choice: thought to be the largest source of unexplored oil fields after the Soviet Union, and far more closely allied with France and Russia than Saudi.

Iraq had been tempted into war with Iran by spurious American intelligence promising easy victories, and emerged from the Iran-Iraq war in 1988 with massive war debts to Russia and Eastern Europe (who expected to be repaid in oil), Kuwait, Saudi and French, British and American banks: a total of $65bn. Kuwait had been encouraged by the UK-US to extend extensive credit to Iraq in order to prevent the Iraqis suing for peace, because of the profits the UK-US was making from arms sales. In the spring of 1990, with UK-US encouragement Kuwait changed tack, rapidly increasing oil output and forcing the price down from $19 to $13 a barrel. Iraq and other OPEC members pleaded with Kuwait to return within its OPEC quota, but the Kuwaitis refused. Iraq became unable to service its debt.

Saddam started drawing attention to the American insistence on maintaining a large naval presence in the Middle East, despite Russia's increasing incapacity to project force in the region and the end of the Iran-Iraq war. He called for greater pan-Arab cooperation and the use of oil wealth to forge better relations with Europe, Russia and Japan.

Glaspie, US Ambassador to Iraq, met Saddam in April 1990, and Iraq/US transcripts of the meeting agree that Glaspie told Saddam that the US would not take a position on the Iraq-Kuwait conflict. Less than a week later, Iraq occupied Kuwait City. The al-Sabah royal family of Kuwait had fled in advance with their valuables, acting on CIA information, which they neglected to pass on to the Kuwaiti armed forces. Taking care to avoid a diplomatic solution, the US gained international support for intervention to liberate Kuwait, including $54.5bn to cover the costs of the war, on which America apparently made a profit of some $19bn. The Iraqi section of the Berlin-Baghdad railway was extensively destroyed.

Washington emerged from the Cold War determined to establish itself as the preeminent superpower, extending its reach throughout the war. This meant neutralising all potential rivals throughout the Eurasian area.

The Japanese economy, threatening the US at the end of the Cold War, crashed heavily in late 1989/early 1990 and failed to recover through the nineties. This was the result of a stock and real estate bubble fuelled by low interest rates and a strong Yen, policies both urged by Washington in order to help to improve US exports and decrease the US trade deficit. The crash was precipitated by Morgan Stanley and Salomon Brothers, who were in the process of developing new financial instruments which helped them to profit from collapsing stock prices.

The unique threat of Japan was the MITI system, by the late 1980s a very strong alternative to IMF-style free-market capitalism, clearly highly successful in the Asian Tiger economies and naturally attractive to the countries of the former Soviet Empire, who had a natural preference for a state-coordinated economic model over extreme liberalisation.

Attacks on the Tiger economies began with the Thai baht in 1997. Although the Tiger economies had grown primarily through government-controlled investment, under IMF pressure they opened up to short-term investment capital during the nineties, enabling a large inflow of short-term investment in real estate and stock which created a bubble. The attacks were lead by Soros' Quantum Fund and Julian Robertson's Tiger Fund. After Thailand, they moved straight onto the Philippines, then Indonesia and South Korea. The IMF moved in in their wake to ensure that Western banks weren't left with nonperforming loans.

US Secretary of State James Baker played the key role in persuading Russia and the G7 to grant the IMF the central role in reforming the Russian economy in 1990. The IMF demanded an end to subsidies on food and raw materials, and a free float for the ruble in 1992. Within a year prices had risen 9900 per cent and real wages had fallen 84 per cent. America and the IMF's main ally in the Yeltsin government was Anatoly Chubais; his installation was a conditionality of a $6bn IMF loan in 1996. He sold off state assets at prices sometimes 10 per cent of market value, sometimes under 1 per cent. 60 per cent of Gazprom was sold for $20m, market value was $119bn. Control of key infrastructure passed into the hands of a tiny oligarchy. The wider economy collapsed. In 1998 it crashed further; the IMF extended loans but in August Russia declared that it was defaulting on Western debt. The Fed had to call an emergency closed-door meeting with fifteen of the world's most powerful bankers to design a rescue operation which would prevent the bankruptcy of LTCM, the world's largest hedge fund, which threatened a chain-reaction series of bankruptcies that might extend throughout the Western financial establishment.

During the cold war Yugoslavia had received American aid, fostering Tito's mixed socialism as an alternative to the Soviet system. By the late 1980s, the Yugoslav economic model was seen merely as a threat. The solution was what later became known as “Balkanisation”, using NGOs financed by Washington to encourage the dissolution of Yugoslavia into tiny, controllable states, each dependent on the US and IMF. The main body used by Washington was the National Endowment for Democracy (NED) who bought influence with local NGOs and independent media. Under IMF policies, the Yugoslav economy went into a steady decline from 1990. In 1991, whilst demanding a free float for the dinar, the IMF prevented the government securing credit from its own central bank. Engdahl claims that this freeze amounted to a “de facto secession by Croatia and Slovenia”.

In November 1990, the US Congress passed the Foreign Operations Appropriations Act, cutting all US aid to any area of Yugoslavia that refused to declare independence within six months. The law demanded separate elections to be supervised by the US in each republic, and that all aid should be paid directly to the republic rather than to the central Yugoslav authority. Money was funnelled through NED to nationalist groups. Reacting to this initiative, President Milosovic organised a new Communist Party in November 1990 to defend a unified Yugoslavia, setting the stage for a spate of regional wars. In 1992 Washington added a total economic embargo, destroying the economy with hyperinflation and 70 per cent unemployment. The Dayton peace agreement coincided with the realisation in Washington that pipelines would need to be built through Yugoslavia in order to achieve full exploitation of Caspian reserves. From Dayton on, Bosnia became a pliant IMF-Nato puppet. During the 1990s, Europe advanced various initiatives to link Caspian reserves to Europe independent of the US. The bombing of Serbia was required by America to derail these plans. “Negotiations” over human rights abuses amounted to the Rambouillet ultimatum, in which Milosovic was required to allow Nato troops full access to Kosovo and Serbia. He could not agree and bombing followed, in contravention of the UN Charter, the Nato Charter (which commits Nato to a purely defensive role – bombing Serbia was the crucial “out of area deployment” that the US and UK had been seeking for decades), the 1975 Helsinki Accords and the US constitution (which specifies that only Congress can declare war). The bombing extensively hit civilian targets, doing $40bn of damage to the Serb economy. After the bombing, a Serb withdrawal from Kosovo was negotiated (as, seemingly, could have been negotiated at Rambouillet) and the Pentagon began construction of one of the largest US bases in the world, Camp Bond Steel in southeast Kosovo, to permanently house 3000 US soldiers and an airfield. This provided the US with strategic control of all oil routes from the Caspian to Europe, amidst a destroyed Yugoslav economy controlled by the IMF.

American oil interests have a pessimistic view of Peak Oil. They define Peak as the point at which half the contents of a particular field have been extracted. Production is not symmetric around peak: after half of a field has been extracted, the rate at which extraction is possible and the cost of extraction per unit can both take off (this has been the experience with Brent). They expect Peak around 2010, or 2015 at the latest. They don't view Peak as a smooth levelling off of production; they expect it to lead rapidly to sharp increases in oil prices and possibly also a rapid decline in overall oil supply. In geopolitical terms, this implies that the value of oil control is likely to rise immensely over the next ten to twenty years.

In parallel, a group of American strategists around the PNAC and first Bush administration believe firmly that the end of the Cold War should be exploited as an opportunity to build a global American empire. They believe that no sufficient concentration of power exists that can prevent such an empire being built, but that the US' opportunity may not last – it is possible that a coalition of rivals may form as a counterbalance to US hegemony. Therefore, there is great urgency to the project: an empire built now will be in a position to control the development of rivals and prevent threatening coalitions.

There is a fundamental intersection between the two issues: control of oil at the source is on the brink of becoming a much more powerful tool to control other nations. The rise in the market price of oil will inevitably be far greater than the rises in the seventies which cast the global economy into recession and effectively stunted the economic development of the developing world by denying access to cheap energy (an absolute precondition of rapid economic development) and ultimately amassing an unserviceable debt which could be exploited by Washington and New York to pursue a neo-Malthusian policy of undermining economic development in the South to protect gratuitous energy consumption in the North.

Washington is now therefore committed, before all else, to dominating all oil and gas reserves, everywhere. Classical imperial conquests of Iraq and Afghanistan, coupled with the associated building of massive military installations in the former Soviet empire (Uzbekistan and Kyrgyzstan) have effectively turned the entire Middle East into an American protectorate. Iraq is a colony, dismantling extensive agreements with France, Russia and China to develop Iraqi oilfields. Afghanistan is a colony. Georgia (on the route of Baku-Ceyhan) has been a protectorate since the 2004 elections. Kuwait is a protectorate. Pakistan is dependant on US support.

Moves for other oil reserves have met less resistance, but have been no less assiduous. In early 2003, Washington reached agreements over the use of the East Atlantic islands of Sao Tomao and Principe, both within striking distance of the west African oilfields from Morocco to Nigeria, Equatorial Guinea and Angola. Up to 25 per cent of US oil needs will soon come from west Africa, according to some predictions. Military aid continues to pour into Colombia. The removal of Chávez was attempted in 2002. The US imports more oil from Colombia, Venezuela and Ecuador than the entire Middle East. Libya returned to Washington's circle of friends in January 2004, throwing out agreements to develop oil with Japan, Italy, China and France (countries not bound by US sanctions). Somebody was impressed by the Iraqi invasion? New US military bases have been built in Indonesia under terrorist pretexts. Washington has so far managed to block Japanese agreements to develop Iranian oil and is locked in ongoing attempts to become more involved in Russian oil developments.

“If you want to rule the world, you need to control oil. All the oil. Anywhere.” –Michel Collon

“The basic and generally agreed plan is unilateral world domination through absolute military superiority, and this has been consistently advocated and worked on by the group of intellectuals close to Dick Cheney and Richard Perle since the collapse of the Soviet Union in the early 1990s… For the group around Cheney, the single most important consideration is guaranteed and unrestricted access to cheap oil, controlled as far as possible at its source.” –Anatole Leven (Carnegie Endowment for International Peace)

“Let's look at it simply. The most important difference between North Korea and Iraq is that economically, we just had no choice in Iraq. The country swims on a sea of oil.” –Paul Wolfowitz (President of the World Bank, former Deputy Defence Secretary under Rumsfeld during Iraq II)

Washington's plan is “total spectrum dominance”, through which it hopes to gain a virtual monopoly of global oil supplies, controlled by military might at the source. As circumstances in the global oil market inevitably develop through Peak, this will place it in a position to determine who receives oil and at what price – it will gain the discretion to offer sufficient oil at a low enough price for some economies to develop and thrive, but at the same time it will be in a position to deny many a sufficient energy supply to maintain a viable economy – giving it even greater political power to determine which administrations shall succeed and which will be thrown out amid economic chaos than it has ever known before. The Iraqi “disaster” is not a reflection of American overconfidence or misjudgement – the issue of controlling oil at source is about to become so dominant that the costs of an anomic Iraq are insignificant besides the direct control of world affairs that America is set to inherit. There is no limit to how messy Iraq may become – no cost can possibly be great enough to make a withdrawal the more profitable option for Washington.

“Every single empire, in its official discourse, has said that it is not like all the others, that its circumstances are special, that it has a mission to enlighten, civilise, bring order and democracy, and that it uses force only as a last resort.” –Edward Said