The US global war to save the Dollar
THE WAR, THE DOLLAR AND THE US DEBT.
Today I am providing my English translation of an article by Domenico Moro, originally in Italian and published on ComeDonChisciotte.org on Tuesday 24th June 2025.
(All emphasis mine, footnotes original).
There is a close link between war, the [US] Dollar and US debt. Israel's aggression against Iran took place in an area, the Middle East and the Persian Gulf, which is home to the world's largest reserves of oil and gas. In particular, Iran has the world's second largest gas reserves and third largest oil reserves. In addition, 30% of the world's oil passes through the Strait of Hormuz, controlled by Iran, on its way to East Asia and in particular to China, which, despite US sanctions, purchases 90% of the oil exported by Iran.
A few days after the outbreak of the Israeli attack, Il Sole 24 Ore [Italian financial newspaper] ran the headline “International trade, fewer [US] Dollars and more Euros” on its front page. According to the authoritative economic daily, the US Dollar's currency leadership is increasingly being questioned in international trade transactions. A growing share of global trade is beginning to be settled in currencies other than the [US] Dollar, namely the Euro, Chinese Yuan Renminbi, Canadian Dollar and others. Significant in this regard is the statement by the head of sales at US Bancorp: “Many of our customers say that foreign suppliers no longer want to be paid in [US] Dollars. It used to be almost a dogma. Now they say, ‘Give us our currency, just pay us’”.
This trend away from the [US] Dollar towards other currencies is driven not only by the volatility of the [US] Dollar, which rose 7% at the end of 2024 and fell 8% in the first months of 2025 due to Trump's wavering tariff policies. Another factor is the effect of sanctions, which, for example, has led China, Russia and Iran to use the Renminbi Yuan for their transactions. But beyond the contingent, this is a historical underlying trend linked to the decline of US economic and military power. According to Il Sole 24 Ore, a global currency architecture is emerging in which global currency reserves will no longer be dominated by a single currency but distributed among three major blocs: the US, the EU and China.
The geopolitical control of oil reserves and transport routes by the US and its navy is fundamental, because thanks to this control, oil (and other key commodities) transactions have always been conducted in [US] Dollars. But now, as mentioned, this is no longer the case. For example, Iranian oil is sold to China in Renminbi Yuan. The fact that the most important raw materials are traded in currencies other than the [US] Dollar undermines the [US] Dollar's position as the world's reserve currency. To date, 58% of global currency reserves were in [US] Dollars and 20% in Euros.
Why is it important for the US that its currency, the Dollar, is the global reserve currency? Because central banks and global financial institutions, having to accumulate reserves in dollars, buy assets in [US] Dollars, starting with US Treasury bonds. The purchase of the latter is essential because the US needs to finance its enormous public debt. But it is not just a question of public debt. As the former governor of the Bank of Italy, Ignazio Visco, recently said in an interview with Affari & Finanza [another Italian financial newspaper], “There is now only one major debtor in the world, the United States”. The US's net international investment position – the difference between financial assets held abroad by US residents and financial liabilities to non-residents – is negative by more than $26 trillion, 90% of US GDP.
This liability is due to three factors. Firstly, the accumulation over time of US trade deficits, which for decades have been importing more than they export. Secondly, the appreciation of the [US] Dollar against other currencies, which also makes exports less competitive. And thirdly, the exceptional increase of over 370% in the share prices of American companies owned to a significant extent by other countries. These are mainly US technology companies, the so-called “magnificent 7”, which alone account for a third of the US market capitalisation.
Trump's attempt to counteract the trade deficit through tariffs and the devaluation of the [US] Dollar has exacerbated the US debt situation. This has led to a movement away from a whole range of American assets, from the [US] Dollar to bonds and equities. In particular, the lack of appeal of government bonds, which led to a fall in their prices and an increase in yields, prompted Trump to quickly backtrack on tariffs. In recent days, the prices of credit default swaps, which are effectively insurance policies to protect against a possible US default, have also soared due to fears of uncontrolled growth in public debt.
The war between Israel and Iran must also be viewed in this economic context. Growing debt is forcing the US to place its government bonds on the market, but this is difficult if the [US] Dollar loses its status as a reserve currency, which can only be maintained if the [US] Dollar remains the international currency of exchange. To remain an international currency, the [US] Dollar must be used as a means of transaction for the most important commodities, starting with oil and gas. This requires political and military control by the US of the areas where oil and gas are produced and where most of the reserves are located.
As mentioned, the area where the largest reserves of energy raw materials are concentrated is the Persian Gulf, which borders Saudi Arabia, Kuwait, Qatar, the United Arab Emirates and Iran. Therefore, control of the Persian Gulf is essential for the US both from an economic point of view, for the reasons we have outlined above, and from a geopolitical point of view, because by controlling the Persian Gulf, it also controls allied countries, such as Japan, and adversaries, such as China, which depend on that area for their supply of oil and other strategic raw materials.
In order to control the Gulf and the Middle East, it immediately became necessary for Western imperialism, since the 19th century, to control Iran, the most important country in the area in terms of population, history and geographical position. Great Britain was the first to exercise this control, later joined by the United States. The two Anglo-Saxon countries supported the military coup that overthrew Iranian Prime Minister Muhammad Mossadeq in 1953, whose great crime was to have nationalised oil production, taking it away from Great Britain. Iran subsequently became a de facto British and American colony until the Iranian Revolution in 1979 deposed the Shah, Reza Pahlavi.
Since 1979, Iran has essentially escaped Western control, becoming a thorn in the side of the United States and its policy of hegemony over the Middle East. For this reason, in the eyes of the US, total control of this area requires the destruction of Iran as an independent state. On the other hand, Israel represents the longa manus of Western and US imperialism in the area. Therefore, the current war fits into this context and, from this point of view, represents the latest episode in the clash between Iran and US imperialism.