It is about three years now since Saddam made his most astute move ever although it was probably done in a fit of petulance rather than with foresight. Possibly however some Iraqi economists did know the true state of the American economy when they advised their president to demand payment in Eurasia for Iraq's oil. The U.S.A. far more than any other nation except perhaps Switzerland depends on the strength and stability of its currency. Exports are weak, the national debt is out of control and trade deficits are insupportable. If the dollar was not the currency the world trades, the U.S.A would be if not quite a basket case of African levels then certainly in no better economic shape than "walking wounded" like Brazil and Mexico.

The American economy is both beneficiary and victim of the fact that the dollar is the world's reserve currency. Whatever nations buy from across national borders they must pay for in dollars and whatever they bring to the world market to trade they want to be paid in dollars for. So it does not really matter how big the US deficit on oil, steel, foodcrops and chocolate because what Uncle Sam is really selling in the world market is the dollar. This means the Federal Reserve Bank can print dollars to buy whatever the consumers demand.

The situation had persisted since the British economy crashed and burned in the early nineteen - sixties. The pound is still a trading currency but mostly within the British Commonwealth. In the world market a wodge of British wonga no longer begs the question "how much of our stuff would you like, sir?" but "how many dollars will that monopoly money buy, schmuck?" No matter, we own enough of America to ensure we have a ready supply of dollars flowing in through our holdings in the Caymans, Bermuda, The Isle of Man etc. World trade is truly wonderful.

The happy situation of dollar supremacy would have continued but for the push towards European integration. After the fall of the Soviet Union certain economists and political philosophers (mostly in France and Germany) decided that to have only one superpower would be bad for the world community. Another trading bloc was needed and the European Union could easily be adapted to fill the void.

It is easy to follow the reasoning, around 70% of the world's currency reserves are held in dollars which of course means that essential commodities, particularly oil, are valued in dollars. While the U.S.A. controls the money supply in effect it gets imports for free. As a bonus most of the dollars that other nations have worked hard to earn have to be invested back in the U.S. economy. It is so smart we should be surprised the Mafia did not think of it first.

In spite of its recent enlargement the European Union's (EU) economy suffers from none of the systemic weaknesses of the American economy. This being so, the Euro is the only serious competitor to the Dollar as a world currency. There we have one of the true , but unmentionable reasons why The White House was so anxious to bring about regime change in Iraq. Now American interests control Iraq's oil it is once more priced in dollars.

The lesson has not been lost on people who are not friends of America however.

The nations of the Middle East do more trade and have better political relationships with Europe, the EU imports more oil and the European economies are cashflow based rather than debt based and so are more sustainable in adverse trading conditions. There have already been rumblings from within OPEC (the Organisation of Petroleum Exporting Countries) that a switch from dollars to euros for pricing oil could be a serious option. Should Europe's two main oil producers, Britain and Norway adopt the euro it could well be the tipping point at which a switch by OPEC becomes not possible but inevitable. On top of that there is another risk. Western News Media portray Al Qaeda as an organisation intent upon destroying western civilisation but this is a dangerous over estimation of terrorist ambitions. There are surely terrorist cells around the world who meet in gloomy basements and mutter darkly through beards of mass destruction about the downfall of the decadent west and the triumph of Islam but Osama bin Laden is certainly neither mad nor stupid. He knows well the American collective psychology, the siege mentality that sees enemies lurking behind every rock and tree along the borders. The destruction of the World Trade Centre was a perfect tactical move and in his response George W. Bush played right into the terrorists hands. Now with the threat is inflated beyond all feasibility in the American psyche and the death toll in Iraq creeping past a thousand, isolationism is starting to look like a good option to American voters. A shift to a more inward looking stance on foreign policy could well open the way for a Bin Laden inspired coup in Saudi Arabia, overthrowing the House of Saud and replacing it with an Islamic fundamentalist regime. And with the fundamentalists pulling the strings in the world's main oil producing area you can bet the exodus from the dollar would be rapid and total.

The American currency is already weak in world markets, the past twelve months have seen a decline of around 15% against other major currencies. Should control of the oil trade slip from America's grasp the decline would accelerate. Central banks would start to shift reserves into more stable currencies and create a snowball effect. With demand for its main trading commodity destroyed the US economy would collapse and America's position as the world's strongest nation would dissolve.

British Prime Minister Tony Blair is seen by the U.S. Government to be their greatest ally but in his way Blair is a bigger fool than Bush. Both men put religious conviction before political pragmatism but while Bush has the support of around half of the American people Blair, on the issue of the European currency, is out on a limb. He is hell-bent on taking Britain into the single currency group. Blair has often been called a control freak and displays all the insecurities that go with that condition. Wanting to be America's best friend he followed blindly down the road to war and isolated himself within the EU. Now he tries to show that he is a fervent supporter of European integration in order to recover his standing alongside Germany and France as one of Europe's main players. But Mr. Blair risks far more than his job as head of the British Government.

Economically speaking Britain's accession to the singe currency group in the near future would be catastrophic for both Europe and the global economy. Whereas the Soviet Union was a military superpower but an economic island, Europe and the U.S.A. are allies militarily but economic competitors that, under the unwritten rules of free market economics, would have go head to head in a trade war like two bull elephants. Free market economics compels all participants to compete for a bigger share of the cake at a time when America is more vulnerable than it has been in well over a century.

The prospect of a rapid collapse of American economic and political power might please some fundamentalists both Christian and Islamic, who would see the ensuing chaos as vindication of extremist interpretations of ancient scriptures but would not benefit any sane person. The concentration of economic power into two camps, with China possibly emerging as a third force over the next two decades would lead to economic colonisation of the third world and social paralysis of a global community facing the challenges of climate change and over - population.

The only way to avert a series of economic crises is for the other nations of the industrialised world to persuade America to adopt a more responsible and internationalist attitude to the obligations that go with its role as the world's most powerful nation. Before we can begin to do that though, the American people must play their part by making sure that whoever is to be President for the next few years understands that being the biggest and the richest does not absolve a nation from its moral duty to the world community as a whole.

Before plunging into a war in Iraq, a war that Saddam Hussein knew he could not win on the battlefield, the U.S. Government and that of Britain should have consulted with experienced diplomats of other nations. In the west we are ruled by short - termism. The troops were in Baghdad within a month, a great triumph was proclaimed. It should have been all over but anyone experienced in Middle Eastern affairs would have advised that the Arab mindset is different and well suited to playing a long game.

So far the war has gone the way Saddam would have predicted. He knew his army could not withstand the assault, even if the British had not been involved the Iraqis would have been overwhelmed. But America has been sucked into a prolonged and costly occupation that has done inestimable damage to its standing in the world.

The consequences of a collapse of the global economy could result in global cultural war and plunge the world into a new dark age. The message that must be sent to the White House or carried through the front door by a new tenant is that the world needs a strong and confident America but America needs a supportive world community in order to regain its confidence and its sense of moral duty. If that message is not heeded then Saddam will truly have won the war.

How Saddam May Yet Win The War