Living Politics: In Round 2, It's The Dollar Vs. Euro

Jacques Chirac of France wants in. He called the president the other day to say so. Like the has-been don in "The Godfather," Chirac just wants to "wet his beak." A French contract to rewire Baghdad's phone system, perhaps. (After all, Alcatel of France built the old one). In the movie, Robert De Niro's response to a similar plea is to blow the old dude away.

George W. Bush isn't going to do that. I'm told he responded politely. Though a typical Gallic opportunist, Chirac may still have his uses, depending on how eager he really is to suck up. But Bush isn't going to rush to ask him--let alone the European Union or the United Nations--to join us in the back booth of post-Saddam Iraq. The thinking in and around the White House is: We're Boss now, and it's going to stay that way for a ... while.

Mankind is at one of those hinge moments in history, in which every big-power decision, phone call and diplomatic move has the potential to echo loudly down the years. The forces set in motion by 9/11 essentially destroyed a global structure that had lasted since 1947. A new world is being created. Ironically, the most troublesome clash of civilizations in it may not be the one the academics expected: not Islamic fundamentalists vs. the West in the first instance, but the United States against Europe.

To oversimplify, but only slightly, it's the dollar vs. the euro.

And just because Newt Gingrich attacked the State Department the other day, don't assume that Secretary of State Colin Powell is on the other side. He's not. The much ballyhooed war between Foggy Bottom and the Pentagon is exaggerated. Yes, mid-level diplomats at State, leaking to their favorite reporters, seethe at the influence of Defense Secretary Donald Rumsfeld and his coterie of neocons. Yes, the neocons view the lifers at State as naive accommodationists. But Powell, I'm told by White House officials, is firmly with the president in being wary--very wary--of Europe and its bureaucratic ally, the United Nations.

Powell made that plain in an interview on public TV. As if to respond to Gingrich's accusation that State had been too meek in its diplomatic dealings, Powell blandly said that France would suffer "consequences" for its role in trying to undermine American efforts to win global backing for the forcible removal of Saddam Hussein. As with much else in life and politics, those consequences will involve money.

Nobody in an official capacity on either side of the Atlantic wants to say this in so many words. We say that the war isn't over, that it's our job--and only our job--to continue the search for weapons of mass destruction and to bring stability to Iraq with an interim government. The Europeans and the United Nations insist that they should resume the task of searching for WMDs. Until that issue is settled, they say, international sanctions can't formally end. (France is only proposing to "suspend" them.)

In fact, the dispute isn't about WMDs at all. It's about something else entirely: who gets to sell--and buy--Iraqi oil, and what form of currency will be used to denominate the value of the sales. That decision, in turn, will help decide who controls Iraq, which, in turn, will represent yet another skirmish in a growing global economic conflict. We want a secular, American-influenced pan-ethnic entity of some kind to control the massive oil fields (Iraq's vast but only real source of wealth). We want that entity to be permitted to sell the oil to whomever it wants, denominated in dollars. We want those revenues--which would quickly mount into the billions--to be funneled into the rebuilding of the country, essentially (at least initially) by American companies. Somewhere along the line, British, Australian and perhaps even Polish companies would get cut in. (Poland provided troops.) President Bush doesn't dare sell the war as a job generator, but it may, in fact, produce more than a few.

The Europeans and the United Nations want the inspections regime to resume because as long as it is in place, the U.N. "oil-for-food" program remains in effect. Not only does France benefit directly--its banks hold the deposits and its companies have been involved in the oil sales--the entire EU does as well, if for no other reason than many of the recent sales were counted not in dollars but in euros. The United Nations benefits because it has collected more than a billion dollars in fees for administering the program. As long as the 1990 sanctions remain in effect, Iraq can't "legally" sell its oil on the world market. At least, to this point, tankers won't load it without U.N. permission, because they can't get insurance for doing so.

Sometime in the next few weeks, push will come to shove. There are storage tanks full of Iraqi crude waiting in Turkish ports. For now, Rumsfeld and Powell are playing "bad cop, bad cop." "This isn't on the president's radar screen right now," an aide told me. "Powell is totally on board, though. He is as angry at the French as anyone else, maybe more. There may come a time when the smart thing to do is turn the whole Iraq situation over to the U.N. This is not that time." Meanwhile, if the rest of the world tries to block any and all Iraq oil sales, it's possible that American companies will find a way to become the customer of first and last resort.

And we'll pay in dollars.