US Dollar Dominance Exposed in Iran Conflict
The recent conflict in Iran has exposed two illusions at the center of contemporary energy power: the illusion of control and the illusion of capacity.
These illusions arise from the continued importance of crude oil and refined petroleum products to modern economies, as well as the dominant role of the US dollar in the financial system through which much of that energy is traded.
The US occupies a privileged position within this monetary architecture due to its influence over international trade in crude oil and refined petroleum products. However, the consequences of physical oil supply disruption have shown that this influence does not guarantee resilience.
Australia makes it clear that conditional access to globally traded energy is not equivalent to capacity. The country consumes large quantities of diesel but depends heavily on foreign refining, international shipping, and imported refined products.
The same structure constrains producing states in reverse, exposing them to a dollar-centered financial architecture they do not control.
Bitcoin offers an interesting test case for these illusions. As a decentralized monetary unit, it has no sovereign issuer, which could weaken the source of both illusions: the sovereign monetary privilege embedded in a settlement architecture organized around the currency of a single state.