But in 2007, the world changed.
By 2007, the sheer scale of US dollar liabilities to China led to the opening of a new front. I believe that at this point [...] the Chinese called a halt to US adventurism by using an economic veto - ie mutually assured economic destruction.
I believe that energy security is a red line issue for China as much as for the US, and China was prepared to pull the plug on the US economy unless they pulled out of Iraq, and refrain from attacking Iran.
The US and Israel have in my view been warned off any physical attack on Iran or other significant oil producers without the consent of China and are therefore restricted to sanctions ... and this is where it gets interesting.

The prize
"While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies" - Dick Cheney, Halliburton chief executive officer, Institute of Petroleum, London 1999.

When Cheney came to power as US vice president in 2001, he was able to act to secure the oil prize, based on his belief that a peak in oil production was imminent.

The first act was the campaign to liberate Iraq's oil, and the demonstration of the sheer scale of US arms and fire-power had a salutary effect on recalcitrant nations generally and on the potential nuclear troublemakers, Libya and Iran in particular.

Libya's capitulation was sufficient for Muammar Gaddafi to be able to remain in power for a few more years, while Iran immediately ceased all work on nuclear weapons and offered - via the Swiss - everything the US was looking for, short of regime change.

Pragmatists such as then secretary of state Colin Powell, who considered that this olive branch should be accepted, were over-ridden: the neo-conservatives were riding high, flushed with success: real men go to Tehran!

The ill-prepared and catastrophically badly managed US occupation of Iraq rapidly bogged down, and the realization that Iran was instrumental in the Iraqi resistance led to the gradual ramping up of the Iranian "nuclear threat" as a casus belli.

But in 2007, the world changed.

Currency wars
By 2007, the sheer scale of US dollar liabilities to China led to the opening of a new front. I believe that at this point - in the same way that the US, as principal creditor, vetoed further British adventurism at Suez in 1956 - the Chinese called a halt to US adventurism by using an economic veto - ie mutually assured economic destruction.

I believe that energy security is a red line issue for China as much as for the US, and China was prepared to pull the plug on the US economy unless they pulled out of Iraq, and refrain from attacking Iran.

We have entered into a new era of policy and diplomacy as a result: an era of currency wars.

The US and Israel have in my view been warned off any physical attack on Iran or other significant oil producers without the consent of China and are therefore restricted to sanctions ... and this is where it gets interesting.

Oil sanctions are a completely dumb policy, which Beijing has not been unhappy to see because they enhance China's bargaining power and potentially enable it and other consumer nations to buy discounted oil from Iran to fill their reserves. Threats by the US to apply sanctions to China and the other BRICS nations (Brazil, Russia, India, South Africa) are in my view a bluff.

Financial sanctions are another matter, and it is true to say they have been instrumental in motivating Iran to come to the table. But these sanctions, which have now extended to persuading the craven Belgian domiciled SWIFT bank messaging system to throw out Iranian banks generally and the central bank in particular, will have unintended consequences with far-reaching effects.

Iran - a window of opportunity
Whereas in the West power is exercised through the banking system, in the developing world it is exercised by those who control resources, and particularly valuable and saleable energy resources like oil and gas.

What we have seen in Iran may be viewed as an ongoing struggle for control of oil and gas resources during the privatization process, with close parallels to the oligarchic struggle that took place after the end of the Cold War in Russia.

Since the election of President Mahmud Ahmadinejad in 2005, we have seen an ongoing power struggle that culminated in April 2011 with an attempt to take control of the crucial Intelligence Ministry. At that point, key players in the Army of the Guardians of the Islamic Revolution (aka Islamic Revolutionary Guards Corps, or IRGC) and elsewhere sided with the present leadership, and a political battle was then left to play out during the approach to the recent Iranian parliamentary elections.

Although these elections were dismissed outside Iran, they were instrumental in conferring legitimacy on the winning faction. Once it was clear that the Ahmadinejad faction had been soundly defeated, action has followed swiftly by a leadership more confident than it has been for years.

An overture was made within days to the P5+1 to restart negotiations, and key ministers have been given much more freedom of action free from obstructionism, too often based upon personal vendettas and rent-seeking.

The nuclear element of the offer made by Iran in 2003 is possibly now back on the table. Former ambassador Hossein Mousavian, who was Iran's nuclear negotiator at the time, supported this view recently in a US article. I also believe that for his part President Barack Obama has - unlike president George W Bush in 2003 - ruled out military action aimed at regime change.

The question is whether the demands by the P5+1 will be politically acceptable to Iran, and things are not looking good so far, if one listens to the spin from the US and European Union in relation to demands for closing down and even dismantling the underground nuclear facility at Fordow, near Qom. The key questions are what common ground there is among the members of the P5+1 and whose view will be dominant?

US and EU strategy
My analysis is that the Obama administration's strategy is to negotiate a politically advantageous settlement with Iran in the months leading up to the November election, and to manage down the oil market price as the Iran "risk premium" leaks away.

This market management would be achieved through continuation of the macro-market manipulation of the crude oil price orchestrated since 2009 between JPMorgan Chase and the Saudis (with fellow members of the Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates).

This has been achieved through the facilitation by JPMorgan of Enron-style "pre-pay" financing of Saudi crude oil inventory funded by risk averse "inflation hedging" passive investment.

The result of such a strategy would be a "win/win" prior to the November election. The first "win" would be for Obama to have largely resolved an issue that cost president Jimmy Carter re-election. The second "win" would be a managed pre-election reduction in the politically sensitive US gasoline price to below US$2.50 per gallon. Obama's opposition has nothing remotely resembling a credible policy to achieve this.

France, Germany and the United Kingdom will probably take a harsh line in an attempt to be "holier than the pope", whether through grandstanding prior to an election (France); an imaginary "special relationship" with the US (UK), or a generally pro-Israeli line (Germany).

Russia and China
On the face of it, Russia has - like all producers - a short-term interest in prolonging the risk premium on oil as long as possible, but no medium- or long-term interest in oil price levels that act to destroy demand, as now, particularly in their closest markets.

China, on the other hand, would wish to see the end of sanctions and the risk premium which goes with them, and also to maintain the privileged access to Iranian oil that they have been assiduously cultivating for years.

My analysis is that Russia and China will be inclined to accept the sort of Iranian terms set out by Mousavian, and more to the point, they have the economic clout to back up their position.

"How many divisions has the pope?" - Joseph Stalin

Or in this context, how many barrels has the Group of 7 leading industrialized nations? This is the question that exemplifies realpolitik at its most brutal. The fact is that the oil sanctions imposed unilaterally by the US and EU on Iran are counter-productive, and they benefit those who do not participate. In the event of a disagreement at Istanbul or subsequently, China, India, South Africa and others will undoubtedly buy, at a price, every barrel Iran can sell.

But it is through over-reaching in relation to financial sanctions where the US may well have made a major strategic error. At the very time when the banking system is in crisis, the last thing the US should be doing is forcing a major oil producer like Iran to make alternative arrangements.

A secure messaging system - which is all that SWIFT actually comprises - is actually pretty trivial to replicate, and all it needs is participants, which may or may not be banks, that are looking to clear and settle obligations.

When the BRICS nations met late last month in New Delhi, at the top of their agenda was a BRICS bank. There is no reason at all why such a credit institution need pay heed to US sanctions in respect of Iran because, quite simply, the US needs the BRICS more than the BRICS need the US. In fact, there's no reason why it needs to be a bank at all, as opposed to a BRICS credit clearing network or clearing union.

I suspect we are now entering a period of consequences ... unforeseen consequences.

Chris Cook is a former director of the International Petroleum Exchange. He is now a strategic market consultant, entrepreneur and commentator.

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The End of Western History?