New Delhi (PTI): Saddam Hussein made two "huge and significant" strategic "mistakes" to challenge the US dollar-based global oil trading system and American petroleum giants, prompting Washington to invade energy-rich Iraq, according to a new book.

The first mistake Saddam made was when he decided in October 2000 to move away from using US dollars as the currency for oil exports, such as were allowed under the UN 'oil-for-food' programme, writes former Indian Ambassador to Iraq Ranjit Singh Kalha.

Saddam also converted Iraq's $ 10 billion reserve fund from US dollars to Euros. "Although this act of Saddam was not of very great economic significance in overall terms, it represented for the United States a direct challenge to the use of the dollar as a currency for transactions," he says in his just-released book, "The Ultimate Prize".

Iran followed Saddams move and Venezuela started initiating barter deals outside the dollar system. "If most other Organisation of Petroleum Exporting Countries (OPEC) followed the Iraqi and Iranian example, the stability of the US dollar would be at stake," Kalha, who was posted in Baghdad during the tumultuous 1992-94 period, says.

Saddam's second strategic mistake was when he decided to start giving oil contracts to non-US oil companies.

"This was too much for the US," Kalha says, noting that Washington had to forcefully meet the challenge thrown by Saddam as he was "sitting on the world's second largest reserves of oil."