Petrodollar recycling
Petrodollar recycling is the international spending or investment of a country's revenues from
The term petrodollar was coined in the early 1970s during the
Capital flows
Background
Especially during the years
1974–1981 surge
While petrodollar recycling reduced the short-term
From 1974 through 1981, the total
Large volumes of Arab petrodollars were invested directly in
2005–2014 surge
In the 2005–2014 petrodollar surge, financial decision-makers were able to benefit somewhat from the lessons and experiences of the previous cycle. Developing economies generally stayed better balanced than they did in the 1970s; the world economy was less oil-intensive; and global inflation and interest rates were much better contained. Oil exporters opted to make most of their investments directly into a diverse array of global markets, and the recycling process was less dependent on intermediary channels such as international banks and the IMF.[22][23][24]
Thanks to the historic
Foreign aid
Oil-exporting countries have used part of their petrodollar surpluses to fund
High-priced oil allowed the USSR to support the struggling economies of the Soviet-led bloc during the 1974–1981 petrodollar surge, and the loss of income during the 1980s oil glut contributed to the bloc's collapse in 1989.[37] During the 2005–2014 petrodollar surge, OPEC member Venezuela played a similar role supporting Cuba and other regional allies,[38] before the 2014–2017 oil downturn brought Venezuela to its own economic crisis.[39]
Petrodollar warfare
The term petrodollar warfare refers to a theory that depicts the international use of the United States dollar as the standard means of settling oil transactions as a kind of economic imperialism enforced by violent military interventions against countries like Iraq, Iran, and Venezuela, and a key hidden driver of world politics. The term was coined by William R. Clark, who has written a book with the same title.[40] The phrase oil currency war is sometimes used with the same meaning.
According to critics, the use of dollars in international oil transactions increases overall U.S. dollar demand by only a tiny fraction, and the dollar's overall status as the major
Gallery of notable examples
These images illustrate the diversity of major petrodollar recycling activities, in roughly chronological order:
-
US Treasury securities, approximately $300 billion accumulated by OPEC governments during 1960–2015[43]
-
Itaipu Dam between Brazil and Paraguay, financed by loans from petrodollar bank deposits in the 1970s[46][self-published source]
-
Western grain, heavily imported by the Soviet Union to ease food shortages in the 1970s and 1980s[48]
-
American-builtF-15 fighter jet, one of dozens owned by the Royal Saudi Air Force since 1981[49]
-
"Oil for doctors" program, with thousands of Cuban physicians anchoring the Venezuelan health system from 2004[55]
-
Bottles ofEmirates airline since 2005[56]
-
IMF support[57]
-
Cézanne painting, purchased in 2011 by the Royal Family of Qatar for a record-setting price above US$250 million[62]
See also
References
- ^ )
- ^ a b c "OPEC Revenues Fact Sheet". U.S. Energy Information Administration. May 15, 2017. Retrieved May 28, 2017.
- ^ Myers, Amy; Elass, Jareer (January 2016). "War and the Oil Price Cycle". Journal of International Affairs. Archived from the original on April 10, 2019. Retrieved April 10, 2019.
- ^ Hertzberg, Hendrik (May 2, 2004). "In the soup - Bob Woodward's plan of attack". New Yorker. Retrieved April 10, 2019.
- ^ Coll, Steve (August 10, 2014). "Oil and erbil". New Yorker. Retrieved April 10, 2019.
- ^ Nsouli, Saleh M. (March 23, 2006). "Petrodollar Recycling and Global Imbalances". International Monetary Fund. Retrieved January 14, 2017.
- ISBN 978-0470185490.
- ^ a b "Petrodollar Profusion". The Economist. April 28, 2012. Retrieved February 7, 2016.
- ^ "Personality: Ibrahim M. Oweiss". Washington Report on Middle East Affairs. December 26, 1983. p. 8. Retrieved January 11, 2017.
In March 1973... Two weeks after Dr. Oweiss had used the word – at an international monetary seminar held at Columbia University's Arden House in Harriman, New York – it was picked up by a prestigious economics commentator in The New York Times.
According to the Oweiss and NYT websites, it appears that these events actually occurred in March 1974. - ^ Rowen, Hobart (July 9, 1973). "Peterson Urges Cooperation". The Washington Post. p. A1. Retrieved February 5, 2016.
He thinks the U.S. should give more study to ways in which the excess funds – he calls them petro dollars – can be soaked up.
- ^ Popik, Barry (February 1, 2012). "Petrodollar". Retrieved January 11, 2017.
Georgetown University economics professor Ibrahim Oweiss has written about petrodollars and is credited with the word's coinage by Wikipedia, but there is insufficient documentary evidence that he used the term first in 1973. Former commerce secretary Peter G. Peterson was credited with using 'petrodollar' in a July 1973 Washington Post article.
- ^ a b c d Oweiss, Ibrahim M. (1990). "Economics of Petrodollars". In Esfandiari, Haleh; Udovitch, A.L. (eds.). The Economic Dimensions of Middle Eastern History. Darwin Press. pp. 179–199. Retrieved January 31, 2016.
- ^ "Petrodollar Problem". International Monetary Fund. Retrieved January 31, 2016.
- ^ "Recycling Petrodollars". International Monetary Fund. Retrieved January 31, 2016.
- U.S. Congressional Budget Office. pp. 27–29. Retrieved February 5, 2016.
- ISBN 0-8014-2884-X. Retrieved February 8, 2016.
- ^ Wong, Andrea (May 30, 2016). "The Untold Story Behind Saudi Arabia's 41-Year U.S. Debt Secret". Bloomberg News. Retrieved May 31, 2016.
- ISBN 978-1-317-81782-6. Retrieved January 31, 2016.
- ISBN 978-0-671-47989-3. Retrieved January 31, 2016.
- ^ Carrasco, Enrique; McClellan, Charles; Ro, Jane (April 2007). "Foreign Debt: Forgiveness and Repudiation". The E-Book on International Finance & Development. University of Iowa. Archived from the original on June 6, 2011. Retrieved June 6, 2011.
{{cite book}}
: CS1 maint: bot: original URL status unknown (link) - ^ "Federal Reserve Economic Data graph". Federal Reserve Bank of St. Louis. Retrieved August 25, 2016.
- ^ Lubin, David (March 19, 2007). "Petrodollars, emerging markets and vulnerability" (PDF). Citigroup. Retrieved January 31, 2016.
- ^ "Recycling the Petrodollars". The Economist. November 10, 2005. Retrieved February 14, 2016.
- ^ Oxford Analytica (August 11, 2008). "World Economy Less Vulnerable To Petrodollars". Forbes. Retrieved January 13, 2017.
- ^ Bianchi, Stefania (February 22, 2016). "Sovereign Wealth Funds May Sell $404 Billion of Equities". Bloomberg News. Retrieved February 22, 2016.
- ^ "The Resource Curse" (PDF). Natural Resource Governance Institute. March 2015. Retrieved January 22, 2017.
- ISBN 978-1-31643242-6. Retrieved January 22, 2017.
- ^ Blas, Javier (April 13, 2015). "Oil-Rich Nations Are Selling Off Their Petrodollar Assets at Record Pace". Bloomberg News. Retrieved February 14, 2016.
- ^ "Timeline". Kuwait Fund. Retrieved January 22, 2017.
- ^ Hubbard, Ben (June 21, 2015). "Cables Released by WikiLeaks Reveal Saudis' Checkbook Diplomacy". The New York Times. Retrieved February 16, 2016.
- ^ Mukherjee, Andy (February 4, 2016). "Oil's Plunge Spills Over". Bloomberg News. Retrieved February 4, 2016.
- ^ Davis, Mike (September–October 2006). "Fear and Money in Dubai". New Left Review (41): 47–68. Retrieved February 12, 2016.
Dubai is capitalized just as much on cheap labour as it is on expensive oil, and the Maktoums, like their cousins in the other emirates, are exquisitely aware that they reign over a kingdom built on the backs of a South Asian workforce.
- ^ "Iranian General: Tehran Arming 'Liberation Armies'". Associated Press. October 27, 2008. Retrieved March 29, 2017.
- ISBN 978-1-78499764-9. Retrieved March 29, 2017.
- ^ Cockburn, Patrick (October 14, 2016). "US allies Saudi Arabia and Qatar are funding ISIS". The Independent. Archived from the original on May 26, 2022. Retrieved March 29, 2017.
- ^ Pacepa, Ion Mihai (August 24, 2006). "Russian Footprints". National Review. Archived from the original on January 9, 2015.
- ^ McMaken, Ryan (November 7, 2014). "The Economics Behind the Fall of the Berlin Wall". Mises Institute. Retrieved January 12, 2016.
High oil prices in the 1970s propped up the regime so well, that had it not been for Soviet oil sales, it's quite possible the regime would have collapsed a decade earlier.
- ^ Gibbs, Stephen (August 24, 2005). "Venezuela ends upbeat Cuba visit". BBC. Retrieved November 28, 2016.
- ^ Polanco, Anggy (July 17, 2016). "Venezuelan shoppers flock across border to Colombia". Reuters. Retrieved December 31, 2016.
- ISBN 978-0-86571-514-1.
- Foreign Policy Magazine.
- ^ Ben Bernanke (January 7, 2016). "The dollar's international role: An "exorbitant privilege"?". Brookings Institution.
- )
- ^ Taylor, Edward (September 18, 2014). "Kuwait Investment Authority says to expand Germany investments". Reuters. Retrieved January 17, 2017.
The KIA... is the largest shareholder in Daimler.
- ^ Al Saleh, Anas K. (September 18, 2014). "KIA/Daimler 40th Anniversary Celebrations" (PDF). Kuwait Investment Authority. Archived from the original (PDF) on January 18, 2017. Retrieved January 17, 2017.
From a 14.6% stake of around US$329 million acquisition in December 1974, the KIA is now the largest consistent shareholder in Daimler over 40 years where our 6.9% stake is currently valued around $7 billion.
- ISBN 978-1-46910432-4. Retrieved January 18, 2017.
International bankers... began to invest huge amounts of those petro-dollars in Brazil and other developing countries..., allowing them to finance gigantic infrastructure works like the Itaipu Hydroelectric Plant.
- ^ "Shah Faisal Mosque". Lonely Planet. Retrieved March 29, 2017.
Most of its cost (pegged at about US$120 million today) was a gift from King Faisal of Saudi Arabia.
- ISBN 978-1-31602563-5. Retrieved January 18, 2017.
The former head of the Soviet planning agency, Nikolai Baibakov, recalled that 'what we got for oil and gas' was $15 billion in 1976–80 and $35 billion in 1981–85. Of this money, the Soviets spent, respectively, $14 billion and $26.3 billion to buy grain, both to feed the cattle on collective farms and to put bread on the tables of Soviet citizens.
- ^ Mohr, Charles (August 22, 1981). "Saudi AWACS Deal Passes $8 Billion". The New York Times. Retrieved November 5, 2016.
The price of the arms sale gives increased weight to an argument that in part it should be approved because it helps to 'recycle petrodollars'.
- ^ Feder, Barnaby J. (September 8, 1985). "Harrod's New Owner: Mohamed al-Fayed; A Quiet Acquisitor Is Caught in a Cross Fire". The New York Times. Retrieved January 16, 2017.
This was a dream come true for the family, which built its fortune... first in the oil-rich countries of the Persian Gulf.
- ^ "Mohammed Fayed sells Harrods store to Qatar Holdings". BBC. May 8, 2010. Retrieved February 7, 2016.
- ^ "Russian businessman buys Chelsea". BBC. July 2, 2003. Retrieved March 23, 2016.
- ^ Critchley, Mark (April 12, 2015). "Roman Abramovich reaches 700 games as Chelsea owner – but how does his reign stack up against the rest?". The Independent. Archived from the original on May 26, 2022. Retrieved August 1, 2016.
Since the Russian oligarch began pouring petro-dollars into Stamford Bridge, he has turned one of English football's underachieving clubs into an established powerhouse.
- The Sunday Mirror. Retrieved August 1, 2016.
It should not escape notice that this is the first true title showdown, and first genuine title race, between the petrodollar clubs.
- ^ Corrales, Javier (December 2005). "The Logic of Extremism: How Chávez Gains by Giving Cuba So Much" (PDF). Inter-American Dialogue. Archived from the original (PDF) on November 29, 2016. Retrieved November 29, 2016.
In return for oil, Cuba is sending Venezuela between 30,000 and 50,000 technical staff. As many as 30,000 Cubans in Venezuela are presumably medical doctors.
- ^ Gaddy, James (January 5, 2017). "Emirates Has Invested $500 Million to Build a 'Fort Knox' of Wine". Bloomberg News. Retrieved January 5, 2017.
Since the Dubai-based airline began its wine program 12 years ago, it has spent more than $500 million to develop the best wine list in the sky... 'It's an investment. We look at it like a commodity.'
- ^ Aydogdu, Hatice (November 15, 2005). "Oger Telecom signs $6.55 bln Turk Telekom deal". Reuters. Archived from the original on February 2, 2017. Retrieved January 30, 2017.
'... a long-term investment, not only in the future of Turk Telekom but also in Turkey,' Hariri said. The sale of Turk Telekom's controlling stake is a key element of Turkey's IMF-backed privatization program.
- ^ Thomas, Landon Jr. (July 9, 2008). "Abu Dhabi buys 75% of Chrysler Building in latest trophy purchase". The New York Times. Retrieved December 29, 2016.
These funds, which maintain passive investment positions, will perform a crucial petrodollar-recycling function.
- ^ Bagli, Charles V. (July 10, 2008). "Abu Dhabi Buys 90% Stake in Chrysler Building". The New York Times. Retrieved July 3, 2016.
- ^ Lynch, Colum (December 11, 2009). "U.N. panel voices concern over Iran's apparent violations of arms-export embargo". The Washington Post. Retrieved March 29, 2017.
A U.N. sanctions committee expressed 'grave concern' Thursday about what it called apparent Iranian violations of a U.N. ban on arms exports.
- ^ Harel, Amos; Stern, Yoav (August 4, 2006). "Iranian Official Admits Tehran Supplied Missiles to Hezbollah". Haaretz. Retrieved March 29, 2017.
Mohtashami Pur, a one-time ambassador to Lebanon who currently holds the title of secretary-general of the 'Intifada conference', told an Iranian newspaper that Iran transferred the missiles to the Shi'ite militia.
- ^ Peers, Alexandra (February 2012). "Qatar Purchases Cézanne's The Card Players for More Than $250 Million, Highest Price Ever for a Work of Art". Vanity Fair. Retrieved February 19, 2016.
The money is there: the United Arab Emirates region is home to nearly 10 percent of all the world's oil reserve.
- ^ Business Monitor International (March 2016). "Q2 2016". Kuwait Autos Report. Archived from the original on January 16, 2017. Retrieved January 13, 2017.
In 2015, Japanese carmaker Toyota retained its long-held local market leadership..., over three times its nearest rival Nissan.
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Further reading
- Clark, William R. (2005). Petrodollar Warfare. ISBN 978-0-86571-514-1.
- Smolyar, Leonid (2006). Petrodollars: Tracking the Flow and Investment of Oil Windfalls (PDF) (B.Sc. Honors thesis). New York University. Archived from the original (PDF) on April 25, 2012.
- U.S. Government Accountability Office. Retrieved January 31, 2016.