Word: petrodollar
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...hypothetical example of recycling: Italy pays several billions of dollars to Aramco, the marketing agent, for Saudi Arabian oil; Aramco then pays this money to Saudi Arabia, which in turn deposits it in Western banks; the banks then lend it back to the government of Italy. Trouble is, the petrodollar deposits are short-term (the oil countries want the power to pull their money out at a moment's notice), while most loans, to be useful to a government or business, must be for the longer term?anywhere from one to ten years. A further difficulty is that many...
...help in recycling, Henry Kissinger has called for the Western countries and Japan to form a pool of $25 billion this year and perhaps another $25 billion next year. They would draw the money from petrodollar deposits in their banks and lend it out to industrial countries that have financial emergencies. For example, if a big oil producer pulled all of its money out of sterling, the British could get an immediate loan from the pool to cover their currency loss. Some Common Market nations, particularly West Germany, are cool to the Kissinger plan because they and the U.S. would...
Wall Street is well equipped to absorb the petrodollar billions. The Arabs, however, are suspicious of the fluctuating prices on stock exchanges. They prefer to lend money directly to Western companies, buy control of companies not listed on stock exchanges, participate in joint ventures with Western firms, and buy real estate. There is a limit, of course, to how much capital such activities can absorb, and the oil producers will inevitably be tempted to go for a piece of the big industrial action...
...certainly be helpful in establishing whether or not OPEC investors were acting as individuals, or as representatives of governments, who are less desirable because of the political implications behind their holdings. This legislation is especially necessary in order to insulate U.S. foreign policy - particularly in the Middle East - from petrodollar pressure...
...increase to Aramco averages out to 50? per bbl., the Saudis will be taking in an additional $1.5 billion a year; this year their oil revenues will be around $25 billion. But offering lower prices to other buyers would do little to alleviate the petrodollar crisis, says Oil Economist Walter Levy...