Russia Just Pulled Itself Out Of The Petrodollar
Back in November, before most grasped just how serious the collapse in crude was (and would become, as well as its massive implications), we wrote “How The Petrodollar Quietly Died, And Nobody Noticed“, because for the first time in almost two decades, energy-exporting countries would pull their “petrodollars” out of world markets in 2015.
This empirical death of Petrodollar followed years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling.
We added that in 2014 “the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to the following graphic based on BNP Paribas calculations.”
The problem was compounded by its own positive feedback loop: as the last few weeks vividly demonstrated, plunging oil would lead to a further liquidation in foreign reserves for the oil exporters who rushed to preserve their currencies, leading to even greater drops in oil as the viable producers rushed to pump out as much crude out of the ground as possible in a scramble to put the weakest producers
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