Petrodollar Recycling: Turkey's Cold Offices, Cezanne and Sovereign Funds

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Petrodollar recycling is the process by which oil exporters such as OPEC members, Russia and Norway earn more U.S. dollars than their own economies can absorb and send the surplus back into the world. After the 1973 oil crisis, exporters built a collective surplus of roughly $450 billion between 1974 and 1981. The IMF encouraged them to recycle it into U.S. Treasuries and Western banks, which fueled the offshore eurodollar market and a wave of loans to Brazil, Argentina and Turkey. In 1977 Turkey was so short of foreign exchange that government buildings went unheated, and Suleyman Demirel said the country was in need of 70 cents.

When interest rates spiked in the early 1980s, dozens of developing states defaulted, producing a lost decade across Latin America. Between 2005 and 2014 OPEC revenue hit about $1 trillion a year, and sovereign wealth funds, holding around $7 trillion globally by 2014, bought into Daimler, the Chrysler Building, Chelsea Football Club and Cezanne's The Card Players. The episode also covers Soviet grain purchases funded by oil, checkbook diplomacy, proxy funding, and William R. Clark's theory of petrodollar warfare along with the economic arguments against it.

• The Kuwait Investment Authority became the largest, most consistent shareholder in Daimler, parent of Mercedes-Benz.
• Abu Dhabi's investment council bought a 90 percent stake in New York's Chrysler Building.
• Emirates airline bought $500 million worth of French wine to serve on its flights.
• Venezuela sent subsidized oil to Cuba in exchange for tens of thousands of workers, including an estimated 30,000 medical professionals.
• A 2009 interception of a ship carrying over 300 tons of weapons is cited as evidence of Iran arming proxy groups.