Hostage Capital

The placement of petrodollar surpluses of the Arab oil exporting nations in the United States may be regarded politically as hostage capital. In the event of a major political conflict between the United States and an Arab oil-exporting nation, the former with all its military power can confiscate or freeze these assets or otherwise limit their use. It can impose special regulations or at least use regulations for a time, in order to attain certain political, economic, or other goals. It may be argued that such actions are un-American, since they are a direct violation of the sacred principles of capitalism and economic freedom. Nevertheless, the U.S. government resorted to such weapons twice in the l980s against Iranian and Libyan assets. It follows, therefore, that governments placing their petrodollar surpluses in the United States may lose part of their economic and political independence. Consequently, the more petrodollar surpluses are placed in the United States by a certain oil-exporting nation, the less independent such a nation becomes.

For the relationship between hostage capital and petrodollars, see:

"Economics of Petrodollars" by Dr. Ibrahim Oweiss