Oil Brings Americans Closer to OPEC Debtor Dependence Supplanting Japanese

[Purveyor]

Source: Bloomberg

By Daniel Kruger

July 14 (Bloomberg) -- Petroleum exporting nations from Saudi Arabia to Russia are not only charging Americans record high prices for fuel, they are also poised to become the biggest creditor to the U.S. government.

Holdings of Treasuries by oil producers and institutions such as U.K. banks that are proxies for Middle East nations rose 44 percent this year to $510.8 billion through April, four times faster than the rest of the world, according to the Treasury Department's most recent data. At the current pace, they'll surpass Japan, which holds $592.2 billion, as the largest owner this month.

While the investment of so-called petrodollars into government debt is helping to temper a rise in borrowing costs as the U.S. finances a record budget deficit, it highlights America's dependence on foreign money. New York's Chrysler Building was bought last week by Middle East investors.

``We should be very happy that they're buying U.S. Treasuries because they're keeping interest rates low, and that's a positive for bond investors,'' said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG's Private Wealth Management unit in New York. ``Whether there's geopolitical risk is something else.''

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Transfer of Wealth

The United Arab Emirates had $964 billion in foreign assets at the end of 2007, followed by Russia with $811 billion, McKinsey said in a report last week. Soaring oil prices have also given Algeria, Iran, Libya, Nigeria and Venezuela more clout in foreign markets, McKinsey said.

Senators Barack Obama of Illinois and John McCain of Arizona, the presumptive presidential candidates for the Democratic and Republican parties, have taken positions on foreign oil wealth that may be difficult to reconcile with the U.S.'s need to attract $2 billion per day in foreign investment to fund its current account deficit. The shortfall in the broadest measure of trade totals $653 billion.

``I am concerned if these sovereign wealth funds are motivated by more than just market considerations,'' Obama said in February. ``We are over time transferring wealth to those countries, and that's something I intend to stop as president.''

Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=aw6lIs2RpX84&refer=us

[psychopomp]

1. The Great American Fire Sale continues...

[Bonobo]

2. Japanese folks love America! Saudi Arabia? Not so much...

We'd rather owe the Japanese, believe me. They are one of America's last big fans.

[Heywood J]

4. Up until Reagan, most of that debt

was owned privately by the American people. How many people even know what a Treasury bond looks like anymore, much less what it does?

[bulloney]

3. Tell me, Bush supporters, how are we more secure with so much debt to so many nations?