While oil prices are near 3-year highs (oil and gas is 25 per cent of the Russian GDP, making the Kremlin a
petrocurrency state), tighter sanctions could still trigger the highest capital flight since the end of the USSR and tip a fragile economy into recession.
Since the strong dollar has coincided with a 40 per cent fall in Brent crude from its June 20 peak, higher interest rates during a time of $300bn in lost
petrocurrency revenues is a double whammy deflation shock for regional asset markets -- equity, debt and property.
The problem in 1983 was that the pound had became a
petrocurrency, far too high against the dollar and deutschmark for British industry to compete.
The outcome: Firstly, the US would certainly not sit and watch the dollar losing its
petrocurrency status and would do whatever needs to be done to defend the greenback; secondly, China wouldn't allow it as it wants the yuan to be a
petrocurrency as well; thirdly, in the moment oil and gas gets priced in bitcoins, it would be exposed to the cryptocurrency's extreme volatility with massive consequences and fiscal uncertainties for petroleum-exporting countries.
The loonie is a
petrocurrency. As oil prices rose post-2000, so did the loonie: from the low 60 cent range to parity by 2010.
So the Russian equity index fund (symbol RSX) will outperform its emerging markets peers since the rodina, above all, is the ultimate
petrocurrency market.
The Davos consensus will only survive in the fabulously wealthy
petrocurrency enclaves of the Gulf, such as UAE and Qatar, where ruling elites can afford the luxury of pro-market capitalism.
The UAE has now emerged as the most politically stable, global economy integrated state in the Arab world, anchored by Abu Dhabi's
petrocurrency wealth and Dubai's trading entrepot ethous, a $350 billion GDP economy that call well grow at five per cent.
Still, it is striking the extent to which the Canadian economy remains driven by commodity exports, with the Canadian dollar classified as a
petrocurrency, while the petro-politics of Alberta pushed us into free trade with the U.S., with its gluttonous appetite for resources, and continue to transform national politics.
But since then, high oil prices have turned oil sands-rich Canada's dollar into a valuable
petrocurrency: for roughly the past three months the Canadian dollar has hovered at around US$0.90c, making these book prices seem steep.