Transnational Capital Markets and Development Policies: The OPEC Countries, the Eurocurrency Markets, and the LDCs from the 1960s to the 1970s

In the wake of a recent literature in international banking and financial history focused on the role of western commercial banks in placing the OPEC nations’ assets with international borrowers, this article examines the role of leading Wall Street American banks in reflowing the investments of the OPEC oil producing nations to finance the external disequilibria of the non-oil-producing LDCs as a tool of U.S. foreign economic policy during the 1970s. The article suggests that that such a policy aimed at the same time at propping up American development assistance programs to the LDCs and at fixing the decline of the dollar in the foreign exchange markets. Against this backdrop, the article explores the shift of international financial assistance to the non-OPEC LDCs, from dollar-denominated assets mostly allocated by the IBRD before the end of the 1960s, to a set of new international financial arrangements based both on deposits from the OPEC countries with the Eurocurrency markets, and on the intermediary role of the leading American banks specializing in trading these non-resident markets to channel the revenues of the OPEC oil producers to the non-oil LDCs.