portland independent media center  
images audio video
newswire article reposts global

political theory

Russia To Price Oil In Euros, Snubs U.S.

Russia is to start pricing its huge oil and gas exports in euros instead of dollars as part of a strategic shift to forge closer ties with the European Union.

A switch to euro invoicing would not affect the long-term price of oil but it could encourage Middle Eastern exporters to follow suit and have a powerful effect on market psychology at a time when the dollar is already under intense pressure. Russia boasts the world's biggest natural gas reserves and is the number two oil exporter after Saudi Arabia.
The Russian central bank has been amassing euros since early 2002
The Russian central bank has been amassing euros since early 2002
Russia to price oil in euros in snub to US

By Ambrose Evans-Pritchard in Brussels (Filed: 10/10/2003)

Russia is to start pricing its huge oil and gas exports in euros instead of dollars as part of a strategic shift to forge closer ties with the European Union.

The Russian central bank has been amassing euros since early 2002, increasing the euro share of its $65 billion (£40 billion) foreign reserves from 10pc to more than 25pc, according to the finance ministry.

The move has set off a chain reaction in the private sector, leading to a fourfold increase in euro deposits in Russian banks this year and sending Russian citizens scrambling to change their stashes of greenbacks into euro notes.

German officials said Chancellor Gerhard Schroder secured agreement for the change-over on oil pricing from Vladimir Putin, the prime minister, while on a trip to Russia this week.

Moscow: Middle East may follow lead of Russia's changeover to oil pricing in Euro

The two leaders have forged a close personal bond and are both keen to check American economic and diplomatic power.

Mr Putin was coy about German media reports on the deal yesterday but acknowledged that Russia was exploring the idea. "We do not rule out that it is possible. That would be interesting for our European partners," he said.

A switch to euro invoicing would not affect the long-term price of oil but it could encourage Middle Eastern exporters to follow suit and have a powerful effect on market psychology at a time when the dollar is already under intense pressure. Russia boasts the world's biggest natural gas reserves and is the number two oil exporter after Saudi Arabia.

Yesterday the dollar recovered slightly against the yen and euro, but the IMF and the European Central Bank both warn that America's ballooning current account deficit, now over 5pc of GDP, will lead to further declines.

Oil is seen as so central to the global power structure that the choice of currency used for pricing has acquired almost totemic significance. The switch from pounds to dollars after the Second World War has come to symbolise sterling's demise as a world reserve currency.

If the dollar were ever displaced by the euro, it would lose the enormous freedom it now enjoys in running macro-economic policy. Washington would also forfeit the privilege of exchanging dollar notes for imports, worth an estimated 0.5pc of GDP.

Maxim Shein, from BrokerKreditService in Moscow, said the switch to euros makes sense for Russia since it supplies half of Europe's energy needs. But the move is also part of a global realignment stemming from the Iraq war, which threw Russia, Germany and France together into a new Triple Entente.

"Abandoning the dollar is tantamount to a curtsey to the EU," he said. For now, IMF figures show the dollar remains king, accounting for 68pc of foreign reserves worldwide compared with 13pc for the euro.

homepage: homepage: http://www.money.telegraph.co.uk/money/main.jhtml?xml=/money/2003/10/10/cnoil10.xml&menuId=242&sSheet=/money/2003/10/10/ixfrontcity.html
address: address: Telegraph UK

SEE ALSO-- 12.Oct.2003 16:30

--

SEE ALSO:

OIL, PETRODOLLARS, AND THE OPEC EURO QUESTION
 http://ist-socrates.berkeley.edu/~pdscott/iraq.html

Dollars, Euros, and Oil
 http://ming.tv/flemming2.php/__show_article/_a000010-000538/

Excellent article by Cóilín Nunan: "Oil, Currency and the War on Iraq".  http://www.feasta.org/documents/papers/oil1.htm Fascinating explanation of some major economic mechanisms involving dollars and euros and oil. A very big reason that the United States is such an economically and militarily dominating country is apparently that U.S. dollar is the de facto world reserve currency. Lots of things are counted in dollars and some goods are only sold for dolars. That means that foreign governments and corporations and banks are keeping large dollar reserves. That essentially amounts to a huge loan the rest of the world is giving to the United States, which will subsidize the U.S. economy. In order to acquire those dollars, the rest of the world has to provide goods and services for those dollars. That allows the U.S. to have a huge import/export imbalance. Last November, 48% more imports than exports. It would be untenable for any other country to run such a deficit.

Next major point is that one of the reasons everybody has to have dollars is that the OPEC oil producting countries only accept dollars for oil. Well, not all of them. The only one that does something different is Iraq, which only accepts Euros for their oil, since 2000. And Iran is considering it as well. And the thing is that it might just as well be Euros that everybody used as a reserve currency. It would apparently be a better choice in many ways, because the European economies are more balanced, and the OPEC countries would end up getting more value for their oil. So, now, what would happen if Euros became the only choice for buying oil? Most likely the U.S. economy would plunge, because it would no longer be subsidized in that manner. And EU would probably be quite happy being subsidized in its place. Anybody thinks all this might have something to do with the great urgency to take over Iraq? And why would Britain support it?

When will we buy oil in Euros?
When it comes to the global oil trade, the dollar reigns supreme. But it has a challenger
 http://www.observer.co.uk/business/story/0%2C6903%2C900867%2C00.html

Behind the Invasion of Iraq  http://www.rupe-india.org/34/contents.html

Bang for the buck 12.Oct.2003 18:15

jlii

The US Military runs on US Dollars a shift in oil pricing to the Euro can only weaken the dollar more, less bucks for the bangs.

This is *huge* 13.Oct.2003 05:09

peak

Remember the last 2 times a country tried/implemented a change to euros for pricing their oil?

* venezuela: that led to a US-led coup attempt, then a general "strike" (lock out really) aimed at Chavez, and now the venezuelian intelligence services report that the country's under pressure again (some SOA-trained mercenaries have crossed the border in the last few weeks)

* irak: we all know what the 2000' switch to euros meant for irak, 3 years later.

Now you have to realize, both are small potatoes, kinda, when compared to Russia or the Saudis: those 2 latter gentlemen, collectively produce 18MB/d, out of the overall 76MB/d produced on the planet. If they switch to euros, the Empire is done.

What would be smart, would be for "all" oil producing countries to switch at the same time: russia, iran, saudi arabia ..etc, that would be too many targets at once even for the US dr strnageloves. The collapse of the Empire could even make it possible for an internal revolution/overthrow of the bush junta or something (still dreaming out loud here)...