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Edited on Mon Sep-19-05 10:02 AM by Petrodollar Warfare
Chapter V
Dollar Dilemma: Why Petrodollar Hegemony Is Unsustainable
‘In the future the euro is (going to be) taking a place in the international markets in general as the money of exchange.’ Asked if a switch to pricing oil in euros was possible, ‘Of course, in the oil market and in any market. It’s a stable and a strong currency, the role of the euro is going to be increased step by step. It’s normal.’
– Loyola de Palacio, European Energy Commissioner, June 16, 2003
I don’t see any particular merit in that for the average oil producing country. It really is question of which currency (oil producers) feel most comfortable with over the long run — and the dollar’s always won out.
– Guy Caruso, director of the U.S. Energy Information Admintration, June 17, 2003
OPEC Secretary General Alvaro Silva said the oil producers' cartel is considering trading oil in euros or a basket of currencies other than the dollar to compensate for the decline in the value of the greenback. ‘There is talk of trading crude in euros -- it is one of the alternatives,’ Silva told.
– OPEC Secretary Gerneral Alvaro Silva, December 9, 2003
....meanwhile, Russia is preparing for a transition to petroeuros...
In mid October 2003, after meeting with German Chancellor Schroeder, Russian President Putin mentioned that Russian oil sales could be redenominated in euros.
‘We do not rule out that it is possible. That would be interesting for our European partners,’ Putin said.
A move by Russia, as the world’s second largest oil exporter, to trade oil in euros, could provoke a chain reaction among other oil producers currently mulling a switch and would further boost the euro’s gradually growing share of global currency reserves.
...Here's some important info from 2002 (please note 2 of the criteria re an OPEC switch to petroeuros have since transpired)...
'The question that comes to mind is whether the euro will establish itself in world financial markets, thus challenging the supremacy of the US dollar, and consequently trigger a change in the dollar's dominance in oil markets. As we all know, the mighty dollar has reigned supreme since 1945.
… Having said that … in the long run the euro is not at such a disadvantage versus the dollar when one compares the relative sizes of the economies involved, especially given the EU enlargement plans. Moreover, the Euro-zone has a bigger share of global trade than the US and while the US has a huge current account deficit, the euro area has a more, or balanced, external accounts position … looking at the statistics of crude oil exports, one notes that the Euro-zone is an even larger importer of oil and petroleum products than the US.
From the EU’s point of view, it is clear that Europe would prefer to see payments for oil shift from the dollar to the euro, which effectively removed the currency risk.
… There is also very strong trade links between OPEC Member Countries (MCs) and the Euro-zone, with more than 45 percent of total merchandise imports of OPEC MCs coming from the countries of the Euro-zone.… Of major importance to the ultimate success of the euro, in terms of the oil pricing, will be if Europe’s two major oil producers —– the United Kingdom and Norway join the single currency .… This might create a momentum to shift the oil pricing system to euros.
In the short-term, OPEC MCs, with possibly a few exceptions, are expected to continue to accept payment in dollars …. In the long-term, perhaps one question that comes to mind is could a dual system operate simultaneously? Could one pricing system apply to the Western Hemisphere in dollars and for the rest of the world in euros? …. Should the euro challenge the dollar in strength, which essentially could include it in the denomination of the oil bill, it could be that a system may emerge which benefits more countries in the long-term .... Time may be on your side."
– Javad Yarjani, Head of OPEC’s Petroleum Market Analysis Department, in a speech to Spanish officials, April 2002
...and here's the recent data from the BIS....
Oil exporters have sharply reduced their exposure to the dollar over the past three years, according to data from the Bank for International Settlements. Members of have cut the proportion of deposits held in dollars from 75 per cent in the third quarter of 2001 to 61.5 percent .
Middle Eastern central banks have reportedly switched reserves from dollars to euros and sterling to avoid incurring losses as the dollar has fallen and prepare for a shift away from pricing oil exports in dollars alone.
– Steve Johnson and Javier Blas, Financial Times, December 2004
In January 2005, an article on a Middle East Finance and Economy website was succinctly entitled, “Saudi Sees Stronger Euro Role.” This one-paragraph story hinted that Saudi Arabia’s central bank expects the euro to <[b>“play a greater role in currency reserves in the future.” In somewhat cryptic language, it reported that Hamad Saud Al Sayyari, the governor of the Saudi Arabian Monetary Agency, implied it did not matter which currency oil is priced in, but he wanted stability in prices.
If true, this nuanced statement may confirm an active discussion within Saudi Arabia regarding a potential switch to a petroeuro...
Bottomline: Neither OPEC or Russia cares one iota about domestic EU politics re a common Constitution, and that mommemtum towards a petroeuro continues unabated, as do the massive US budget and trade deficits...My guess is that by 2010 some formal accord will have transpired...
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