Trading oil in euros – does it matter?

[tmorr37]

http://www.energybulletin.net/12463.html (http://www.energybulletin.net/12463.html)

Trading oil in euros – does it matter?

by Cóilín Nunan



With speculation mounting over the possibility of a US- or Israeli-led military attack of Iran sometime later this year, it has been suggested that real motivation for US antipathy towards the Iranian government has little to do with concerns that Tehran is developing nuclear weapons. Some commentators have instead suggested that Iran’s real Iranian threat to the US and its economy is that, in defiance of the US administration, it is attempting to establish an oil ‘bourse’ (exchange) in March of this year which would enable oil to be traded in euros. This would move oil sales away from their usual denomination in dollars and would, it is argued, undermine the American currency with grave consequences for the US economy. (1,2) This internet-based debate is reminiscent of what occurred before the invasion of Iraq when several observers, myself included, hypothesised that Saddam Hussein’s decision to sell Iraqi oil in euros was perhaps one of the reasons the US wanted ‘regime change’. (3,4) The US decision after the invasion to return Iraqi oil sales to dollar denomination and to convert back into dollars all Iraqi foreign currency reserves, which had been in euros prior to the war, was certainly entirely consistent with this theory. (5)

read the rest
http://www.energybulletin.net/12463.html

[tattatu]

http://upi.com/InternationalIntelligence/view.php?StoryID=20060118-052333-1392r

"....the crucial OPEC decision (cut production) was as a direct result of President Richard Nixon's Aug. 15 decision to end the dollar's link to the gold standard.

The dollar declined in value, which meant the OPEC producers received less value for their oil. So at their Beirut meeting on Sept. 22, OPEC adopted resolution XXV:140, which resolved to take "any necessary action ... to offset any adverse effects on the per barrel real income of member countries resulting from the international monetary developments as of Aug. 15."

That was also the time when Sheikh Zaki Yamani, the Saudi oil minister, first mentioned the possibility of deploying the ultimate weapon of an oil embargo.

Most of the financial world is currently awaiting another, similar devaluation of the dollar, in response to the monstrous scale of current deficit on the U.S. current account. Writing in the Financial Times last week, Harvard Professor Marty Feldstein suggested that on the basis of the 1985-87 Louvre and Plaza devaluations, the dollar could fall as much as 40 percent or even more.

The markets simply do not know when. But should it come after an Iranian bourse is up and running, some very tidy sums could be made by those playing a dollar-euro trade on Tehran's energy futures market. "

[tattatu]

There is alot of media evidence that the Europeans, Russia, and China have all been profiting from Iran's economy. Aside from agreeing with the US, that Iran should stop uranium enrichment, very little has changed politically. Iran also is an observer at GCC meetings and signed trade agreements with Iraq and Damascus. Right or wrong, Ahmedinejad/Chavez have become the most vocal critics of the US. By changing the power structure in the Middle East, US may have undermined its own currency. If a new reserve currency gets established -- it might be Euros ...but then again why not Yuan, Yen.... or even Dinar.

[tattatu]

Chris Cook, now working with Iran to create a new oil exchange and writing about current events surrounding Iran's nuclear program. From another perspective:

http://www.atimes.com/atimes/Middle_East/HA21Ak01.html

"... the issue is a proxy for Iraq: try looking in the media prior to the events in Fallujah, Iraq, for anything more than desultory mention of this "issue". But once factions in Iran funded Muqtada al-Sadr to the tune of $50 million and the US body count started to rise, then the issue began to attain its current level of importance.

Now that pro-Iranian Shi'ite elements are taking a primary role in the emerging government in Iraq, we see the nuclear temperature rising further. "

Regarding Euros replacing Dollars in the new Bourse -- he says the idea is far-fetched...

"As anyone familiar with the Organization of Petroleum Exporting Countries will know, the denomination of oil sales in currencies other than the dollar is not a new subject, and as anyone familiar with economics will tell you, the denomination of oil sales is merely a transactional issue: what matters is in what assets (or, in the case of the United States, liabilities ) these proceeds are then invested."

[tattatu]

The other perspective...

http://www.globalresearch.ca/articles/CLA410A.html
The Real Reasons Why Iran is the Next Target:
The Emerging Euro-denominated International Oil Marker
by William Clark dated 10/27/04

"During an important speech in April 2002, Mr. Javad Yarjani, an OPEC executive, described three pivotal events that would facilitate an OPEC transition to euros. [10] He stated this would be based on (1) if and when Norway's Brent crude is re-dominated in euros, (2) if and when the U.K. adopts the euro, and (3) whether or not the euro gains parity valuation relative to the dollar, and the EU’s proposed expansion plans were successful. (Note: Both of the later two criteria have transpired: the euro’s valuation has been above the dollar since late 2002, and the euro-based E.U. enlarged in May 2004 from 12 to 22 countries). In the meantime, the United Kingdom remains uncomfortably juxtaposed between the financial interests of the U.S. banking nexus (New York/Washington) and the E.U. financial centers (Paris/Frankfurt).

The implementation of the proposed Iranian oil Bourse (exchange) in 2005/2006 – if successful in utilizing the euro as its oil transaction currency standard – essentially negates the necessity of the previous two criteria as described by Mr. Yarjani regarding the solidification of a "petroeuro" system for international oil trades. [10] It should also be noted that during 2003-2004 Russia and China have both increased their central bank holdings of the euro currency, which appears to be a coordinated move to facilitate the anticipated ascendance of the euro as a second World Reserve currency. [11] [12] In the meantime, the United Kingdom is uncomfortable juxtaposed between the financial interests of the U.S. (New York/Washington) banking nexus and that of the E.U. financial center (Paris/Frankfurt)."

[10] "The Choice of Currency for the Denomination of the Oil Bill," Speech given by Javad Yarjani, Head of OPEC's Petroleum Market Analysis Dept, on The International Role of the Euro (Invited by the Spanish Minister of Economic Affairs during Spain's Presidency of the EU) (April 14, 2002, Oviedo, Spain)
http://www.opec.org/NewsInfo/Speeches/sp2002/spAraqueSpainApr14.htm

[11] Russia shifts to euro as foreign currency reserves soar," AFP, June 9, 2003
http://www.cdi.org/russia/johnson/7214-3.cfm

[12] "China to diversify foreign exchange reserves," China Business Weekly, May 8, 2004 http://www.chinadaily.com.cn/english/doc/2004-05/08/content_328744.htm

[tattatu]

....dissatisfaction with US dollar as a safe haven of value is opening new markets in Europe and Asia.

Norwegian Bourse Director wants oil bourse - priced in euros
http://www.energybulletin.net/13081.html

Andersen is of the opinion that Norwegian oil must be traded in Euros, which can be advantageous for international customers.

"We have performed market studies and both Russia, which is a large oil exporter, as well as the countries of the Middle East have large parts of their economies in Euros. They would be able to view such a bourse as a contribution to balancing their economies in a better manner than at present, where their products are traded solely in dollars," says Andersen.

The Bourse Director holds out the Scandinavian power bourse, Nordpool, as an example of how a successful bourse is constructed. And he believes that this ought to be included in a Norwegian or Scandinavian energy bourse.

"We currently we have the leading power bourse in Europe. It is large, well-respected and efficient. Nordpool would be natural to consider as being important in the establishment of an oil and energy bourse," says Andersen.

[Borage]

The article posted here talks about this as well and is very interesting.
http://www.investorsiraq.com/current-events/15545-europe-2020-alarm.html