Putin: Why Not Price Oil in Euros? : Melbourne Indymedia

For an excellent introduction to the issues of $US vs EURO, and how they may have preciptated the Iraq war read:
http://www.radio4all.org/unwelcome/articles/gheard.html

Putin: Why Not Price Oil in Euros?
By Catherine Belton
Staff Writer
President Vladimir Putin said Thursday Russia could switch its
trade in oil from dollars to euros, a move that could have
far-reaching repercussions for the global balance of power --
potentially hurting the U.S. dollar and economy and providing a
massive boost to the euro zone.
"We do not rule out that it is possible. That would be interesting
for our European partners," Putin said at a joint news conference
with German Chancellor Gerhard Schroeder in the Urals town of
Yekaterinburg, where the two leaders conducted two-day talks.
"But this does not depend solely on us. We do not want to hurt
prices on the market," he said.

"Putin's putting a big card on the table," said Youssef Ibrahim,
managing director of the Strategic Energy Investment Group in
Dubai and a member of the U.S. Council on Foreign Relations, an
influential body of leading world thinkers thought to help set the
United States' foreign policy agenda.

"In the context of what is happening worldwide, this statement is
very important," he said.

Putin's words come in the wake of a protracted drive by the EU to
attract more countries' trade and currency reserves into euros, in
a bid to chip away at U.S. hegemony over the global economy
and money supply.

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.

That would be a huge boon to the euro zone economy and
potentially catastrophic for the United States. Dollar-based
global oil trade now gives the United States carte blanche to
print dollars without sparking inflation -- to fund huge expenses
on wars, military build-ups, and consumer spending, as well as cut
taxes and run up huge trade deficits.

Almost two-thirds of the world's currency reserves are kept in
dollars, since oil importers pay in dollars and oil exporters keep
their reserves in the currency they are paid in. This effectively
provides the U.S. economy with an interest-free loan, as these
dollars can be invested back into the U.S. economy with zero
currency risk.

If a Russian move to the euro were to prompt other oil producers
to do the same, it could be a "catastrophe" for the United States,
Ibrahim said. "There are already a number of countries within
OPEC that would prefer to trade in euros."

Iran, the world's No. 5 oil exporter, has also openly mulled a
move into euros. And after the war in Iraq, there is growing
debate in the United States' traditional ally Saudi Arabia on a
switch too, though its government has not come down firmly on
one side, Ibrahim said. "There is a revision going on of its
strategic relationship with the United States. Already, they're
buying more [French-made] Airbuses," he said. "The Saudi
Crown Prince [Abdullah Bin Abdul Aziz Al-Saud]'s visit to Russia
was of great significance and the regime is talking about closer
cooperation with LUKoil and other Russian companies."

Under Saddam Hussein, Iraqi oil was traded in euros. "This was
another reason [why the U.S. attacked]," Ibrahim said. "There is
a great political dimension to this. Slowly more power and
muscle is moving from the United States to the EU, and that's
mainly because of what happened in Iraq," he said.

Putin had previously brought up the proposal to switch to euros
as prime minister in October 1999, at a meeting of EU leaders in
Helsinki. Then, in an attempt to forge a new bloc to
counterbalance the United States, he made the proposal
alongside calling for closer cooperation between Russia and the
EU, including on security issues.

Since then, however, Russia's ties with the United States have
warmed considerably -- and it is unclear whether Putin would risk
damaging that relationship by going ahead with the euro move,
analysts said.

"Putin is very much interested in changing the structure of OPEC
and he cannot do that without the United States," said Alexander
Rahr, an expert on Russia at the German Council on Foreign
Relations. "He can only get a foothold for Russia in the Middle
East with [U.S. help]. And, he wants to get contracts for the
Russian oil industry in Iraq -- for this, too, he needs the United
States."

Some analysts said that the statement appeared to be aimed at
boosting Russia's global clout on the world stage. "Putin is
trying to create a position for Russia as an independent player.
But his aim is not to undermine relations [with the United
States]. He just wants to boost Russia's position up from being
a junior partner," said Dmitry Trenin, geopolitical analyst at
the Carnegie Moscow Center.

Yevgeny Gavrilenkov, chief economist at Troika Dialog and an
earlier architect of the Putin government's first economic plan,
said debate is growing on a move to the euro as Russia mulls
siding with the EU. "Such an idea is really possible," he said.
"Why not? More than half of Russia's oil trade is with Europe. But
there will be great opposition to this from the United States."

He said that while a switch would have no direct impact on the
Russian economy, it would give a great boost to the euro zone.
LUKoil vice president Leonid Fedun said Thursday that he saw no
problem in the euro switch and that payments for such
transactions would be minimal, at just 0.08 percent.

"There is no problem ... If the state decides to do this, then we
will support this initiative. From the point of view of the
economy, there's no difference," Interfax quoted him as saying.
But even Fedun could not help putting a political price tag on the
move. "We are ready to move to the euro if the country will be
included in a visa-free regime with Europe," he said.

Rahr agreed that the timing of the statement seemed calculated
to extract political concessions from the EU. "It's a bargaining
chip," he said.

Gavrilenkov suggested Putin was also angling for EU concessions
on other issues discussed in Yekaterinburg, such as terms for
Russia's WTO accession.

source i think:
http://www.themoscowtimes.com/stories/2003/10/10/001.html