European Central Bank believes pricing oil in euros is sensible

Oct 14, 2003 02:00 AM

European Central Bank (ECB)President Wim Duisenberg said that it might make sense for Russia to sell oil in euros to certain EU customers, entering a debate sparked that has big implications for currency markets. Asked to comment on remarks by President Vladimir Putin that he did not rule out switching Russia's oil pricing from dollars to euros, Duisenberg said this could particularly suit the nations currently lining up to join the common currency block.
"It would be in their interest to pay for imports in their future domestic currencies," he told. "We are worried about the situation in countries that depend on imports of oil from Russia," he was quoted as saying. The agency also cited him as saying, however, that if Russia made a move to the euro it would be a unilateral decision.

Russia is the world's second-largest exporter of oil after Saudi Arabia and the world's top gas exporter. A switch would be a powerful symbolic victory for the euro and might accelerate its growing role as an international reserve currency to challenge the dominance of the dollar.
Analysts say such a move could prompt other oil exporters mulling a switch to follow Russia's lead. Iran, the world's No. 5 exporter, is openly considering a move to the euro and there is growing debate in Saudi Arabia on the issue. A move by oil exporters to the euro could spark massive inflation in the United States, economists say.

European leaders have campaigned since the single currency's 1999 launch for more of the world's most traded commodity to be priced in euros. Putin made his remarks during an official visit by German Chancellor Gerhard Schroeder. The talk prompted by Putin's statement further, saying Schroeder had actually "secured" an agreement with Putin on making the switch.
Europeans want more central banks to hold euros as a permanent investment because this would create massive demand for assets like European government bonds, underpinning lower long-term interest rates and investment. But economists warn that it would also press the euro higher against the dollar and make exports more expensive on world markets, potentially thwarting the block's economic recovery.

Source: Moscow Times
Market Research

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