Mahathir proposes euro in oil trade

Mahathir proposes euro in oil trade

Eileen Ng, Agence France-Presse, Kuala Lumpur

Malaysian Prime Minister Mahathir Mohamad on Monday proposed a currency basket of the euro and the U.S. dollar for oil trades to hedge against a weak greenback and manipulation by currency traders.

The veteran Southeast Asian leader said producing countries were feeling the impact of the weak greenback, which has fallen sharply against the euro.

"It is time that the quotation of oil prices in dollars be reviewed," he said in a speech read by his deputy Abdullah Ahmad Badawi at the opening of a two-day Asia oil and gas conference.

"Perhaps it would be better if payments for the sale of oil by producer countries are made with the euro equivalent of the U.S. dollar. Then the appreciation of the euro would benefit the producers."

But he added: "Should the euro depreciate against the U.S. dollar, then payment would be made in U.S. dollars. This is a kind of hedging."

The proposal to dump the world's reserve currency is already being mulled by Indonesia's state oil company, Pertamina, which has said it may adopt the euro in its trades because the dollar has become too volatile.

Abdullah, who will succeed Mahathir after he steps down in October after 22 years in power, told reporters later that details of the hedging mechanism were being worked out.

He dismissed suggestions that such a move would upset the U.S., which is Malaysia's key trading partner, because it would not "totally do away with the U.S. dollar."

Experts said a euro-dollar basket could help moderate currency fluctuations but it would take a long time to implement.

Thierry Desmarest, chairman and chief executive of French oil company Total, said such a move would depend on the Organization of Petroleum Exporting Countries (OPEC).

"It is a complex one and it is up to the OPEC countries to decide ... they have looked into it several times and their conclusion at the end of the day was that the dollar was not that bad," he told AFP.