Will OPEC made the move to the euro?

Will OPEC made the move to the euro?

Robert Koch Agence France-Presse Vienna

Has the time come to start pricing oil in euros? As the dollar continues its decline analysts are mulling this question, though the member states of OPEC remain opposed to a change.

OPEC president Purnomo Yusgiantoro of Indonesia made plain that switching to the euro "was not on the cards" during the cartel's last meeting in Algiers at the beginning of February.

Saudi Oil Minister Ali al-Nuaimi, seen as the OPEC's kingpin, and his Algerian counterpart, Chakib Khelil, also ruled out discarding the U.S. currency for the stronger euro.

But experts from the Organisation for Petroleum Exporting Countries are more ambivalent.

The question was raised by the outgoing secretary general of OPEC, Venezuela's Alvaro Silva-Calderon, in January when the American currency fell to a historic low of US$1.29 to the euro.

"We are speaking about negotiating for crude in euros. It is possible that the organization will discuss this and take a decision at a given moment," Silva said.

At OPEC's ministerial meeting in Vienna in December, the member states -- responsible for one-third of the world's oil production -- complained that their oil profits were down 25 to 30 percent due solely to dependence on the dollar.

The euro has strengthened by 50 percent against the greenback since July 2001.

It was at a conference on the "hidden threats of currency crises" back in March 2001 that Venezuela's ambassador to Russia, Francisco Mieres-Lopez, first publicly evoked a possible switch.

In 2000 Iraq, which has remained a member of OPEC throughout its political crisis but was excluded from the quota system after its 1990 invasion of Kuwait, was granted permission by the United Nations to export oil in euro-denominated prices under the "oil for food" program.

A trader at the Rothschild bank in London said: "Trading in petrol involves enormous sums of money. If the dollar loses its role as a currency of reference, the United States, the world's largest oil importer, will no longer be able to have outside countries finance its abyssal trade deficit."

He said it was unlikely that the price of crude would be quoted in euros in the near future but that over time prices could be fixed in line with a "basket" of currencies -- "dollar, euro or yen".

Francis Perrin, from the French trade magazine Petrole et gaz arabes, said "nobody can exclude that one day oil could be priced in a currency other than the dollar."

"For the moment the high prices allow OPEC to redeem its losses. But how long can this last?" he said.

An analyst at the Dresdner-Kleinwort-Wasserstein brokerage firm in London said: "With all this talking, the euro makes slowly and surreptitiously its way in the price fixing mechanism.

"What's more, Russia, one of OPEC's competitors, has been threatening for several months now to switch its oil market to euros," the source said.

For other raw materials, notably iron and cast-iron, Russia already demands being paid in euros.

And this challenge to the supremacy of the U.S. currency seems to be gaining ground.

The world's foremost steel maker, Europe's Arcelor, has started asking that China pays for steel in euros.

And the big German chemical groups are selling some of their products, like the plastics polyethylene and polypropylene, in the European currency.