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.