scotsman.comChina shifts to euros for Iran oilWed Mar 28, 2007 16:07
A view of a petrochemical complex in Assaluyeh on Iran's Persian Gulf coast May 28, 2006. Picture taken on May 28, 2006. Iranian officials have said for months that more than half the OPEC member's customers switched their payment currency away from the dollar as Tehran seeks to diversify its reserves. REUTERS/Morteza Nikoubazl
China shifts to euros for Iran oil
By Chen Aizhu
BEIJING (Reuters) - China's state-run Zhuhai Zhenrong Corp, the biggest buyer of Iranian crude worldwide, began paying for its oil in euros late last year as Tehran moves to diversify its foreign reserves away from U.S. dollars.
The Chinese firm, which buys more than a tenth of exports from the world's fourth-largest crude producer, has changed the payment currency for the bulk of its roughly 240,000 barrels per day (bpd) contract, Beijing-based sources said.
Japanese refiners who buy about 500,000 bpd of Iranian crude, nearly a quarter of Iran's 2.2 million-bpd shipments, continue to pay in dollars but are willing to shift to yen if asked, industry sources and officials said separately.
Iranian officials have said for months that more than half the OPEC member's customers switched their payment currency away from the dollar as Tehran seeks to diversify its reserves, but news of the Zhenrong change is the first outside confirmation.
The price of the oil is still based on dollar quotes.
The shift, being watched closely by foreign exchange traders, comes amid an extended row between Tehran and Washington over Iran's nuclear programme.
China, which depends on Iran for about 12 percent of its imported crude oil, has at times used the threat of its United Nations veto to blunt Western measures.
The UN imposed new sanctions on Iran on Saturday as Tehran refused to halt its nuclear programme, targeting arms exports and 28 Iranian individuals and entities.
Iran's central banker told Reuters earlier on Tuesday that Tehran had cut its holding of U.S.-dollar assets to a minimum level of around a fifth of its foreign reserves in response to U.S. hostility, still enough to handle major shocks.
CHINA SWITCHES EARLY
"Most of China's purchases have shifted to euro. It's not difficult so long as our banks can handle that," said a Chinese state oil trader.
Hojjatollah Ghanimifard, head of international affairs at the National Iranian Oil Company (NIOC), told Reuters last week that around 60 percent of its oil income was in non-dollar currencies as almost all of Iran's European clients and some of its Asian customers had agreed to make non-dollar payments.
Iran is China's third-largest crude supplier with daily volume of 335,000 barrels last year. Sinopec Corp. <0386.hk>, Asia's top refiner but a minor lifter of Iranian oil, is still paying in U.S. dollars, said a Sinopec trader.
Japanese buyers, including top refiner Nippon Oil Corp. <5001.t>, said they had all received inquiries from Iran to pay on non-U.S. dollar terms, but were awaiting an official request.
"We are looking at it so that we can switch the currencies any time, but we have not gotten any official requests from them (NIOC). We are doing the transactions in dollars (now)," Nippon Oil chairman Fukuaki Watari told reporters last week.
Sources with other majors refiners concurred.
Iran ranks as Japan's third-largest crude supplier so far this year with daily rate of just under 500,000 bpd.
Tokyo has cautioned world powers against including oil in sanctions they may impose on Iran for its refusal to suspend atomic work, which the U.S. says is aimed at developing a nuclear weapon, but Tehran insists is for generating electricity.
Iran's major European customers include Royal Dutch Shell , France's Total and Spain's Repsol . The United States has banned imports of Iranian crude since 1995.
(Additional reporting by Ikuko Kao in Tokyo)
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Last updated: 27-Mar-07 06:47 BST
01/10/07: "Our troops will have a well-defined mission, to help Iraqis clear and secure neighbourhoods, to help them protect the local population, and to help ensure that the Iraqi forces left behind are capable of providing the security that Baghdad needs"
THE REAL REASON WE ARE AT WAR!
THE REAL REASON WE ARE AT WAR!
TIME MAGAZINE NOVEMBER 13, 2000 - Page 34
SADDAM TURNS HIS BACK ON GREENBACKS
Europe's dream of promoting the euro as a competitor
to the U.S. dollar may get a boost from SADDAM HUSSEIN.
Iraq says that from now on, it wants payments for its
oil in euros, despite the fact that the battered
European currency unit, which use to be worth quite
a bit more than $1, has dropped to about 82 cents.
Iraq says it will no longer accept dollars for oil
because it does not want to deal "in currency of the
The switch to euros would cost the U.N. a small
fortune in accounting paperwork changes. It would also
reduce the interest earnings and reparations payments
that Iraq is making for damage it caused during the Gulf War,
a shortfall the Iraqis would have to make up.
The move hurts Iraq, the U.N. and the countries receiving
reparations. So why is Saddam doing it? Diplomatic
sources say switching to the euro will favor European
suppliers over U.S. ones in competing for Iraqi contracts,
and the p.r. boost that Baghdad would probably get in
Europe would be another plus.
-By William Dowell/ New York City
Saddam Turns His Back on Greenbacks
By WILLIAM DOWELL/NEW YORK CITY
The Euro And The War On Iraq
By Amir Butler
As Mark Twain once noted, prophecy is always difficult, particularly
with regards to the future. However, it is a safe bet that as soon as
Saddam is toppled one of the first tasks of the America-backed regime
will be to restore the US dollar as the nation's oil currency.
In November 2000, Iraq began selling its oil for euros, moving away from
the post-World War II standard of the US dollar as the currency of
international trade. Whilst seen by many at the time as a bizarre act of
political defiance, it has proved beneficial for Iraq, with the euro
gaining almost 25% against the dollar during 2001. It now costs around
USD$1.05 to buy one Euro.
Iraq's move towards the euro is indicative of a growing trend. Iran has
already converted the majority of its central bank reserve funds to the
euro, and has hinted at adopting the euro for all oil sales. On December
7th, 2002, the third member of the axis of evil, North Korea, officially
dropped the dollar and began using euros for trade. Venezuela, not a
member of the axis of evil yet, but a large oil producer nonetheless, is
also considering a switch to the euro. More importantly, at its April
14th, 2002 meeting in Spain, OPEC expressed an interest in leaving the
dollar in favour of the euro.
If OPEC were to switch to the euro as the standard for oil transactions,
it would have serious ramifications for the US economy. Oil-consuming
economies would have to flush the dollars out of their central bank
holdings and convert them to euros. Some economists estimate that with
the market flooded, the US dollar could drop up to 40% in value. As the
currency falls, there would be a monetary evacuation by foreign
investors abandoning the US stock markets and dollar-denominated assets.
Imported products would cost Americans a lot more, and the trade deficit
would be magnified.
It is foreign demand for the US dollar that funds the US federal budget
deficits. Foreign investors flush with dollars typically look to US
treasury securities as a means of secure investment. With a large
reduction in such investment, the country could potentially go into
default. Things could turn very bad, very quickly.
In May 2004 an additional 10 member nations will join the European
Union. At that point, the EU will represent an oil consumer 33% larger
than the United States. In order to mitigate currency risks, the
Europeans will increasingly pressure OPEC to trade in euros, and with
the EU at that stage buying over half of OPEC oil production, such a
change seems likely.
This is a scenario that America cannot afford to see eventuate. The US
will go to any length to fend off an attempt by OPEC to dump greenbacks
as its reserve currency. Attacking Iraq and installing a client regime
in Baghdad may have a preventative effect. It will certainly ensure that
Iraq returns to using dollars and provide a violent example to any other
nation in the region contemplating a migration to the euro.
An American-backed junta in Iraq would also enable the US to smash
OPEC's hold over oil prices. The US or its client regime could increase
Iraqi oil production to levels well beyond OPEC quotas, driving prices
down worldwide and weakening the economies of the oil producing nations,
thus lessening their likelihood of abandoning the dollar. It would have
the short term effect of reducing the profits of domestic oil companies,
but the long term effect of securing America's economic hegemony.
The frequently offered canard of the Left that this war is being fought
to secure oil revenues for American oil companies may have some truth to
it. However, a more plausible explanation may be that the Bush
administration is waging war to protect the dollar and smash the OPEC
hold over international oil prices. It's a war whose purpose is bigger
than Halliburton or Exxon: it's a war being fought to maintain America's
position in the world.
Attending the 1992 Earth Summit in Rio, George Bush Senior told the
world that, "the American way of life is not negotiable". As cruise
missiles rain on Iraq, we are learning just how 'non-negotiable' that
way of life really is.
9/11 and the Evidence
By Paul Craig Roberts
- More Patriots Made 'Terrorists' - 'Officially' Ed Ward, MD, Wed Mar 28 18:20
Main Page - Wednesday, 03/28/07
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