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Putin: Why Not Price Oil in Euros?
moscow times ^ | Oct. 10, 2003 | Catherine Belton

Posted on 10/10/2003 10:01:54 PM PDT by zacyak

President Vladimir Putin said Thursday Russia could switch its trade in oil from dollars to euros, a move that could have far-reaching repercussions for the global balance of power -- potentially hurting the U.S. dollar and economy and providing a massive boost to the euro zone.

"We do not rule out that it is possible. That would be interesting for our European partners," Putin said at a joint news conference with German Chancellor Gerhard Schroeder in the Urals town of Yekaterinburg, where the two leaders conducted two-day talks.

"But this does not depend solely on us. We do not want to hurt prices on the market," he said.

"Putin's putting a big card on the table," said Youssef Ibrahim, managing director of the Strategic Energy Investment Group in Dubai and a member of the U.S. Council on Foreign Relations, an influential body of leading world thinkers thought to help set the United States' foreign policy agenda.

"In the context of what is happening worldwide, this statement is very important," he said.

Putin's words come in the wake of a protracted drive by the EU to attract more countries' trade and currency reserves into euros, in a bid to chip away at U.S. hegemony over the global economy and money supply.

A move by Russia, as the world's second largest oil exporter, to trade oil in euros, could provoke a chain reaction among other oil producers currently mulling a switch and would further boost the euro's gradually growing share of global currency reserves.

That would be a huge boon to the euro zone economy and potentially catastrophic for the United States. Dollar-based global oil trade now gives the United States carte blanche to print dollars without sparking inflation -- to fund huge expenses on wars, military build-ups, and consumer spending, as well as cut taxes and run up huge trade deficits.

Almost two-thirds of the world's currency reserves are kept in dollars, since oil importers pay in dollars and oil exporters keep their reserves in the currency they are paid in. This effectively provides the U.S. economy with an interest-free loan, as these dollars can be invested back into the U.S. economy with zero currency risk.

If a Russian move to the euro were to prompt other oil producers to do the same, it could be a "catastrophe" for the United States, Ibrahim said. "There are already a number of countries within OPEC that would prefer to trade in euros."

Iran, the world's No. 5 oil exporter, has also openly mulled a move into euros. And after the war in Iraq, there is growing debate in the United States' traditional ally Saudi Arabia on a switch too, though its government has not come down firmly on one side, Ibrahim said. "There is a revision going on of its strategic relationship with the United States. Already, they're buying more [French-made] Airbuses," he said. "The Saudi Crown Prince [Abdullah Bin Abdul Aziz Al-Saud]'s visit to Russia was of great significance and the regime is talking about closer cooperation with LUKoil and other Russian companies."

Under Saddam Hussein, Iraqi oil was traded in euros. "This was another reason [why the U.S. attacked]," Ibrahim said. "There is a great political dimension to this. Slowly more power and muscle is moving from the United States to the EU, and that's mainly because of what happened in Iraq," he said.

Putin had previously brought up the proposal to switch to euros as prime minister in October 1999, at a meeting of EU leaders in Helsinki. Then, in an attempt to forge a new bloc to counterbalance the United States, he made the proposal alongside calling for closer cooperation between Russia and the EU, including on security issues.

Since then, however, Russia's ties with the United States have warmed considerably -- and it is unclear whether Putin would risk damaging that relationship by going ahead with the euro move, analysts said.

"Putin is very much interested in changing the structure of OPEC and he cannot do that without the United States," said Alexander Rahr, an expert on Russia at the German Council on Foreign Relations. "He can only get a foothold for Russia in the Middle East with [U.S. help]. And, he wants to get contracts for the Russian oil industry in Iraq -- for this, too, he needs the United States."

Some analysts said that the statement appeared to be aimed at boosting Russia's global clout on the world stage. "Putin is trying to create a position for Russia as an independent player. But his aim is not to undermine relations [with the United States]. He just wants to boost Russia's position up from being a junior partner," said Dmitry Trenin, geopolitical analyst at the Carnegie Moscow Center.

Yevgeny Gavrilenkov, chief economist at Troika Dialog and an earlier architect of the Putin government's first economic plan, said debate is growing on a move to the euro as Russia mulls siding with the EU. "Such an idea is really possible," he said. "Why not? More than half of Russia's oil trade is with Europe. But there will be great opposition to this from the United States."

He said that while a switch would have no direct impact on the Russian economy, it would give a great boost to the euro zone.

LUKoil vice president Leonid Fedun said Thursday that he saw no problem in the euro switch and that payments for such transactions would be minimal, at just 0.08 percent.

"There is no problem ... If the state decides to do this, then we will support this initiative. From the point of view of the economy, there's no difference," Interfax quoted him as saying.

But even Fedun could not help putting a political price tag on the move. "We are ready to move to the euro if the country will be included in a visa-free regime with Europe," he said.

Rahr agreed that the timing of the statement seemed calculated to extract political concessions from the EU. "It's a bargaining chip," he said.

Gavrilenkov suggested Putin was also angling for EU concessions on other issues discussed in Yekaterinburg, such as terms for Russia's WTO accession.


TOPICS: Business/Economy; Foreign Affairs; Front Page News; News/Current Events; Russia
KEYWORDS: clashofcivilizatio; currency; dollar; energylist; euro; europelist; forex; freetrade; geopolitics; nwo; oil; putin

1 posted on 10/10/2003 10:01:54 PM PDT by zacyak
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To: zacyak
Good move Putin you marooon. A commie you may be, a trader you are not. Move to Euros just at the time when Euroland is trying to devalue to gain competitive advantage.
2 posted on 10/10/2003 10:04:35 PM PDT by Dialup Llama
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3 posted on 10/10/2003 10:06:06 PM PDT by Support Free Republic (Your support keeps Free Republic going strong!)
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To: zacyak
Or chickens.
4 posted on 10/10/2003 10:06:39 PM PDT by <1/1,000,000th%
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To: zacyak
LOL, go ahead and watch the US "suddenly" discover an alternate source of power. Then the oil money will be next to worthless as the world moves to a new energy source.

People forget how dependent the world was on rubber until WWII made it impossible to get rubber. We just invented nylon. Seen any rubber tires lately?

Putin is not that dumb. He knows what would happen, and he'd be sitting on a reserve of worthless oil.

5 posted on 10/10/2003 10:09:12 PM PDT by McGavin999
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To: zacyak
That would be a huge boon to the euro zone economy and potentially catastrophic for the United States. Dollar-based global oil trade now gives the United States carte blanche to print dollars without sparking inflation -- to fund huge expenses on wars, military build-ups, and consumer spending, as well as cut taxes and run up huge trade deficits.

Almost two-thirds of the world's currency reserves are kept in dollars, since oil importers pay in dollars and oil exporters keep their reserves in the currency they are paid in. This effectively provides the U.S. economy with an interest-free loan, as these dollars can be invested back into the U.S. economy with zero currency risk.

I doubt Putin will go thru with this anytime soon, but the mere threat of it provides him with a certain leverage. Bin Laden himself admitted that he couldn't bring down the U.S. militarily, and envisioned an economic war as the means by which to put us in our place. We are certainly vulnerable.

6 posted on 10/10/2003 10:15:58 PM PDT by zacyak
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To: McGavin999
****People forget how dependent the world was on rubber until WWII made it impossible to get rubber. We just invented nylon. Seen any rubber tires lately?*****

Actually, nylon was invented by DuPont in 1938, but you're right that we put it to use to replace rubber in as many ways as possible.

It also replaced silk from Japan during WWII.

And we CAN replace oil.
7 posted on 10/10/2003 10:30:55 PM PDT by kitkat
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To: McGavin999
He knows what would happen, and he'd be sitting on a reserve of worthless oil.

And the added expense would destroy us. If it was cost effective we would be doing it now. The other cost effecvtive option is biodiesel, and the oil companies aren't going to allow that, they have little control over farmers.

8 posted on 10/10/2003 10:31:48 PM PDT by steve50 ( Democracy is a form of religion; it is the worship of jackals by jackasses. -- H.L. Mencken)
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To: zacyak
That would be a huge boon to the euro zone economy and potentially catastrophic for the United States.

But euro zone investments in the USA would lose big time. I imagine that we would stop selling oil, pump a little more, and get serious about alternative fuels.

9 posted on 10/10/2003 10:36:57 PM PDT by Mike Darancette (No Taxation Without Respiration - Repeal Death Taxes!)
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To: steve50
No, the real way to replace crude oil is the 'oil from anything' process that started recently. We could easily replace the Arabs, Russians, Venezuelans, etc. with this - just by processing our landfills.
10 posted on 10/10/2003 10:37:15 PM PDT by 11B3 (Old enough to remember the real America, young enough to fight to bring it back.)
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To: McGavin999
"LOL, go ahead and watch the US "suddenly" discover an alternate source of power. Then the oil money will be next to worthless as the world moves to a new energy source."

About time someone else brought this up !

I've been telling people this for two years now. Oil will only be for third world countries in 5 years.

11 posted on 10/10/2003 10:41:28 PM PDT by america-rules (I'm one proud American right now !)
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To: zacyak
Our foreign "partners" are intent on seeing that Bush Admin does not get elected to a second term for a multitude of reason, the most prominent, our "pre-emptive strike" doctrine". They will work in concert to see this administrations removal.

They also know that oil is the lever they can use to trash the US economy.

The US populace votes its "pocketbook" and right now this economy dangles by a string.

Another "energy shock" to this economy sends it into recession for the 2004 elections...if it is not already on that path.

JMO...
12 posted on 10/10/2003 10:43:26 PM PDT by Brian S (" In the United States, armed masses represent the foundation of political order.")
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To: 11B3
No, the real way to replace crude oil is the 'oil from anything' process that started recently.

The volume of material needed to be cost effective will require biomass to keep a plant running full time at peak. Conservatives aren't going to like the most cost effective source of high oil biomass.

13 posted on 10/10/2003 10:45:42 PM PDT by steve50 ( Democracy is a form of religion; it is the worship of jackals by jackasses. -- H.L. Mencken)
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To: zacyak
Pricing Russian oil in Euros for Europeans would be a good thing. Our political differences have more to do with France and Arabs than anything else. Each military success brings another diplomatic assault from the French led Eurozone upon America. Again, French and Arab Oil interests are providing cover for another economic attack on the US financial system. This is a protracted assault. It may come down one day to military action by the US which is totally unconcieved by the those who make these "intellictual communist mistakes" of thinking they can topple a country without a shot. The US will eventually have to fight or die a slow liberal death, giving rise to wars as the global economic-militray-political system breaks down. Europe has never renounced the use of force of occupation in Africa so we can expect them to make a grab for land legimitized by the UN and other dictatorial regimes once the "voice of the people" is conquered.

The dollar reserves in the world might only be dumped if the UN can gain economic control of American oil investments and Iraq. Pumping US crude in Alaska would hamper any arguements for American trade deficits in trade "on balance". Americans, faced with an economic crash directed by global traders and pumping Alaskan oil, will chose our own reserves in both $$ and oil before domination by France. The risk of confrontation between France and the US may actully come to pass on a limited economic scale very soon, and quite possibly on a military level in limited measure as well. French interests in Africa are ripe for "third party" intervention directed by Washington and I would highly recommend kicking another prop out from under the European economic zone, e.g., African interests. Syria's loss to France would provide another blow both politically and economically, and the soon to be felt lost of Afarat will surely hurt the Paris skyline as well.

14 posted on 10/10/2003 11:11:02 PM PDT by Jumper ("Its economic warfare, stupid")
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To: steve50
Soylent Green

Militec Is People?

Considering how large the Buffett clan has entered into the "oil from biomass" market, and how they have kept it private, there seems to be a huge upside.

15 posted on 10/10/2003 11:11:56 PM PDT by JerseyHighlander (Utinam logica falsa tuam philosophiam totam suffodiant!)
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To: steve50
The MOST cost-effective, total cost/all costs paid, source of biomass would, without doubt, be the sundry liberal/Marxist/dirtbag lefties and their children. Why wouldn't a conservative ''like'' this source?

Granted, perhaps it would be more effective just to hold them captive and reprocess their feces, but that solution would lack a certain elegance, and besides, the taxpayer would be hung for the cost of their food in the interim.

16 posted on 10/10/2003 11:17:24 PM PDT by SAJ
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Comment #17 Removed by Moderator

To: JerseyHighlander
Considering the "related" costs of imported oil, biomass is probably close to being cost effective. Henry Ford planned on doing it himself, until 1937 anyway. Oil was dirt cheap then and he still thought the alternative was better.
18 posted on 10/10/2003 11:20:10 PM PDT by steve50 ( Democracy is a form of religion; it is the worship of jackals by jackasses. -- H.L. Mencken)
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Comment #19 Removed by Moderator

To: SAJ
The MOST cost-effective, total cost/all costs paid, source of biomass would, without doubt, be the sundry liberal/Marxist/dirtbag lefties and their children. Why wouldn't a conservative ''like'' this source?

Please don't bother posting such idiocy to me.

20 posted on 10/10/2003 11:24:02 PM PDT by steve50 ( Democracy is a form of religion; it is the worship of jackals by jackasses. -- H.L. Mencken)
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To: steve50
Can't add, eh?

Any given politico-economic philosophy carries with it consequences, and these consequences are cumulative over time. When I used the phrase ''all costs paid'', it meant ''ALL costs paid'', economic, social, and political, not, simplistically, just the cost of converting these folks' body mass into crackable hydrocarbons.

Would you deny, just offhand, that there is and always has been a surplus of those who would confiscate, either arbitrarily or under colour of ''law'', the property of their fellow citizens?

Idiocy, is it? The idiocy is that folks such as you have let these slime proceed as far as they have done.

21 posted on 10/10/2003 11:47:55 PM PDT by SAJ
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To: america-rules
I agree. The way I see it, the only reason we continue to rely so heavily on oil is because it's been so dang cheap. Just think of all the great things that could happen with a replacement fuel source. Taking money out of the middle-east for starters. No money, no more buwets, or certainly not nearly as many.
22 posted on 10/11/2003 12:14:24 AM PDT by SoDak
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To: SAJ; steve50
SAJ, you just admitted on a widely read forum that you had no moral qualms over SaddamHussein's wood chipper executions, only a political disagreement over thedetails of who was the executioner and whom the executed. Bully! Don't talk to me again...

I've opined earlier when this story first broke, Russia will own wide swathes of Western Europe if(when) the Euro's valuation stumbles. Russia will continue supplying petro in Euro denominations, but as collection, such as Quaddafi has done in Zimbabwe and Russia has done to Belarus, the terms of payment will include control of the petro purchasing nations' oil industries' vertical assets. Gas stations, distribution facilities, and storage facilities. The enemic Euro countries will slower barter away their energy independence if Russia moves to Euros and builds more pipeline capacity to Poland/Germany and where ever the Caspian production pipeline is ever built.

Which should be noted, because the Eurolands will have inextricably tied themselves to the Caspian and 'Stans. Which is better discussed by experts at Jane's or other publications I can't afford.

If Russia moves to Eurosfor petro contracts, the UK can't enter the Euro, the North Sea income will be crushed if(when) the Euro sinks.

If not mistaken, a few Euro countries have percentage taxes on percentage taxes for petro? Lowering petro at the pump means lower revenues for them, which is crazy, but long been a part of life over there.
23 posted on 10/11/2003 12:22:44 AM PDT by JerseyHighlander (Utinam logica falsa tuam philosophiam totam suffodiant!)
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To: JerseyHighlander
OK, next time I won't omit this part:

''Paging Doctor Swift...Jonathan Swift to the white courtesy telephone, please.''

When you get a moment, read over Swift's ''A Modest Proposal''; it's very short. Clearly and unfortunately, my technique is not in his league and needs some work. And, I lost a fast $50 betting a friend that the similarity wouldn't be lost on FReepers, too. Rats!

24 posted on 10/11/2003 10:07:57 AM PDT by SAJ
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