Russian Plan: Trade in Oil -from Dollars to Euros

Putin: Why Not Price Oil in Euros?

Moscow Times -Friday, Oct. 10, 2003. Page 1

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.

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"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.

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