Dumping petrodollar, switching to petro-euro may be way out for Iran

Baku, Azerbaijan, June 20

By Dalga Khatinoglu - Trend:

After a couple of months since lifting sanctions on Iran, the country still faces a challenge in trade with the international markets, especially the oil markets, which deal with USD-based deals and payments.

Iran's Oil Minister Bijan Namdar Zanganeh announced June 17 that the country sells its crude oil to international markets only through euro.

The announcement came after a US court blocked $2 billion of Iranian assets. The US Supreme Court ruled in April that the assets must be turned over to American families of people killed in the 1983 bombing of a U.S. Marine Corps barracks in Beirut and other attacks blamed on Iran.

The restrictions imposed by the US treasury on the use of USD by Iran continues, while the process of freeing of the dollar-denominated assets (blocked during the sanctions era) of Iran, has faced delays.

Iran has previously considered abandoning use of petrodollars, so the idea is nothing new.

Sohbet Karbuz, Director of Hydrocarbons, France, Mediterranean Energy Observatory (OME) told Trend June 20 that the motive behind the idea of selling oil in euros was to end the petrodollar's hegemonic status as the monopoly oil currency and hence challenge the U.S. dollar supremacy.

"In a way, this would have major impact on the macroeconomics of 'petrodollar recycling'. However, it has long been debated what the alternative oil currency could be. Some have proposed euo, others have proposed gold or gold dinar."

The idea of selling oil in euros was first introduced in 2000. In November 2000 Iraq's former president Saddam Hussein demanded Euros for his oil.

In 2001, Venezuela started to speak about switching to euro for all their oil sales. In 2003 Iran required payments in euro for its European and Asian exports. A year later Iran announced intentions to create an Iranian oil bourse using a euro-based international oil-trading mechanism.

Karbuz added that the Tehran oil bourse was scheduled to open in 2005.

"In 2006 Russian president Vladimir Putin announced that an oil and gas stock exchange will be created in Russia that would trade in rubles. In 2007, Tehran failed to persuade OPEC members to switch away from the US dollar but at the end of 2007 Iran stopped selling oil in U.S. dollars. Libya has also been urging that oil be priced in other currencies rather than the US dollars," he said.

"Since Kaddafi was attempting to create a pan-African gold standard, he was urging African oil producers to abandon the petro-dollar, and demand gold payment for oil/gas. In 2010 Libya proposed a new currency called the Gold Dinar to replace the dollar for oil sales".

Iran's oil exports increased from around 1 million barrels per day (mb/d) in sanctions era to about 2.1 mb/d in May. Iran says its June exports soared to above 2.3 mb/d. The country's oil production also increased from 2.8 mb/d in 2015 to about 3.7 mb/d in May.

Karbuz said that from a purely economic and logical perspective, switching oil sales to euros makes sense if oil exporters’ biggest trading customers use euro. It is the case with Iran.

"If large oil and gas exporters made the switch together from the US dollar to euros, the dollar would take a hit. Perhaps this would not cause real damage to the US dollar and the US economy but if other nations follow and dump their US dollar holdings rapidly by replacing it with euro, then the result would cause an economic meltdown," he explained.

"This could happen if a coordinated large scale conversion takes in place shortly. A smaller scale and individual cases such as Syria switching all of the state's foreign currency transactions to euros from dollars in 2006 would not make a remarkable impact".

Karbuz said that now, perhaps, a more important issue that sticks out in the above given short summary, is what happened to the countries or leaders attempting to move away from the US dollar in selling their hydrocarbons.

Subscribe to Trend in Google News! Subscribe
Azerbaijani president receives EU Special Representative (PHOTO/VIDEO) (UPDATE)
Azerbaijani president receives EU Special Representative (PHOTO/VIDEO) (UPDATE)
Slovakia interested in deepening relations with Azerbaijan - FM
Slovakia interested in deepening relations with Azerbaijan - FM
Azerbaijan - supporter of normalization of relations with Armenia, says FM
Azerbaijan - supporter of normalization of relations with Armenia, says FM
Loading Bars
Latest
​Iran allocates more funds for oil and gas projects in Ilam Province
Turkey unveils data on cargo traffic via its ports from Spain
Georgia's domestic export up in 9M2021
Value of Turkish cement exports to Georgia for 8M2021 down
Turkey shares data on cargo traffic with Greece for 8M2021
Turkey reveals cargo volume handled from Egypt in 8M2021
Azerbaijan shares data on number of vaccinated citizens
Azerbaijan confirms 2,102 more COVID-19 cases, 863 recoveries
Cargo traffic on Azerbaijan's section of TRACECA for 8M2021 revealed
IMF lowers breakeven oil price level for Azerbaijan
Saudi index hits 15-year peak as most Gulf bourses gain
Israel's Bank Mizrahi Tefahot to issue $1.1 bln of CPI-linked bonds
Iran seeks to complete semi-finished project related to Lake Urmia's revitalization
Iran imports trucks to renovate transportation fleet
IMF revises up forecasts for Azerbaijan’s non-oil GDP growth
Iran`s domestic appliances production increases
IMF reveals forecast for Azerbaijan’s annual inflation
Iran's imports from neighboring countries up
Turkey discloses volume of cargo shipment via its ports from Singapore for 8M2021
Hungarian companies to attend Rebuild Karabakh EXPO
Azerbaijan raises gas exports via BTE pipeline
IMF predicts growth for Azerbaijan's GDP
Azerbaijani ministry denies rumors about full transition of schools to online lessons
Slovakia interested in deepening relations with Azerbaijan - FM
Turkey reveals cargo traffic with Morocco for 8M2021
Data on cargo shipping between Turkey and Algeria for 8M2021 revealed
Turkey shares data on cargo traffic with Israel for 8M2021
TAP partially stems increase in gas prices – managing director
Iran to sell oil through private sector
Iran started exploration of mining sites in South Khorasan Province
Minister talks preferential loans issued in Azerbaijan since early 2021
Bakcell ready to implement eSIM project in Azerbaijan - CEO
Iran reveals COVID-19 data for October 19
Iran's steel production increases
Iran eyes to boost domestic production in mining, industrial and commercial sectors
AccessBank eyes increasing loan portfolio mainly in segment of micro, agricultural entrepreneurs - Acting Chairman of Board (Interview)
National bank of Georgia shares data on payment cards issuance
Average mobile internet download speed continues to grow in Azerbaijan - Ookla
Galt & Taggart publishes overview of Georgia's economic growth
USAID selecting Turkmen business projects for co-financing
Eni Turkmenistan Ltd opens tender for supply of wellhead equipment
Azerbaijan exported most of its oil to Italy in 9M2021 - State Customs Committee
Iran ready to attract investment in renewable energy sector - minister
Azerbaijan - supporter of normalization of relations with Armenia, says FM
Azerbaijan, Slovakia eye signing agreement on economic co-op
Slovakia to supply Azerbaijan with de-mining machines in near future
Azerbaijan denies rumors about impeding exports from Iran to Russia
Iran Standards and Quality Inspection Agency releases car quality report
Iran to complete railway transit corridors - RAI
Baku Expo Center to soon open 'Rebuild Karabakh' exhibition
Joint press conference of Azerbaijani and Slovak FMs held in Baku (PHOTO/VIDEO)
VTB Bank in Georgia to back up creation of Nuclear Medicine and Diagnostic Center
Uzbekistan to produce its first electric cars
Turkey's steel export to Uzbekistan surges in value for 9M2021
Turkey shares data for cargo traffic via domestic ports from Ukraine in 8M2021
Azerbaijani, Slovak FMs holding expanded meeting (PHOTO)
Turkmen state concern to buy chemical products via tender
Azerbaijan’s 'Kalbajar' tanker leaves for first voyage
Renewables’ share in global energy supply to increase to over 25%
Georgia shares data on COVID-19 cases for October 19
Iran discloses volume of exports from Parvizkhan border terminal
PwC announces new strategy: The New Equation
India’s active Covid cases fall below 200k for the first time in seven months
Russia’s investments in US government securities in August remain at July level
Death accident takes place during construction of road in Azerbaijan's Kalbajar
Quake off Greece's Karpathos shakes eastern Mediterranean
Renewable Energy Agency talks on projects in Azerbaijan’s liberated lands
Israel's El Al Airlines starts talks to buy smaller rival Arkia
NEQSOL Holding ​comments on its intent to purchase shares in Ukraine’s largest cement producer
Azerbaijani president receives Slovak FM (PHOTO)
Azerbaijani president receives EU Special Representative (PHOTO/VIDEO)
Iran COVID-19 vaccinations on track - President Raisi
Iran continues to sell state-owned property
Iran textile industry faces smuggling challenges - official
Turkey names volume of cargo traffic via its ports from China for 8M2021
Turkmenistan’s education ministry opens tender for drip irrigation system
Turkey reveals volume of cargo shipment via local ports from Belgium for 8M2021
Iran boosts exports to Pakistan
Number and value of exchanged checks in Iran increases
Kazakhstan to develop railway corridors to China
Azerbaijan notes decrease in oil prices
Uzbekistan, Int'l Foundation for Electoral Systems discuss co-op prospects
Turkmen Khazar Consortium opens tender for building materials
Azerbaijan repairing small hydropower plants in liberated lands
Iran provides land for affordable housing project
Iran shares data on trade turnover with ECO member states
Iran sees increase in exports to Azerbaijan
TBC Capital publishes weekly economic review of Georgia
Most COVID-19 infection cases in Azerbaijan fall on Baku
Heydar Aliyev Center in Baku to hold concert of famous European chamber orchestra
Iran cannot accept loss of control for "gray zone" of drug trafficking via Karabakh - analyst
Colder winter could boost gas to oil switching demand
'Umblical cord': In Israel, Jaishankar hails contribution of Indian Jewish community
Further boost in OPEC+ output could risk building inventories above five-year average
India, US, Israel & UAE coming together to form a 2nd Quad?
Azerbaijani army starts command post exercises in Lachin district
Iranian currency rates for October 19
Iran makes investments in oil and gas fields in Ilam Province
Saipem to adopt Honeywell Forge software to create digital twin
Iberostar to purchase 10 tons of hydrogen
All news