Russia’s oil economy: Dollars out, Euros in
Why is this such a big deal? Well, as of right now, the U.S. dollar is basically the exclusive currency for oil prices, which helps buoy the dollar’s value even in a sweeping recession.
Europe certainly could need such a soild anchor. But then, I thought Russia is increasingly moving towards the Northern American market (big time!). Would such a switch by Russia and possibly other oil countries such as Iran (which has been discussing this; see this interesting article) destabilize the US Dollar? Interestingly enough, Iraq also priced their oil in Euros before the war but I guess it’s US Dollars again…
Telegraph | Money | Russia to price oil in euros in snub to US: “Russia is to start pricing its huge oil and gas exports in euros instead of dollars as part of a stragetic shift to forge closer ties with the European Union.
The Russian central bank has been amassing euros since early 2002, increasing the euro share of its $65 billion (£40 billion) foreign reserves from 10pc to more than 25pc, according to the finance ministry.
The move has set off a chain reaction in the private sector, leading to a fourfold increase in euro deposits in Russian banks this year and sending Russian citizens scrambling to change their stashes of greenbacks into euro notes.
German officials said Chancellor Gerhard Schroder secured agreement for the change-over on oil pricing from Vladimir Putin, the prime minister, while on a trip to Russia this week.”