On 30 April 2008, Iran decided to make all transactions in trading of its crude with Euros in Europe, and the Japanese Yen within Asia. This was largely triggered by the tensions between Iran and Washington for the past few years and lately, due to the weakening of the dollar. Despite its weakened position against almost every currency last year, the dollar has continued to dominate as currency of trade. Traders continue to use the greenback as it was a convenient currency. While exporters stood to gain by billing in dollars, buyers did not always agree. Also, there were logistics problems in carrying out trade in multiple currencies.
Iran is a member of the Organisation of Petroleum Developing Countries (OPEC) and is the fourth-largest exporter of crude oil globally after Saudi Arabia, Russia, and Norway and a section of the observers are of the opinion that the impact on the dollar could be much more intense if countries like Saudi Arabia and Russia also decide to move away from the US Dollar.
However, Iran's decision to stop trading its crude in US Dollars despite the inconveniences is more political than economic. It is worth noting that in the past although Iranian crude was being quoted in the US dollar, actual payments were being carried out in other currencies. This time however, continuation of this new arrangement would depend on the negotiating capabilities of Iran and its bilateral deals with the countries buying oil from it.
Actually the first country to stop trading Oil in Dollars was Saddam's Iraq. One of the first thing that the Coalition Provisional Authority (CPA) did in 2003 was to change it back from EUR to USD.
Contributed by:
Prof. Bikramjit Sen
(Globsyn Business School)
Ref: http://economictimes.indiatimes.com/articleshow/3000162.cms
No comments:
Post a Comment