Iran demands oil payment in euros
Feb 07, 2016
The US petro-dollar is melting away like ice on an Arizona lake. The US government has used its financial clout to punish many countries, like Iran, Iraq, and Russia. Now, not only those countries, but others too, are leery that they might run afoul of the US government and be treated in similar fashion. They are looking for others to take the lead in dumping the US dollar as payment for oil and other things.
Now that Russia accepts Chinese renminbi (or yuan) for oil payments, Saudi Arabia is coming under pressure to do the same. If (or when) they do so, it will open the door to all other nations, and that will mark the end of the petro-dollar.
Iran held out long enough to come out from under most of the US sanctions, and is now in a position to accept euros rather than dollars. The fact that the US is continuing to impose some trade sanctions on Iran puts the two countries at odds, but it also means that US companies are unable to trade with Iran. This puts the European companies at an obvious advantage, because in effect, the US government has placed sanctions on US corporations from doing business in Iran.
Though there is an agreement between the US and Iran, it is clear to Iran that the US government is still hostile. Hence, Iran has little incentive to do business with US companies. But with Iran doing so much business with Europe, it just makes sense to make payments in friendly euros, rather than in hostile dollars.
Iran wants to recover tens of billions of dollars it is owed by India and other buyers of its oil in euros and is billing new crude sales in euros, too, looking to reduce its dependence on the U.S. dollar following last month's sanctions relief.
A source at state-owned National Iranian Oil Co (NIOC) told Reuters that Iran will charge in euros for its recently signed oil contracts with firms including French oil and gas major Total, Spanish refiner Cepsa and Litasco, the trading arm of Russia's Lukoil.
"In our invoices we mention a clause that buyers of our oil will have to pay in euros, considering the exchange rate versus the dollar around the time of delivery," the NIOC source said….
Switching oil sales to euros makes sense as Europe is now one of Iran's biggest trading partners.
"Many European companies are rushing to Iran for business opportunities, so it makes sense to have revenue in euros," said Robin Mills, chief executive of Dubai-based Qamar Energy….
With Iran now again linking to international lenders through SWIFT, the NIOC source said it was easy for Tehran to be paid in any currency it wants, adding: "And we want euros."