In the latest de-dollarization efforts, Iran announced last week that it is dumping the dollar for the euro in oil sales following the lifting of international sanctions last month.
Here is more from Reuters:
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.
Dollars? No thanks, Iran says. Here’s more from Reuters:
Iran has also told its trading partners who owe it billions of dollars that it wants to be paid in euros rather than U.S. dollars, said the person, who has direct knowledge of the matter.
Iran was allowed to recover some of the funds frozen under U.S.-led sanctions in currencies other than dollars, such as the Omani rial and UAE dhiram.
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.
Iran has pushed for years to have the euro replace the dollar as the currency for international oil trade. In 2007, Tehran failed to persuade OPEC members to switch away from the dollar, which its then President Mahmoud Ahmadinejad called a “worthless piece of paper”.
. . .
Iran’s insistence on being paid in euros rather than dollars is also a sign of an uneasy truce between Tehran and Washington even after last month’s lifting of most sanctions.
But why now the shift in payments? Right after sanctions were lifted?
The NIOC source said Iran’s central bank instituted a policy while the country was under sanctions over its disputed nuclear program to carry out foreign trade in euros.
“Iran shifted to the euro and canceled trade in dollars because of political reasons,” the source said.
Ahhh yes, forget that “worthless piece of paper”, let’s send the U.S. a message. Here’s more from Zerohedge:
Of course all fiat money amounts to “worthless pieces of paper” and as things currently stand, the USD is the least “worthless” of the lot which means that Iran’s insistence on being paid in a currency that Mario Draghi is hell bent on devaluing might seem strange to anyone who knows nothing about geopolitics.
Put simply, this has very little to do with economics and a whole lot to do with sending a message. “Iran shifted to the euro and canceled trade in dollars because of political reasons,” the same NOIC source told Reuters.
Right. So basically, Iran is looking to punish the US for instituting years of economic tyranny by de-dollarizing the oil trade.
This comes at a time when the petrodollar is under tremendous pressure. Russia and China are already settling oil sales in yuan and “lower for longer” crude has broken the virtuous circle whereby producing countries were net exporters of capital, recycling their USD proceeds into USD assets thus underwriting decades of dollar dominance.
The question, we suppose, is whether other producers move away from the dollar just as Russia and Iran have. If there’s a wholesale shift away from settling oil sales in greenbacks, another instrument of US hegemony will be dismantled and Washington’s leverage over “unfriendly” producers will have been broken.
The irony is this: if Iran follows through on its promises to flood an already oversupplied market, crude might not fetch any “worthless pieces of paper” at all – dollars or euros.
Here’s more commentary from The Next News Network: