Moscow struggles to price oil in euros

ATTEMPTS by Russian President Vladimir Putin and the European Union to beef up the euro's challenge to the dollar as the global currency would be boosted by the pricing of Russian oil in the single currency but it is not yet time to back the euro's future world dominance, say oil analysts and economists.

Using euros instead of dollars might simplify Russian trade in some respects because most of its trade takes place with Europe. But it is far-fetched to imagine that would translate into a more global move, the experts say.

So far, despite occasional talk of alternatives, the dollar's reign is unchallenged. 'This is an issue that crops up perennially,' said Danny Gabay, an economist at Fathom Financial Consulting.

'Opec has threatened to move reserves into other currencies. But since the euro's launch, the only person to my knowledge who has acted rather than talked about it was Saddam Hussein - which I doubt is the kind of advert for the currency the EU was looking for.'

The continuing weakness of the dollar may be behind Moscow's murmurings. Locking in prices in euros would have a significant impact on companies' bottom lines. But, economists and analysts point out, currency trends have a habit of changing and companies will be mindful of that.

'The whole thing's absurd,' said an oil analyst. 'Russia is a commodity-focused exporter, with dollar-linked revenues, but imports in euro-priced goods. The euro is appreciating, even from a very low point, which means not as much export gain as import pain. But that will reverse as soon as currency trends reverse.'

Changing to euros, even in Russia's case, would be difficult because of the complex web of oil transactions. Oil traders, who are used to dealing in dollars, would be opposed to it.

Said one: 'It would be a big complication and people would be against it. Anyway, so far, all the talk has been about Russia and, although it is a big exporter, in the context of the global market, it would not be a significant change.'

In addition, oil trade is global, not European. The US, easily the world's largest oil market, is unlikely to welcome attempts to encourage a switch to euros and it is hard to imagine other big oil nations such as Venezuela lobbying for payments in euros.