Analysts say that the move is not just politically motivated: Now that sanctions have been lifted, Europe has become one of Iran's top trading partners. So why use dollars?
But the decision seems to be yet another act of defiance against dollar dominance. This week Russia became China's biggest oil partner, thanks in part to Moscow accepting payment in yuan. And last month, Iran and India announced that they intend to settle all outstanding crude oil payments in rupees, as part of a joint strategy to dump the dollar and trade instead in national currencies.…Exorcising the ghost of Bretton Woods.
Russia Insider
Iran Dumps Petrodollar, Wants Euros for All Oil Sales
Rudy Panko
4 comments:
Not defiance, basic sovereignty.
This is what is going to cause world war 3.
In that case lets hope Iran reconsiders.
I have discussed this with N. Wilson. He says:
"If you have a resource and sell it for Euros, then you will either use those Euros to buy things from the Eurozone, or you will hand them over to the central bank (via the banking system) in exchange for Iranian Rials.
When you come back from a foreign holiday you throw the foreign money in a drawer where it never really sees the light of day again. A 'Sovereign Wealth Fund' is the foreign currency drawer of a nation - where all the excess foreign money gets thrown never to see the light of day again.
The best way to look at it is to see the oil companies as joining the Eurozone. But they still have to pay local contractors and employees, and they then buy Rials on the exchange market to pay the local contracts. Those Rials have to come from somewhere, and the source is the banking system discounting foreign exchange for new Rials. The foreign exchange then goes in the drawer.
So it's the same 'deficit spending' game as any other country where people save the local currency. The only difference is that there is this big 'excess foreign currency denominated financial assets pool' that can be used to make it look less bad."
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