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Danger seen in Venezuela's sale of oil in euros: experts
CARACAS
Petroleumworld.com, Mar 24, 2008
Venezuela's decision to sell some of its oil in euros will help the country offset the economic impact of the falling US dollar but could cause problems if more widely applied, experts said Wednesday.
Energy Minister Rafael Ramirez confirmed Tuesday that the government was billing some of its oil exports in euros because of the "worrying" weakness of the dollar and its effect on Venezuela's already high inflation rate.
"We are trialing billing in euros for some deliveries," said Ramirez, who is also head of the state oil company PDVSA.
He stressed, however, that "this does not constitute a specific policy."
It remained unclear which oil sales would require payment in euros.
For Jose Guerra, an economy professor at the Central University of Venezuela in Caracas and former central bank board member, the experiment was "positive" for the country.
"A way to compensate for the devaluation of the dollar is to charge euros for the barrels of oil," he said.
He noted that previously if PDVSA had to spend in Europe it had to pay in euros even though it was earning in dollars.
But oil expert Mazar Al Shereidah said he saw political motivations in the move, implying that the anti-US stance by leftwing Venezuelan President Hugo Chavez may have had influence.
"There has existed a political desire (for this direction) from the government for some time," he said.
Venezuela recently, unsuccessfully lobbied the Organization of Petroleum Exporting Countries (OPEC) for a generalized switch to euros.
"Oil is not just merchandise. In the world market around 45 million barrels of oil are sold each day, and they are billed in dollars. Transactions of this magnitude affect the stability of the global financial system," Al Shereidah said.
Venezuela's embrace of the euro "can serve as a test, but the economic and trade results must not be broadened to all Venezuelan exports, nor be taken up by OPEC," he advised.
A London-based analyst with the CIBC bank, Audrey Childe Freeman, said Venezuela's decision would have been more of concern if it had come from an OPEC member in the Middle East. The fact that it came from a country with a history of hostility towards the United States "reduces its impact," she said.
Venezuela exported 2.78 million barrels per day in 2007, according to PDVSA figures. Other sources say that amount has been exaggerated and put the number closer to two million barrels.
The United States is the main purchaser, buying 1.5 million barrels a day from Venezuela.The dollar's slide has had an impact on oil-exporting countries, which have seen the euro rise to be worth more than 1.50 dollars.
Venezuela and OPEC ally Iran have pushed to dethrone the dollar as the reference currency for oil, but were blocked from doing so by OPEC heavyweight Saudi Arabia.
Story by Nina Negron from AFP
AFP 20 0835 GMT 03 08Copyright© 2008 respective author or news agency. All rights reserved.
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