UPDATE - Russia may switch oil prices to euros-German source
Wednesday October 8, 12:33 pm ET
YEKATERINBURG, Russia, Oct 8 (Reuters) - A German government source said on Wednesday that Russia may switch to pricing oil sales in euros rather than dollars, potentially huge news for financial markets. However, Russian energy and finance ministry officials said they were unable to confirm any change was planned.
"The question is taking on increasing significance," said a government official travelling with German Chancellor Gerhard Schroeder on an official visit to Russia, referring to the possibility of a switch in the traditional energy currency.
Any such change would be a major shift in the balance of currencies behind the world's most traded commodity and the success of a long campaign by Europe to get oil priced in euros.
It could deal a blow to U.S. economic prestige, as well as the strength of the dollar on foreign exchange markets.
Russia is the second biggest oil exporter behind Saudi Arabia with the world's largest natural gas reserves.
Schroeder meets Russian President Vladimir Putin later on Wednesday and they hold a news conference on Thursday morning.
European leaders have long sought to promote the common currency and boost price stability in the European Union (News - Websites) by getting energy contracts priced in euros as well as dollars.
Most energy contracts are settled in dollars, meaning that for European buyers, trade in gas and oil is subject to fluctuations in the U.S. currency as well as in their market prices.
MOSCOW MUTE
Officials in Moscow said that they had no knowledge that anything was going on behind the scenes.
"We cannot confirm this information. No talks are taking place on the issue. The ministry draws up export timetables, but does not deal with financial issues on oil supplies," a source at the Russian Energy Ministry told Reuters.
A Finance Ministry source also said he was unaware of any preparations for a switch.
"We have not heard anything of the sort. All information (about prices) we get is in dollars and roubles...and we do not see any tools to force companies to use the euro," he said.
LUKOIL (LKOH.RTS), Russia's second biggest oil company, said that it was continuing to work in the U.S. currency.
"LUKOIL draws up its accounts based on the dollar. The company has not yet reviewed its position to change its functional currency to prepare reports," said head of investor relations Gennady Krasovsky.
A source in a large Western trading company was downright dismissive of the talk.
"This is a complete nonsense. The market has been trading in dollars for dozens of years. Until companies which buy oil do not want to do this, the Russian Federation will not be able to do anything," he said.
I got this off Yahoo. I imagine, if this comes to pass, that there will be enormous repurcussions for the dollar.