WI: The PetroEuro

One interesting tidbit is that Iraq in the early 2000s got into the idea of selling its oil in terms of Euros rather than dollars. Later on, Gaddafi tried to set up a new African currency backed by gold and oil.

Assuming the 2003 invasion of Iraq doesn't happen, what if in the 2000s Libya and Iraq had both gotten into denominating their currencies in Euros as a means to stick it to the Americans?
 
One interesting tidbit is that Iraq in the early 2000s got into the idea of selling its oil in terms of Euros rather than dollars. Later on, Gaddafi tried to set up a new African currency backed by gold and oil.

Assuming the 2003 invasion of Iraq doesn't happen, what if in the 2000s Libya and Iraq had both gotten into denominating their currencies in Euros as a means to stick it to the Americans?
With the volumes they were trading at, vs the rest if the world, would make no difference. And you still need Dollars to operate in the Western world. You can't cut yourself off from the global financial system, that's run on Dollars, and not ending up like Cuba or Venezuela
 
Trouble then is, who buys it and how? A serious attempt by countries already on the shitlist to break one of the US key monopolies is going to get all sorts of reaction. I work in financial services and US domestic regulations affect how we do business in every country in the world. Doing business with entities the US disapproves of can get horrendously expensive and I doubt any serious players in the world financial system would be keen to get deeply involved.

Now if it was some other oil producers as well plus some big buyers it might be a different story but I think you’d need to have China participating at the very least.
 
Trouble then is, who buys it and how? A serious attempt by countries already on the shitlist to break one of the US key monopolies is going to get all sorts of reaction. I work in financial services and US domestic regulations affect how we do business in every country in the world. Doing business with entities the US disapproves of can get horrendously expensive and I doubt any serious players in the world financial system would be keen to get deeply involved.

Now if it was some other oil producers as well plus some big buyers it might be a different story but I think you’d need to have China participating at the very least.

Given how China is currently trying to set up something of a PetroYuan, that's not inconceivable.

If you put Iraq, Libya, Venezuela, and Russia together you get to about 23% of global oil output. Iran on top of that gets you to 28%.
 
With the volumes they were trading at, vs the rest if the world, would make no difference. And you still need Dollars to operate in the Western world. You can't cut yourself off from the global financial system, that's run on Dollars, and not ending up like Cuba or Venezuela

I disagree, at least for oil producing countries, the reason you need dollars is because oil is traded in dollars, oil exporters clearly don’t need to import significant amount of oil. Honestly if Iraq and Libya had jumped on this wagon I could see Iran join it and Russia would also be thinking about going that way. Beside that few other actor have both the interest and opportunity to use Euro. Venezuela depend on USA as their export destination, the rest of the Arabic oil producers are to closely connected to USA or to hostile to EU (Algeria) to shift. EU wouldn’t push this, as the cost-benefits wasn’t high enough.
 
Trouble then is, who buys it and how? A serious attempt by countries already on the shitlist to break one of the US key monopolies is going to get all sorts of reaction. I work in financial services and US domestic regulations affect how we do business in every country in the world. Doing business with entities the US disapproves of can get horrendously expensive and I doubt any serious players in the world financial system would be keen to get deeply involved.

Now if it was some other oil producers as well plus some big buyers it might be a different story but I think you’d need to have China participating at the very least.

The countries who would do this would already be on USA’s shitlist and wouldn’t dependent on USA economic. A lot of the ability of USA to regulate foreign to foreign trade depend on using dollars. If Libya as example decided to move to Euro as petrocurrency, there was little USA could do short of invading. While EU wouldn’t support this move, it wouldn’t object either, and American attempt to take on EU economical have tended to end up badly for USA.
 
The countries who would do this would already be on USA’s shitlist and wouldn’t dependent on USA economic. A lot of the ability of USA to regulate foreign to foreign trade depend on using dollars. If Libya as example decided to move to Euro as petrocurrency, there was little USA could do short of invading. While EU wouldn’t support this move, it wouldn’t object either, and American attempt to take on EU economical have tended to end up badly for USA.
None of this is true, IMO. In the modern world you can’t just carve yourself off into some sort of standalone Juche system without having a lot of allies, so instead you need to do business with people who also need to do business with the US.
Plenty of European companies who screen their customers against the US sanctions list as the price of being allowed access to Wall Street finance and the US market. Then there is ITAR and all the other stuff, all of which boil down to the simple fact that applying the US shitlist to some grotty third world country to keep the US onside is always going to benefit you more than doing a favour for the grotty third world country and joining them on the shitlist.
Now if China and Russia and a few others wanted to go big on this then it could conceivably work but why would they, when such a direct confrontation could potentially result in escalation to the point of cleaving the world economy in two. China cutting itself off from the US (and almost certainly EU) markets in order to form an economic bloc with Russia and a few oil producers benefits them how?

Interesting to see how the current shenanigans play out with US threatening to sanction India and others for buying Iranian oil, which is a vaguely similar situation.
 

kernals12

Banned
One interesting tidbit is that Iraq in the early 2000s got into the idea of selling its oil in terms of Euros rather than dollars. Later on, Gaddafi tried to set up a new African currency backed by gold and oil.
Please tell me you are not entertaining this ridiculous conspiracy theory.
 
Trouble then is, who buys it and how?

Well I would reckon the Iraqi move was aimed at mainly EU countries and basically all countries other than the US. Of course, it made little sense at the time because Iraqi oil revenue was held by the UN in an escrow account in New York. But perhaps Saddam wanted to poke the US in the eye and look forward to a future after sanctions when he would have access to the oil revenue again and Iraq could decide where and how to bank the money.

Using a mish-mash of figures from after 2003 and supposing they roughly applied to 2003, then in 2016, oil constituted over 99% (but not exactly 100%) of Iraqi exports.

In 2015 the main export partners were:

China 22.8%
India 20.4%
South Korea 11.3%
United States 7.8%
Italy 6.7%
Greece 6.1%
Netherlands 3.5%
Taiwan 2.6%
Spain 2.4%
Singapore 1.9%
Japan 1.9%
France 1.8%
Poland 1.3%
Germany 0.9%
Brazil: 0.9%


Assuming these percentages also held for 2003, then in 2003 the countries using the euro accounted for 21.4% of Iraqi exports. A further 1.3% would have been to Poland which was in the process of joining the EU and traded extensively with the euro members and would thereby likely have some euros to pay for Iraqi oil. Brazil accounted for 0.9% but Brazil has historically traded more with Europe than the US if I remember correctly (so there would be an incentive for Brazil to accept euros for payment of some of its exports to pay for Iraqi oil imports). All in all, about a quarter of Iraqi oil exports were to countries that either used the euro or traded heavily with countries that did and this doesn't take into account China, India, Singapore, Korea and Taiwan (although China's yuan was then fixed to the US dollar and wouldn't be officially de-pegged until 2005, but Saddam had likely little way of knowing that).

As to how it would be done, I suppose Saddam could have come up with something like (or later looked at) Iran's efforts to do the same in 2007.

In fact had it continued and most sanctions been lifted by the UN (even if retained by the US) Iraq and Iran might have cooperated on euro payment for oil after 2007.
 
Please tell me you are not entertaining this ridiculous conspiracy theory.
It's as much a conspiracy theory as stating that the Second Gulf of Tonkin incident never actually happened. Whether that's the reason why the US helped overthrow those leaders, that's actually debatable in Iraq, though definitely a conspiracy theory with regards to Libya.
 
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I disagree, at least for oil producing countries, the reason you need dollars is because oil is traded in dollars, oil exporters clearly don’t need to import significant amount of oil. Honestly if Iraq and Libya had jumped on this wagon I could see Iran join it and Russia would also be thinking about going that way. Beside that few other actor have both the interest and opportunity to use Euro. Venezuela depend on USA as their export destination, the rest of the Arabic oil producers are to closely connected to USA or to hostile to EU (Algeria) to shift. EU wouldn’t push this, as the cost-benefits wasn’t high enough.

Well yes, that could potentially have happened. Iraq, Iran, Libya and later Venezuela joining such a scheme.

It would seem to have a major impact but I doubt it would do more than slightly increase the usage of the euro for international payments since many other oil producers would still take US dollars and this would be more convenient.
 
Please tell me you are not entertaining this ridiculous conspiracy theory.

I'm not entertaining the theory that the US went after these countries to prop up the petrodollar.

I just think the idea of a few countries with lots of oil coming up with another standard is a fun thought experiment.
 

kernals12

Banned
I'm not entertaining the theory that the US went after these countries to prop up the petrodollar.

I just think the idea of a few countries with lots of oil coming up with another standard is a fun thought experiment.
The reason why oil is traded in dollars is because the US dollar is so widely used that it's more convenient. It amounts to a tiny share of the total transactions conducted in dollars.
 
The reason why oil is traded in dollars is because the US dollar is so widely used that it's more convenient. It amounts to a tiny share of the total transactions conducted in dollars.

Its because enough players agree to it, just like they agree to buy planes in US$. IIRC Airbus was keen to sell planes in Euros at one stage.

Once the barrier is broken then the whole edifice is up for grabs.
 
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