Iran hopes that the special purpose vehicle that would allow the European Union (EU) to continue buying Iranian oil amid the U.S. sanctions will become operational by the end of this year, Ali Akbar Salehi, the head of the Atomic Energy Organization of Iran, told local outlet PressTV on Thursday.
The idea behind the SPV is to have it act as a clearing house into which buyers of Iranian oil would pay, allowing the EU to trade oil with Iran without having to directly pay the Islamic Republic.
The EU has been struggling to set up the vehicle for months, because no EU member was willing to host it for fear of angering the United States, the Financial Times reported recently, citing EU diplomats.
Last week, Germany and France were said to be joining forces to host the special vehicle to keep trade with Iran, including oil trade, flowing, according to the Wall Street Journal.
In another energy-currency related development, the European Commission (EC) is calling for a wider use of the euro currency in energy-related transactions.
"The Commission will start a consultation on the market potential for a broader use of euro-denominated transactions in oil, refined products and gas," the EC said in a statement on Wednesday.
The EU's energy import bill each year is US$340 billion (300 billion euro), around 85 percent of which is paid in U.S. dollars, while the share of the imports from the U.S. is currently just 2 percent, said Miguel Arias Cañete, European Commissioner for Climate Action and Energy.
Iran's take on this is that the EU would ditch the U.S. dollar and start paying in euros for all its oil-related transactions.
"The EU is going to ditch the US dollar and just use the euro in the financial transactions of all European oil deals with other countries," PressTV quoted Salehi as saying on Thursday.
By Tsvetana Paraskova for Oilprice.com
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Comments
However, the European Commission’s (EC) call for a wider use of the euro as an oil currency medium could be another blow for the petrodollar coming in the footsteps of the launching of China’s petro-yuan on the 26th of March 2018.
The petro-yuan already accounts for 21 million barrels of the daily traded global oil or 32%. Ditching the petrodollar by the EU for their oil transactions will deprive the petrodollar of another 23% of the traded oil around the globe.
I think this is a logical step with the EU hardly importing crude oil from the United States. The same logic applies to the Arab Gulf oil-producing nations. The US hardly imports oil from these producers so there is no justification of continuing to sell their oil in petrodollar when the bulk of their exports go to the Asia Pacific region where they could be paid in petro-yuan and yen.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London