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Iran reported switching from dollars to euros in oil trade

Section: Daily Dispatches

By Marc Wolfensberger
Bloomberg News Service
Wednesday, December 6, 2006

TEHRAN -- Iran, the world's fourth-largest oil exporter, plans to reduce its use of the U.S. dollar in world trade and increase use of the euro, two Tehran-based newspapers reported.

The Tehran Times said today Iran has started substituting euros for dollars in oil sales, citing an unidentified person at the Oil Ministry. Iran Daily reported Iran wants to cut its dollar-based transactions to a minimum, citing Minister of Economy Davoud Danesh-Ja'fari.

Iran's policy of selling oil in U.S. dollars "has not changed yet," said Hojatollah Ghanimifard, executive director for international affairs at National Iranian Oil Co., in a statement read to Bloomberg News from his office.

The U.S. and several European nations are pushing the United Nations to sanction Iran for its nuclear program. The dollar touched a 20-month low against the euro this week, and central banks in the Middle East including the United Arab Emirates have plans to convert some of their dollar reserves into euros.

Exporting nations "are only holding so many dollars because of all the trade in the currency, but if the trend begins to move out of it, then it's going to be a positive for the euro and add to the negative sentiment on the dollar," said David Mann, a foreign-exchange strategist at Standard Chartered Bank Plc in Hong Kong.

The dollar was at $1.3278 against the euro at 8:07 a.m. in New York, compared with $1.3317 late yesterday.

Iran's oil export contracts for months have included a clause that allows the nation to seek payment in the euro and other currencies, creating a mechanism for a switch should Iran's policy change, according to traders who buy Iranian oil.

Organization of Petroleum Exporting Countries members including Qatar earlier this week expressed concern about the falling dollar, saying output should be cut to drive prices higher.

Iran has repeatedly said it would limit dollar-based transactions following the U.S. decision in September to block one of Iran's biggest state-owned lenders from doing business with the U.S. The U.S. Treasury on Sept. 8 blocked Bank Saderat for its alleged support of "terrorist organizations" such as Lebanon's Hezbollah movement and Hamas in the Palestinian territories.

Iran exports 60 percent of its crude to Asia, 32 percent to Europe, and 8 percent to Africa. It is the world's fourth-largest exporter of crude and OPEC's second-biggest member. The nation last month produced 3.76 million barrels a day, according to data compiled by Bloomberg.

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