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Iran and its oil
The US and Europe are getting tough with Iran. But what will stringent new sanctions against a major oil country mean for the industry and the region?
July 20, 2010 4:34 by Reuters
SWITCH TO ALTERNATIVE CURRENCIES?
Iran could also elect to carry out transactions in currencies other than the US dollar and the euro, as the currencies of those most implicated in sanctions.
US foes Iran, Iraq under Saddam Hussein, and Venezuela have all previously raised the issue of non-dollar pricing, but until the latest European sanctions against Iran, the euro was viewed as a natural alternative.
Following the latest sanctions, Iranian officials have said they fear transactions in euros as well as dollars could be blocked.
Iran is considering selling its oil in other currencies, including the UAE dirham and the Chinese yuan, industry sources and an Iranian official have said. Analysts have questioned how practical this might be and the UAE is seen as unlikely to be receptive.
Although international oil futures are denominated in dollars, parties involved in a physical oil sale can carry out the transaction in whichever currency they can both agree on.
If Iran receives UAE dirham or Chinese yuan, it would not necessarily have to convert them provided it could spend them on goods in the United Arab Emirates or China, respectively, both of which are trading partners with Iran.
(By Barbara Lewis. Additional reporting by Parisa Hafezi in Iran and Cynthia Johnston in Dubai)