Euro vs Dollar
Nov 19th, 2007, in Business & Economy, by PatungIndonesia should sell oil in Euros.
Vice President Jusuf Kalla, who often says things without any follow-up whatsoever, said Iran’s proposal that oil sales be done in euros or some other currency, instead of the declining US dollar, was a good idea but things would have to be studied first.
Speaking at an Organization of Petroleum Exporting Countries (OPEC) summit in Riyadh, Kalla made the remark after having met Iranian President Ahmadinejad.
Jusuf Kalla.
Kalla said Iran’s idea on switching to the Euro would be discussed further at a meeting of the Organization of the Islamic Conference (OIC) in Senegal next year.
He also seemed to agree with Venezuelan President Hugo Chavez’s suggestion that oil be sold at two prices, one for industrialized countries and a cheaper rate for developing countries.
Kalla said Indonesia had no objection to Chavez’s proposal because Indonesia is an oil producing country that is also a developing nation like Iran, Venezuela and Nigeria. antara
19 Comments on “Euro vs Dollar”
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pj_bali says:
Just my two cents
The USA is still the largest consumer economy in the world and it would be difficult to get them to pay in anything but dollars.
I can only imagine the opportunities for corruption that will arise if there are two world prices for oil. JK is in a much better position to take advantage of such a scheme.
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Stefan says:
@pj_bali: The situation is far more complex. The USD is not just used to buy and sell goods in the US. It is also used to trade with oil. If a country of the Euro zone wants to buy oil from Norwey they neither can pay in EUR, nor in NKR. They must pay USD. So UDS iks needed not just to trade goods and serviced with the US, it’s also needed to trade oil. Countries which exports a lot of oil, such as Saudi Arabie now earn a lot of USD and must ask themselves what to do with it. They nuw invest it in the US. The result is a capital inflow of 2 billion USA into the US economy every day. Without this capital inflow the US government wouldn’t be able to fund their huge military expenses. Without this money the US will lose most of its military power. That’s the reason why especially the US enemies Chavez and Ahmadinejad like the idea of trading oil in Euro.
But it it really happens, suddenly a lot of now useless USD banknotes is floating around. So the US economy will suffer from hyper inflation. But then also all the investemens done by the governments of Saudi, UAE, Kuwait etc. will de devaluated too. So there is still a strong group of USD supporters inside the OPEC.
And about the idea of tow different oil prices. I can imagine how JK and other rich Indonesian politicians start dreaming tp profit from this. They can buy cheap oil at the price for developing countries and sell it to China or Japan at the price for industrialized countries. Of courde they will act as private persons, not as govt reps. And there are many other corrupt politicians in other developing countries who will have the same idea.
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Stefan
Thanks for supplying the background to this topic. I will concede my oversimplification.
The gobal consequence of an imploding US economy are rather frightening which is why I said that the US as the worlds biggest consumer will probably not take too warmly to a euro based exchange.
Given your second point this has already happenned in indo – Oil designated for small villages in Indo mysteriously turning up in the Phillipines. This was part of the reason the government reduced the fuel subsidies a year or so ago.
Cheers
PJ
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WP says:
I think Indonesia should fear increasing oil price, and should fear if other producers start to sell in Euro. Our energy consumption has been soaring high, while we fail to find sufficient new sources. The reason of the first is that we have been fueling our economy growth by staightforwardly burning more fossil energy. At the moment, our own consumption almost equate the production. Very soon we will become an importer.
In several of my earlier posts I keep iterating how urgent the energy issue is for Indonesia. But my impression is that the politics (of Indonesia) just doesn’t see it coming.
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TheWrathOfGrapes says:
Looks like JK is trying to step into the shoes of Mahathir of Malaysia. Why not go for the gold standard (Dinar)? Better still, make Rupiah the world currency.
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naga says:
I think Indonesia should fear increasing oil price, and should fear if other producers start to sell in Euro. Our energy consumption has been soaring high, while we fail to find sufficient new sources. The reason of the first is that we have been fueling our economy growth by staightforwardly burning more fossil energy. At the moment, our own consumption almost equate the production. Very soon we will become an importer.
RI has suffered because the government has consistently failed to diversify its energy sources, relying solely on coal and oil; RI has been a net importer of oil for several years now and is the only memebr of OPEC to do that!
Business occurs in cycles, even if the US goes into recession, it will bounce back; don’t panic….
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Business occurs in cycles, even if the US goes into recession, it will bounce back; don’t panic”¦.
Sadly, this time I don’t think Indonesia will bounce back. Without energy, you have no economy. To exagerate, to bounce back from this will be like trying to grow a plant in planet Pluto. Since the government, the House, the entire politics have no real sense of urgency at all regarding this energy issue, we will not be able to come with a solution on time.
If we want to survive this, we probably have to go back to the basic. Calculate how much food we can grow and distribute given the amount of energy we can acquire at year T, then you know how much population we can sustain. Then control the population so that we can get that number by year T. In the mean time, put all spare cents we have into alternative energy research, like that Geothermal thing.
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serious man says:
it seems that you people are smart :)) congrat
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“Sadly, this time I don’t think Indonesia will bounce back”
i meant the US economy, not Indonesia; The RI is on the road to ruin, Africa-style….
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i meant the US economy, not Indonesia;
Oooh…. Ya, with that much research power, it will survive.
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Falcon says:
A country who links its currency with a weak foreign currency will also have a weak currency and perhaps a weak economy as well. Never in the past (in case of the yen in the past and now US$) heard of any Indonesia Central Bank officials explaining their strategy as how to position the country foreign reserve facing the weakening of US dollar. It is a little to late, ain’t it, but may be never too late. Perhaps the word of proactive or reactive currency is never in their dictionary, may be the word of devaluation is more familiar. Why?
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Dragonwall says:
Oil using USD as a standard for pricing. USD weaken Oil Price goes up.
To use EUROS and change change into USD to buy oil?
No one will change IDR for EUROS unless high exchange rate.
So Indonesia will be digging their own grave…OIL PRICE UP..UP..AND AWAY in Indonesia. -
Cukurungan says:
i meant the US economy, not Indonesia; The RI is on the road to ruin, Africa-style”¦.
Hi hihi…sorry dude I do not agree……Indonesia will never close to ruin because the back bone of the RI is not the economic and technology resources but the patient and love of its people to always maintain existence of this country at any cost …..If necessary we run amok, pogrom and riots…so what
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Ignorance is the basic of an idiot…not knowing the outcome but counting the chickens before they are hatch.
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They can buy cheap oil at the price for developing countries and sell it to China or Japan at the price for industrialized countries. Of courde they will act as private persons, not as govt reps. And there are many other corrupt politicians in other developing countries who will have the same idea.
Actually these tricks were adopted since the early 80’s. No wonder those people could be greedy rich that fast. First in line JK followed by Arifin Ponogoro and Aburizal (still dreammmmming of Porong). I guess he can get over with that but could be happy when someone else takes the tab.
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Farzand says:
The EURO will be very soon the choice of many countries to sell their oil. Like Venezuala Iran Sudan, maybe Indonesia as well. Keep in mind the oil that they will sell priced in EURO will be to countries other then the USA example India China & Japan.. This will have a very big impact and the US dollar in international invoicing forcing the the US to bring it’s budget under control.
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raden says:
Again our VP made wrong statement internationally ?
Indonesia is a producing oil country but at negative balance, meaning more import than finding new reserves & local production output. What is the point to make international statement on currency for selling oils when IDR equally unstable against Eur & USD ? instead of focus on creating domestic value but confusing international public while agitating USA & stir up controversial comments while he carries Ahmadinaj’ balls ? Are Indonesian looks like Arab (Iranian) with long curve nose ? JK is short with pesek nose like typical Malay races, why should we gang up with Middle east ? -
Ya otherwise how could a person’s attention be attracted if he is not outspoken. Every one knows Indonesia’s VP is short without a bagel nose. That was why he is making preparation to go short on USD and long on EUROS for pocket change.
I wonder what this “A mad di jimad” character thinks of JK. Can’t think of a reason why.
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You got that right since the IDR is in a state of perpetual decline with some yo-yo in-betweens and the USD still seems reasonably stable in comparison.