Iran Oil Industry to Trade in Euro Instead of Dollar

TEHRAN, Dec 20, 2006 (Dow Jones Newswires)

The Iranian Oil Ministry will carry out all its oil-industry related equipment purchases in euros instead of dollars after the Iranian government decided to base its new-year budget in euros, Iran's oil minister, Kazem Vaziri Hamaneh, said Wednesday.

"Based on the government's policy of substituting the euro for the dollar, all oil industry purchase contracts will be done in the euro," the official IRNA news agency quoted Vaziri as saying.

Government spokesman Ghollam Hussein Elham said earlier this week that all national hard currency revenues, including those from oil exports, will be calculated in euros in the Iranian budget being drafted for the Iranian fiscal year beginning March 21.

Vaziri said it is about 10 months since Iran began to inform its oil buyers that they should pay Iran in euros for the crude oil they purchase, although oil is traditionally traded in U.S. dollars.

"The basis of crude oil (trade) in the world is in the dollar, and one cannot find a report in which the price of crude oil is quoted in any other currency," Vaziri said.

He said generally the kind of currency demanded by Iran in its oil trades with the rest of the world is determined by the Central Bank of Iran in relation to its currency basket requirements.

Monday, an Iran government spokesman told state-run radio all Iranian hard currency budget revenue for the next fiscal year beginning March 21 will be calculated in euros. He said this would include government oil revenue.

Regarding Iran's success in attracting foreign capital to its oil industry, Vaziri said: "Investment in the oil industry not only has not diminished, it has even had good growth."

He said in the space of a little more than a year, Iran has finalized contracts worth around $28.5 billion, and is currently in negotiations to put the finishing touches on an additional $61 billion worth of contracts.

He said Iran is now encountering difficulties persuading international lending institutions to finance its oil and gas projects and is trying to find alternative investment sources.

"We are busy finding domestic alternatives, and the country's officials are involved to make sure shortcomings are compensated," he said.

Vaziri was asked if Iran would be able to meet all its goals with the $118 billion projected to be spent on developing the oil industry under the country's five-year economic development plan.

"If the figures quoted are met in the three branches (oil, gas and petrochemicals), undoubtedly the projected targets in the...economic development plan will materialize."

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