Andrew E. Kramer

The International Herald Tribune

February 25, 2008

The effort to squeeze the dollar out of Russian oil sales marks another project with swagger and ambition by the Kremlin, which has already wielded its energy wealth to assert influence in Eastern Europe and in former Soviet states.

Russia, the world’s second-largest oil-exporting nation after Saudi Arabia, has been quietly preparing to switch trading in Russian Ural Blend oil, the country’s primary export, from the dollar to the ruble. But the change, if it comes, is still some time off, industry analysts and officials said.

The Russian effort began modestly this month, with trading in refined products for the domestic market.

Still, the effort to squeeze the dollar out of Russian oil sales marks another project with swagger and ambition by the Kremlin, which has already wielded its energy wealth to assert influence in Eastern Europe and in former Soviet states.

“They are serious,” said Yaroslav Lissovolik, the chief economist at Deutsche Bank in Moscow. “This is something they are giving priority to.”

Oil trading is now nearly always denominated in dollars, the de facto common currency of the petroleum business. When Kuwait sells oil under a futures contract to India, for example, the price is set in dollars.

Similarly, Russia’s large trade with Western Europe and the former Soviet states in crude oil and natural gas is conducted in dollar-denominated contracts. Gazprom, the natural gas monopoly, set the price of natural gas in Ukraine at $176 per 1,000 cubic meters in 2007, for example. There are no proposals yet to switch natural gas pricing away from dollars.

Read entire article

The Emergency Election Sale is now live! Get 30% to 60% off our most popular products today!