Syria Switches To Euros

#1
From Reuters.

The state-owned Commercial Bank of Syria announced today that all Syrian government foreign exchange transactions would henceforward be conducted with euros rather than US dollars.

The linked article quotes conjecture by an unnamed "economist" that the move may have been intended to protect Syrian assets from American exchange controls in the event Syrian/US relations become even frostier than they presently are.

That explanation doesn't strike me as credible. The Syrian government could keep dollar assets on deposit in Europe or euro assets in Europe. It seems to me that the choice of depository institutions, rather than currencies, would be the determinant of vulnerability to having the US government block the account.

The linked article doesn't mention what Syria proposes to do the dollar denominated liquid assets it already owns. I think it would be telling if the Syrians dumped these in favor of some other liquid asset.

The linked article also says that Syria is an oil producer on a modest scale with an output of about 400,000 barrels/day.

"UPDATE 2-Syria switches to euro amid confrontation with US"
Mon Feb 13, 2006 5:11 PM ET
http://today.reuters.com/investing/...213:MTFH50822_2006-02-13_22-10-01_L13432231:1
 
#2
The Economic reasons are probably more related to the fact that the dollar has been for some time a much less stable currency than the euro, on top of that there is a suggestion that if enough oil producing countries ask to be paid in euros for their oil instead of dollars then the dollar will lose its gold standard throughout the world. This means in practise that the US can not bankroll foreign spending by simply selling more dollar bonds.

The fact that the main foreign stocks of dollars are held by China and Japan is a matter of consternation to world economists, as they could be cashed at any time which would wreck the US and in series the world economies.

In addition to this, if China asked to be paid in euros rather than dollars by the US, given the amount of imports from that country the US would simply grind to a halt.

Syrias move to euros could be a small shift in this direction, as well as an isolent, but well considered b1tch slap to the US, which is like finding a fiver, and a quid underneath. I like Syrias style- they are the french of the middle east.

edited for mong spelling
 
#4
Fascinating! There is a feeling that the dollar may be over-valued at the moment, and this is not helped by the huge current account deficit that America is currently running. America is sucking in imports and paying for them with dollars. Those dollars are held by the Japanese, the Chinese and the oil producers. Some of it is recycled into buying raw materials - Japan has to buy oil. China is buying oil, steel and raw materials. Some of those dollars are going into gold.

The current account deficit cannot last and, at some point, these countries will decide they don't want dollars. If they start to sell their dollar holdings, things could move fast. We could see the £2/£ again and Florida will then be cheap....

Against all that is the sad story of the Euro. The strains of the single currency are still there - magnified in some countries and hidden in others.
If the dollar started sinking, the pound and the Euro would rise which would not be good for either, long-term, IMHO!

Should I be following the Syrians?

Litotes
 
#7
mattspanic said:
Yeah but we can always join the euro- there is no stability with, dare I say it, small currencies anymore- they float on the seas of the big uns
sounds like we may eventually be on to the path of single global currency.
 
#8
semper said:
mattspanic said:
Yeah but we can always join the euro- there is no stability with, dare I say it, small currencies anymore- they float on the seas of the big uns
sounds like we may eventually be on to the path of single global currency.
Do you mean beer? :D
 
#10
Didn't Iraq insist on being paid for it's oil in Euros before the invasion. It reverted back to the US dollar rather sharpish after the yanks arrived.

I also remember reading that Iran is considering moving to Euros too.

It appears to be the one way oil producers can put pressure on the US and if it catches on sink the country into a recession from hell. Now that would be veeery scarey.
 
#12
AndyPipkin said:
*looks in bovvered bag*

It's empty!

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_lynn&sid=aT231DpHFSIY

Now, what currency will hydrogen and vegetable oil be priced in?
Two words I didn't see in Mr. Lynn's article: "Peak Oil." I'm referring to the hypothesis that we have reached the point at which the marginal cost of extraction starts to rise and that we are headed toward an outcome in which the amount of energy consumed in extracting a barrel of crude oil exceeds the amount of energy in that oil.

http://www.princeton.edu/hubbert/current-events.html

The questions of (i) whether the Peak Oil hypothesis is actually valid and (ii) whether we have yet reached or passed the peak are both quite controversial and technical.
 
#13
NWD - and irrelevant. The fix is in, alternative sources of energy are coming on stream rapidy. So long as oil remains over $40 long-term, the incentive is there to invest in alternatives.
 
#14
AndyPipkin said:
NWD - and irrelevant. The fix is in, alternative sources of energy are coming on stream rapidy. So long as oil remains over $40 long-term, the incentive is there to invest in alternatives.
Nuclear? :lol:

litotes
 
#16
Another middle eastern central bank is starting to scale down the size of its US dollar holdings.

The United Arab Emirates, which includes Dubai, said it was looking to move one-tenth of its dollar reserves into euros...

"Arab central banks move assets out of dollar"
By Philip Thornton, Economics Correspondent
Published: 14 March 2006
http://news.independent.co.uk/business/news/article351127.ece

The linked article ascribes this decision to congressional scuttling of the Dubai Ports deal.
 
#17
Saudi monetary authority weighs in. Tough but empty talk? Curtain-raiser for a Saudi dollar sell-off? We report, you decide.

... the governor of the Saudi Arabian central bank condemned the decision by the United States to force Dubai Ports World to transfer its ownership to a ‘US entity,’ the UK Independent reported.

“Is it protectionism or discrimination? Is it okay for US companies to buy everywhere but it is not okay for other companies to buy the US?” said Hamad Saud Al Sayyari, the governor of the Saudi Arabian monetary authority.


"UAE, Saudi considering to move reserves out of dollar" 21 March 2006
http://www.middleeastforex.com/index.php?section=147
 
#18
Interesting post, especially after a recent discussion I had in the USA about US reasons for going into Iraq.
The rumour mill there is that part of the reason for going in was that in 2002/3 Iraq had switched to doing its Oil transactions in Euros thus potentially having a severe impact on the US economy. Now I believe they are back to US$ (well they would be now wouldn't they) - not being that up to date on such issues I could not comment further but this comment was made by grass root Americans - with some brains too boot.

Food for thought though.
 
#19
Not_Whistlin_Dixie said:
Two words I didn't see in Mr. Lynn's article: "Peak Oil." I'm referring to the hypothesis that we have reached the point at which the marginal cost of extraction starts to rise and that we are headed toward an outcome in which the amount of energy consumed in extracting a barrel of crude oil exceeds the amount of energy in that oil.
Not really that relevant, most of the crude ends up as plastic in one form or another. We can get all the energy we need from nuclear, but we need oil to make PVC to insulate the cables.
 

Similar threads

Latest Threads

Top