Home
[size=36]Government advisor explains the possibility of using the dinar instead of the dollar in oil sales[/size]
economy | 12:17 - 08/18/2024
[You must be registered and logged in to see this image.]
[You must be registered and logged in to see this link.]
[You must be registered and logged in to see this link.]
Mawazine News - Baghdad
The Prime Minister's Advisor for Financial Affairs, Mazhar Mohammed Salih, clarified today, Sunday, what is being circulated in some media outlets regarding the possibility of using the dinar instead of the dollar in oil sales.
Salih said in an interview with the official agency: "The adoption of the dinar in pricing oil, or what is called (petro dinar), especially when the national currency is not one of the international reserve currencies, requires the availability of foreign reserve currencies or gold, as Russia did when buying Russian oil with gold-backed rubles, which caused problems that we will come to later."
He added that "these foreign reserves must be available (as a necessary condition) and operate according to a high standard of efficiency that guarantees the stability of the exchange rate linked to oil (petro dinar) in order to hedge against fluctuations in oil prices to ensure the stability of the exchange rate (petro dinar) itself from the beginning."
He added that "linking oil sales to the dinar on a fixed basis with oil prices instead of the foreign reserves base means linking the dinar to the oil asset cycle first, and that oil is sold according to global oil prices. If the exchange rate of the dinar (petrodinar) against the (petrodollar) is fixed, for example, and oil prices fall, the demand for the dinar for accounting purposes will certainly fall, and the dinar will be exchanged for oil in larger quantities and the demand for the (petrodinar) will be lower, and vice versa."
He pointed out that "any deviation between oil prices (petrodollar) and the exchange rate (petrodinar) according to international market data will be considered a cost that requires compensation by paying fewer dinars or collecting a higher dinar in the opposite case," indicating that "international reserve currencies are foreign currencies held by central banks and global financial institutions as part of their monetary reserves. These currencies are used in international transactions and settling debts between countries, and are a standard for international payments and facilitating global trade."
He explained that "Russia suffered a lot when it priced its exported oil in rubles (petrorubles) and the ruble is a non-reserve currency and committed to a value for the ruble that was initially denominated in gold to ensure the stability of oil revenues. Here, the (petrorubles) were subject to two asset cycles at the same time (which complicated the scene of selling oil in local currency and stabilizing the value of the petrorubles).
He pointed out that "the first cycle: is the result of the impact of the so-called gold asset cycle and its impact on the value of the (petrorubles) or the local currency denominated in exported oil, while the second: is the oil asset cycle, and its impact on the value of a barrel of oil outside the global price and its reflection on oil revenues priced in that currency."
He stressed that "the two cycles are asset cycles that are interconnected and contradict each other at the same time on the value (of the currency priced in exported oil such as the petrorubles), which made pricing Russian oil in rubles as a local currency and according to the data of the global oil market a very complex issue."
He added that "the principle of using the dinar as a local currency in international oil exchanges (petrodinar) is not It is free from many challenges, which requires careful consideration of those potential challenges, especially the issue of the flexibility or stability of the value of the (petrodinar) itself to change and fluctuation, especially since we in the oil market are not price makers in it, but rather price takers.
He noted that "the global oil market will control the fluctuation of the local currency (petrodinar), in addition to the importance of international recognition of it, and the financial infrastructure needed to support such operations from (petrodinar), in other words, the strategy of relying the value of the currency directly on oil exports may make the value of the local currency vulnerable to fluctuations in the global market."
Saleh added that "the proposal to sell oil in dinars as a local currency must take into account an important theory in global trade called the Law of One Price, which is an economic concept that assumes that the same commodity should be sold at the same prices in all markets when the price is expressed in the same currency, provided that there are no transportation costs or trade barriers such as customs tariffs and others, as the theory of one price here is the basis for many economic and commercial models and the theory is based on the assumption that markets operate efficiently."
He added: “The single price theory is the basic path to understanding the pricing mechanism in foreign exchange markets, as the theory seeks to explain that currency exchange rates always reflect the difference in prices between two countries, and when oil is priced in dollars (petrodollars), the exchange rate of the dinar (petrodinar) should be consistent with oil prices without fluctuation and at the same time consistent with the (petrodollars) and also steadily, and these are two issues that are difficult to control because they are external international factors that determine the value of the local currency so that it operates regularly and in a stable price compatibility with the oil market and international foreign currencies at the same time.”
“For example, if a barrel of oil is sold in the United States at $76 and in Europe at 72 euros, the single price theory predicts that, taking into account the exchange rate between the dollar and the euro, the price of a barrel of oil should be equal after adjusting the currency, provided that there are no transportation costs or trade barriers. This requires that the value of oil sold to Europe and America be consistent with the fluctuations in currency prices in order to ensure that the single price theory is in place. Thus, adopting the local currency in global trade is a very complex issue to ensure the stability of oil prices consistent with the value of the Iraqi dinar (petrodinar), especially in a fixed exchange rate system (exchange rate), unless discounts are granted or differences are charged in oil marketing operations or floating (petrodinar). Then, for example, the Oil Marketing Company (SOMO) will play a dual role in oil and monetary policies, whether in the field of oil pricing or pricing the oil dinar exchange rate (petrodinar),” he continued.
He added: "The strength and stability of the Iraqi dinar will remain linked to the factors of real growth and diversity in the national economy, in addition to achieving an appropriate surplus in the current account of the balance of payments, and linking the national currency to a basket of foreign currencies that provides stability in the value of the dinar itself. In light of the above, introducing mechanisms for stabilizing the dinar exchange rate into a single rentier economy exclusively based on the oil dinar is an economic trend with ambiguous results and is very vague, in addition to entering the (petrodinar) system, which requires risks (the aforementioned single price theory) to ensure its stability in light of the fluctuations in the oil assets cycle and a single rentier economy, not to mention not knowing the adopted exchange system (petrodinar). Will it be a fixed exchange system supported by foreign reserves or will it be a flexible exchange system in which the (petrodinar) changes with the change in oil prices? These are paths that have no answers on the ground and are really very ambiguous."
The Prime Minister's Advisor for Financial Affairs, Mazhar Mohammed Salih, clarified today, Sunday, what is being circulated in some media outlets regarding the possibility of using the dinar instead of the dollar in oil sales.
Salih said in an interview with the official agency: "The adoption of the dinar in pricing oil, or what is called (petro dinar), especially when the national currency is not one of the international reserve currencies, requires the availability of foreign reserve currencies or gold, as Russia did when buying Russian oil with gold-backed rubles, which caused problems that we will come to later."
He added that "these foreign reserves must be available (as a necessary condition) and operate according to a high standard of efficiency that guarantees the stability of the exchange rate linked to oil (petro dinar) in order to hedge against fluctuations in oil prices to ensure the stability of the exchange rate (petro dinar) itself from the beginning."
He added that "linking oil sales to the dinar on a fixed basis with oil prices instead of the foreign reserves base means linking the dinar to the oil asset cycle first, and that oil is sold according to global oil prices. If the exchange rate of the dinar (petrodinar) against the (petrodollar) is fixed, for example, and oil prices fall, the demand for the dinar for accounting purposes will certainly fall, and the dinar will be exchanged for oil in larger quantities and the demand for the (petrodinar) will be lower, and vice versa."
He pointed out that "any deviation between oil prices (petrodollar) and the exchange rate (petrodinar) according to international market data will be considered a cost that requires compensation by paying fewer dinars or collecting a higher dinar in the opposite case," indicating that "international reserve currencies are foreign currencies held by central banks and global financial institutions as part of their monetary reserves. These currencies are used in international transactions and settling debts between countries, and are a standard for international payments and facilitating global trade."
He explained that "Russia suffered a lot when it priced its exported oil in rubles (petrorubles) and the ruble is a non-reserve currency and committed to a value for the ruble that was initially denominated in gold to ensure the stability of oil revenues. Here, the (petrorubles) were subject to two asset cycles at the same time (which complicated the scene of selling oil in local currency and stabilizing the value of the petrorubles).
He pointed out that "the first cycle: is the result of the impact of the so-called gold asset cycle and its impact on the value of the (petrorubles) or the local currency denominated in exported oil, while the second: is the oil asset cycle, and its impact on the value of a barrel of oil outside the global price and its reflection on oil revenues priced in that currency."
He stressed that "the two cycles are asset cycles that are interconnected and contradict each other at the same time on the value (of the currency priced in exported oil such as the petrorubles), which made pricing Russian oil in rubles as a local currency and according to the data of the global oil market a very complex issue."
He added that "the principle of using the dinar as a local currency in international oil exchanges (petrodinar) is not It is free from many challenges, which requires careful consideration of those potential challenges, especially the issue of the flexibility or stability of the value of the (petrodinar) itself to change and fluctuation, especially since we in the oil market are not price makers in it, but rather price takers.
He noted that "the global oil market will control the fluctuation of the local currency (petrodinar), in addition to the importance of international recognition of it, and the financial infrastructure needed to support such operations from (petrodinar), in other words, the strategy of relying the value of the currency directly on oil exports may make the value of the local currency vulnerable to fluctuations in the global market."
Saleh added that "the proposal to sell oil in dinars as a local currency must take into account an important theory in global trade called the Law of One Price, which is an economic concept that assumes that the same commodity should be sold at the same prices in all markets when the price is expressed in the same currency, provided that there are no transportation costs or trade barriers such as customs tariffs and others, as the theory of one price here is the basis for many economic and commercial models and the theory is based on the assumption that markets operate efficiently."
He added: “The single price theory is the basic path to understanding the pricing mechanism in foreign exchange markets, as the theory seeks to explain that currency exchange rates always reflect the difference in prices between two countries, and when oil is priced in dollars (petrodollars), the exchange rate of the dinar (petrodinar) should be consistent with oil prices without fluctuation and at the same time consistent with the (petrodollars) and also steadily, and these are two issues that are difficult to control because they are external international factors that determine the value of the local currency so that it operates regularly and in a stable price compatibility with the oil market and international foreign currencies at the same time.”
“For example, if a barrel of oil is sold in the United States at $76 and in Europe at 72 euros, the single price theory predicts that, taking into account the exchange rate between the dollar and the euro, the price of a barrel of oil should be equal after adjusting the currency, provided that there are no transportation costs or trade barriers. This requires that the value of oil sold to Europe and America be consistent with the fluctuations in currency prices in order to ensure that the single price theory is in place. Thus, adopting the local currency in global trade is a very complex issue to ensure the stability of oil prices consistent with the value of the Iraqi dinar (petrodinar), especially in a fixed exchange rate system (exchange rate), unless discounts are granted or differences are charged in oil marketing operations or floating (petrodinar). Then, for example, the Oil Marketing Company (SOMO) will play a dual role in oil and monetary policies, whether in the field of oil pricing or pricing the oil dinar exchange rate (petrodinar),” he continued.
He added: "The strength and stability of the Iraqi dinar will remain linked to the factors of real growth and diversity in the national economy, in addition to achieving an appropriate surplus in the current account of the balance of payments, and linking the national currency to a basket of foreign currencies that provides stability in the value of the dinar itself. In light of the above, introducing mechanisms for stabilizing the dinar exchange rate into a single rentier economy exclusively based on the oil dinar is an economic trend with ambiguous results and is very vague, in addition to entering the (petrodinar) system, which requires risks (the aforementioned single price theory) to ensure its stability in light of the fluctuations in the oil assets cycle and a single rentier economy, not to mention not knowing the adopted exchange system (petrodinar). Will it be a fixed exchange system supported by foreign reserves or will it be a flexible exchange system in which the (petrodinar) changes with the change in oil prices? These are paths that have no answers on the ground and are really very ambiguous."
[You must be registered and logged in to see this link.]
» utube 9/10/24 MM&C IQD Update-Iraq Dinar-#iraqidinar-#xrpIraq Reconciling-Unif
» utube 9/9/24 MM&C Iraq Dinar-Central Bank-#Iraqidinar #exchangerate #iraqidinarexchangerate Baghda
» US Embassy in Iraq confirms yesterday's attack: No casualties
» Iraq calls for common understanding on debt repayment, Iran urges strategic program
» Criticisms of the Iraqi parliament’s discussion of cancelling the economic unity agreement
» Will Iraq succeed in harmonizing its labor legislation with international standards?
» Al-Maliki's coalition: The Sunni house did not leave the decision of the presidency to the parliamen
» Waiting for legislation.. Laws on the table of the Parliamentary Health Committee
» MP calls on government to pressure Washington to fulfill its obligations towards Iraq
» Prime Minister: Iraq rejects the use of its territory as a launching pad to threaten neighboring cou
» Parliamentary Agriculture Committee stresses the need to legislate the law on agricultural land rent
» Al-Sudani: Iraq's position was clear as a government to expand economic partnership with Iran
» Al-Sudani during a press conference with Bazeshkian: The ties between Iraq and Iran are historic
» Resources: Iraq is the first country in the Middle East to monitor groundwater electronically
» Bitcoin ETFs Lose $1.2 Billion in 8 Days
» Communications: Blocking of websites is done in accordance with final and binding judicial decisions
» The Council of Ministers issues a number of decisions to complete stalled projects
» Signing of 14 bilateral memoranda of understanding between Iraq and Iran
» Work: Two million families covered by protection salaries
» Ratification of a joint agreement between Baghdad and Erbil regarding taxes
» It was launched a few days ago.. What are the objectives of social research on beggars in Iraq?
» Iranian Foreign Minister to Al-Sabah: We look forward to broader horizons with Iraq
» Implementation of the largest water project in Erbil
» Nineveh Exhibition for Construction, Reconstruction and Energy Launches
» Offers from Egyptian companies to implement projects in Iraq
» Work: Two million families covered by protection salaries
» Electricity to {Sabah}: Adopting the combined cycle in all stations
» Desertification and drought swallow 23 percent of agricultural land
» 77 trillion dinars is the country's revenue in 7 months
» Contribute to increasing revenues
» Two experts: Food prices are stable thanks to government support
» With the imminent launch of Al-Faw Port...an international decision to fine Iraqi ports $120 million
» Joint agreement between Baghdad and Erbil to unify tax work
» The first of its kind in Iraq.. Arrest of a member of the Dhi Qar Council on charges of "electronic
» The President of the Supreme Judicial Council receives a delegation from the Arab Union for Combatin
» Kurdistan is a stop for Bezeshkian after Baghdad.. What does Erbil want from Tehran?
» Extensive bilateral talks between the President of the Republic and the Iranian President
» Meeting between Al-Sawad and Baker Hughes USA to develop oil and gas in Iraq
» A "secret" agreement to continue Mandalawi... no new parliament speaker
» Iraqi Oil holds expanded meeting with ALEXANDROS JV in the United States
» The Council of Ministers approves a mechanism for appointing graduates of medical and health college
» Coordination Framework: We discussed the “wiretapping network” file and we still support Al-Sudani’s
» Communications: We are an executive body and orders to block websites are issued by the competent au
» Reintroducing the monthly pricing system for generators.. Baghdad Council reveals pressures to “thwa
» Sudani's financial advisor: Iraq will face a financial crisis in 2025
» The Grand Political Deal... General Amnesty is Conditional on Amending the Personal Status Law!
» Trade announces completion of final forms of joint memoranda of understanding between Iraq and Iran
» Dollar prices stabilize at 151 thousand Iraqi dinars
» Cabinet session decisions include Sunday holiday
» Baghdad and Tehran prepare to sign security memoranda and discuss important economic projects
» Ministerial Council for Economy.. Differing opinions on the region’s commitment to the outcomes
» Find out the dollar exchange rates in the Iraqi stock exchanges
» More than 500 violators tried and about 3,000 projects closed.. Iraq fires decreased by 55% in 2024
» Iranian Parliamentary National Security Committee: Pezeshkian's visit to Iraq aims to "remove border
» Winners and losers from the fluctuation of the dollar exchange rate against the dinar in Iraq
» US Sanctions Iran for Providing Hundreds of Missiles to Russia
» Even CNN's Erin Burnett shocked by unearthed evidence of Kamala Harris' radicalism: 'She supports th
» Potential for Abuse’: Kamala’s Debate Prep With Lead Google Attorney Sets Off Alarm Bells
» ͏MM&C 9/924 The parallel market will be upended.. Sources: Expected decisions from the Central B
» Iraq's "King of the Dollar" to the forefront and money smuggling under the American microscope
» Dollar crisis: Changing exchange rates will create “huge problems” and smuggling is led by a “deep s
» The government is looking for taxes but cannot find any.. Iraq will face financial pressure in 2025
» Parliamentary Finance: Electronic payment achieved 7 gains and prevented the smuggling of money outs
» Baghdad and Erbil agree on several points regarding taxes, customs and salaries
» Are the amendments to the Anti-Narcotics Law enough to curb the phenomenon?
» Call to Break the Silence on Corruption: Separation of Powers and Promoting Human Rights
» Parliamentary committee intends to submit its report on the government evaluation next week
» Al-Sudani's government faces a difficult test: Falling oil prices threaten to cut salaries
» Iraqi state banks account for 88% of banking sector investments
» Iraq's financial revenues exceed 77 trillion dinars in 7 months of 2024
» Iraq: We closed 77 headquarters of the Iranian Kurdish opposition and handed over their weapons to t
» "Currency Auction" .. Central Bank of Iraq's sales rise to more than $ 258 million
» Investment Authority: Iraq’s entry into the New York and Singapore agreements achieves its transitio
» Special for the Development Road.. Transportation: A ministerial meeting in Baghdad includes Iraq an
» Minister of Electricity: Combined cycle projects will save the state $3 billion annually
» The Gulf Cooperation Council confirms the continuation of the electrical interconnection project wit
» Government stresses the importance of following up on the collection of electricity consumption fees
» Dana Gas: Pearl Petroleum sues Khor Mor field contractor for cost recovery
» Chairman of the Integrity Commission: Iraq advances four ranks in the classification of the most cor
» Rafidain Bank identifies three advantages of electronic payment systems
» The Iraqi Economic Observatory reveals the volume of Iraq's exports during the past month of August
» During 2023.. Cryptocurrency fraud and scams increase by 45%
» Iraq expects financial crisis in 2025 as oil prices fall
» A source in the Iranian presidency reveals to “Al-Sabah” the agenda of Pezeshkian’s visit to Iraq
» Residential lands for educators in developed and serviced areas
» Government prepares to launch first digital knowledge platform
» Masrour Barzani discusses joint cooperation with the Governor of the Central Bank
» The Communications and Media Commission is looking into settling debts and fines owed by Korek Telec
» Pentagon: We continue security cooperation talks with Iraq
» Transparency International: We appreciate the Iraqi government's measures to combat corruption
» The Companies Registration Department issues a notice to its auditors
» US court orders Iraqi ports to pay $120 million to Cypriot company
» Parliamentary Security Committee proposes two options to end the "Turkish incursion" and a proposal
» Parliamentary letter to the US Embassy regarding personal status amendments: Do not interfere, "Your
» Defense and Foreign Ministry issue humanitarian appeal regarding remains of missing Kuwaitis
» Results of the meeting of the Ministerial Council for Economy in Erbil
» Economist blames central bank for dollar's rise: Confused decisions
» Kurdish proposal to end the "crisis" of Kurdistan employees' salaries initially