The situation in Ukraine, and its geopolitical repercussions, according to Qatar’s foreign minister, is forcing some countries to look for new ways to price oil that aren’t based on the dollar.
Mohammed bin Abdulrahman Al-Thani made the remarks on Saturday in response to a Wall Street Journal story that Saudi Arabia is speeding up talks with China to accept yuan instead of dollars for oil purchases.
Al-Thani told Hadley Gamble at the Doha Forum that he didn’t expect such a system to be implemented in the near future, but that the economic ramifications of the Ukraine conflict were already wreaking havoc on some countries.
“Look at what’s going on and the dynamics around us right now, to be honest. “I’m sure there are many more countries that are dissatisfied with what has occurred and the implications of the Ukrainian-Russian situation, particularly the economic consequences,” he said.
“And they’re going to look into a parallel mechanism [for oil price]… At the very least, they’ll be able to hedge their bets financially. So, while we are in the midst of a change, it will not just be a political transition, but also an economic transition.”
Gal Luft, co-director of the Institute for the Analysis of Global Security, told CNBC last week that the United States’ harsh economic sanctions could drive countries away from the dollar, which is the currency in which oil is normally priced.
Russia’s central bank reserves have been effectively frozen, and Russia has been cut off from the SWIFT interbank communications system.
“On the one hand, you’re endorsing both the right and the left. You, on the other hand, want countries to buy your Treasury bonds and help you pay down your debt. That’s not a viable option, according to Luft.
Diversification of the oil industry
Al-Thani also stated that Qatar was “moving up” and holding negotiations with European countries about increasing gas exports.
“With the small quantity that we have, we are stepping up and aiding our European partners who are starting to suffer from some gas shortages,” he added, emphasizing that the majority of its gas contracts are long-term and thus cannot be amended.
It comes as European countries attempt to diversify their energy supplies, particularly gas, away from Russia. According to the International Energy Agency, the EU imported 45 percent of its gas from Russia last year.
On Friday, the United States said that it would collaborate with partners, including Qatar, to send at least 15 billion cubic meters of liquefied natural gas to Europe this year, with that number expected to rise in the future.
However, according to Al-Thani, no single energy provider can take the place of another.
“I believe that diversifying the source of supplies is the best way ahead,” he continued. “This is the only way to go forward.” We are currently in talks with a number of other European countries about potential long-term contracts. And the debate is still going on.”