EU says broad support for reducing dollar payments

A European Commission report has found "broad" support for reducing Europe's dependence on the US dollar for commodities trade.

The commission has consulted with relevant industries since it issued a non-binding recommendation in December for member states to increase payment in euros for energy, metals, agricultural and other commodities.

The commission said the euro is the only currency with "all of the necessary attributes" to act as an alternative to the US dollar as a "single dominant" global currency. But it has not proposed any legally binding proposals to increase euro payments on EU commodities markets.

The commission noted the need for increased supply of euro-denominated financial market products and for euro-hedging, as well as more generally "engaging" directly with third countries and market participants at national and EU level. It suggested "avenues" to be considered, including discussions with downstream market participants from sectors such as motor fuels, heating, petrochemical and fertilizers.

The commission wants to discuss with price reporting agencies (PRAs) the feasibility of establishing euro-denominated price benchmarks for refined petroleum products. It specifically called for euro-denominated agricultural and food commodity benchmarks as well as more euro-denominated settlement and risk management in agri-food trade.

Commission vice-president Valdis Dombrovskis said strengthening euro payments for commodities is not intended to "antagonize" anyone.

"The euro is already the second-largest reserve currency and is almost on a par with the dollar for payments," Dombrovskis told Argus.

Economic and financial affairs commissioner Pierre Moscovici said that the EU "highly" values its relationship with US allies and friends, "but they should also refrain from unilateral action. Love is certainly a two-way street."

The commission's recommendation has been supported most notably by France, which has explicitly linked a move toward allowing euro payments with pushing back against US policy on Iran.