The EU Commission President finds the supremacy of the dollar “absurd” in some areas. Juncker wants Europe to pay oil and gas in euros in the future. That, however, requires a lot. An analysis.
Next year, the euro is 20 years old. Despite the crisis years of monetary union, the single currency has a global significance that no single national European currency has held since the end of World War II – neither the deutschmark nor the French franc, the British pound or the Swiss franc. Even in countries that have not adopted the euro, it is sometimes used as an alternative means of payment.
However, compared to a specific currency, the importance of the euro remains very small: the dollar. Major commodities such as oil are traded mainly in dollars, about 60 percent of world trade in the US currency. South Korea, Canada, Japan and Australia, for example, even pay more than 80 percent of their imports in dollars, economist Gita Gopinath has calculated. Central banks around the world do not build larger reserves in any currency than in dollars.
The fact is: For many years, everyone involved – countries and companies – was very satisfied with this situation. Recently, however, displeasure is growing and public opinion is about to change it. German Foreign Minister Heiko Maas, for example, recently said that Europe needs to become less dependent on America – and that also applies to currency and payments. Reason is the more aggressive appearance of the American government under President Donald Trump , who is more active than his immediate predecessors to exploit the dollar foreign policy, as shown in the case of the Washington canceled nuclear deal with Iran.
“Face and tool of new sovereignty”
However, well before Trump’s inauguration, China’s leaders, the world’s second-largest economy, set the goal of making the yuan more international and strengthening its role in trading deals with China’s other companies – including commodities. Trump’s policy, of course, encourages them.
Now EU Commission President Jean-Claude Juncker has also made clear words in favor of making the single currency more important. “The euro must become the face and tool of the new European sovereignty,” he said this Wednesday during a keynote speech in the European Parliament. After this rather flowery formulation, he explained more specifically what he means: “It is completely nonsensical that 80 percent of European energy imports – 300 billion euros a year – are paid in dollars, if only about 2 percent of energy imports from the United States States are coming. “
Juncker therefore suggests that importers in Germany, France or Spain should pay more oil or gas in future than ever before in euros. And not with dollars.
“It is absurd”
He added another example: “It is absurd for European companies to pay for European aircraft in dollars rather than in euros.” Before the end of the year, he would make several proposals on how the euro could gain more international weight.
Especially in the energy sector, however, shows what important topic is the currency. After all, all EU countries, including Germany, are energy importers. They produce too little themselves to meet their own needs. According to figures from the Federal Statistical Office , these net imports in the EU amount to 54 percent on average, while in Germany they are above average at 64 percent. Reason is the strong dependence on the non-domestic energy sources oil and natural gas, which cover the lion’s share of consumption in Germany with nearly 60 percent.
Above all, the traffic still depends on all e-mobility efforts to more than 90 percent of gasoline and diesel. But German industry and households, too, each supply more than one third with imported natural gas.
Germany has no oil
Germany has virtually no own oil reserves. What is consumed in the Federal Republic, the Germans from 33 countries, by far the most important supplier is Russia. It is followed by Norway and the UK. These three countries together cover approximately two-thirds of German oil imports, writes the Federal Institute for Geosciences and Natural Resources in their most recent energy study.
As far as natural gas is concerned, Germany is not only the largest importer in Europe, but also throughout the world. Ten to ten years ago, their own inventories were still 15 to 20 percent, but now they have shrunk to less than 10 percent. Reference countries for natural gas are Norway, Russia and the Netherlands, with stocks in the neighboring country already running out in just a few years.
Throughout the EU, Russia was able to maintain its position as the main supplier of crude oil and natural gas, despite a slight decline. According to Eurostat, the Russian share of crude oil imports was recently between 25 and 30 percent, while Norway contributed only about 11 percent. Libya follows in third place. In addition, well over 30 percent of the natural gas imported into the EU comes from Russia. Norway also ranks second here, but even accounts for around a quarter of all imports. Russia and Norway, together with Algeria, the EU’s third most important supplier, thus account for almost two-thirds of natural gas imports.