Press remarks by Commissioner Arias Cañete on the International Role of the Euro in the Field of Energy - Main contents

Ladies and gentlemen, good morning.

As the Vice President has highlighted, the Euro is underutilised in world trade and transactions.

It is stable, widely used and the world's second reserve currency, but still it could play a bigger role. This is also true in the energy sector.

The European Union is the world's largest energy importer: around 90% of the oil it needs and around 70% of its gas needs are imported.

The greatest share of energy imports originates from Russia (34%) the Middle East and Africa (33% combined) and Norway (20%).

Our annual energy import bill amounts to €300 billion euro. And around 85% is paid in US dollars while the US' share in imports is currently only 2%.

This means that the vast majority of the long-term contracts of these energy imports are not denominated in euros.

This is clearly not sustainable and it does not reflect the role the euro should have worldwide.

The dominance of the US dollar in EU energy trade has historical reasons with the dollar being the reserve currency of the world rather than the role of the US as an energy supplier.

This strong exposure to the dollar - common in many globally traded commodities - poses uncertainties, risks and costs which may be mitigated through a larger use of euro contracts.

In particular, the dominant role of the US dollar has important implications for European companies:

o First, energy transactions are exposing them to an exchange rate risk which have to be managed in the financial market.

o And second, the predominance of trades based on US dollars means that recent unilateral actions by third countries, together with declining support for international rules based governance and trade, can impede or at least make energy trade more difficult.

Strengthening the international role of the Euro in the field of energy investment and trade will help to reduce the risk of supply disruptions and promote the autonomy of European businesses.

It can therefore make an important contribution to our objective to ensure security of supply in the Energy Union.

This is why we are making three concrete proposals today:

o First, we recommend the wider use of the euro in international agreements and non-binding instruments related to energy.The Commission will systematically draw the attention of the Member States to the use of the euro as part of its role in the framework of the Intergovernmental Agreements (IGAs) Decision adopted in 2017.

o Second, we call for a wider use of the euro in energy-related transactions.

o And third, we recommend the broader use of euro to companies providing financial services for energy related projects and transactions.

We are addressing our recommendations to Member States, central oil stockholding agencies, participants of the energy markets, price-reporting agencies, commodity exchanges, and European companies providing financial services.

Moreover, we intend to launch consultations to gather feedback from stakeholders on why the euro currently plays such a modest role as a medium of exchange in energy trade.

In particular, we will invite stakeholders to express their views on the market potential for a broader use of euro-denominated transactions in the areas of crude oil, refined products and gas.

The consultation will gather feedback on the need to set-up a euro denominated crude oil price benchmark and reference contracts. The consultation will also gather stakeholder's views on the expansion of the use of euro denominated gas contracts.

Together with stakeholders, we will explore what instruments could be used to reinforce the international role of the euro in energy transactions.

More generally, stakeholders will be invited to propose energy sector actions to strengthen the EU's position at the heart of the global trading system. We will also inquire if the increased use of the euro could reinforce those actions by preserving the rules-based international system in a context of increasing geopolitical tensions.

Let me conclude with a loud and clear message: a growing role of the euro is in Europe's interest:

o It will support our energy policy objectives through lowering transaction costs and risks.

o It will help increase access to reliable finance and strengthening autonomy.

o And it will reduce risk of disruption of energy supplies due to third-party actions.

Thank you very much.

SPEECH/18/6683