Politics keeps Gulf oil revenues in dollars

Core Gulf producers receive 100% of their oil revenues in dollars and politics makes it unlikely that will change despite the US currency's weakness, analysts said on Wednesday.OPEC members Saudi Arabia, the United Arab Emirates and Kuwait between them pump about 13.5 million barrels per day of oil, nearly 16% of the world's supply.Record revenues from high prices have fuelled an economic boom in the region, but the weak dollar has eroded oil producers' purchasing power in currencies not pegged to the US greenback. The dollar hit an all-time low against the euro earlier this week.

The potential political fallout from the impact on the dollar of any change would likely keep the region's oil sales in the US currency, said Steve Brice, regional economist at Standard Chartered."The US would probably be concerned about major producers doing this," said Brice. "Currency reform is much less politically sensitive. It's another thing to move oil receipts away from dollars. That's a very big step."Kuwait allowed its dinar to appreciate 1.7% against the dollar on Wednesday, encouraging investors to bet that other Gulf Arab oil producers would review their pegged exchange rates.But while Kuwait takes small steps to shield its economy from the dollar's weakness, oil revenues in the world's seventh-largest oil exporter will stay tightly bound to the US currency."All our oil revenue is in dollars and there is no plan to change this," said a Kuwaiti source.OPEC's second largest producer Iran caused a stir in financial markets when it asked Japanese oil buyers to pay in yen rather than US dollars two weeks ago. That move was in part politically motivated as the row drags on with the United States over Tehran's nuclear ambitions.Libya and sometimes Syria also ask for payments in other currencies, an industry source said. But Gulf Arab producers have shown little interest. Source