Commission hopes euro can challenge greenback’s reserve currency status

As part of its effort to bolster its international standing amid spats with the United States of tariffs and foreign policy, the European Commission is hoping to promote the euro as an alternative to the supremacy of the dollar for all international transactions, including those involving energy, commodities, and aircraft manufacturing, as well as in derivative operations.

As part of the drive, the Commission also announced that will also strive to convince African states to denominate their public debt in euros in what would be the first serious challenge to Washington’s economic leadership, which Brussels sees as a way to counter the unilateralist “America First” policies of the Donald J. Trump administration.

Europe’s efforts to establish a clearinghouse known as a Special Purpose Vehicle (SPV) to safeguard the 2015 Iran nuclear deal – which the US pulled out of earlier this year after accusing Tehran of being in violation of the terms of the agreement, which prompted Washington to re-impose crippling economic sanctions on the Islamic Republic – have fallen completely flat.

The main guarantors of the Iran nuclear deal – Germany, France, and the UK – have refused to host the proposed clearinghouse, which could be used to help match Iranian oil and gas exports against purchases of EU goods in a barter arrangement that would circumvent the US’ sanctions. This would expose to the three European powerhouses to being subject to stiff penalties imposed by the Americans that would have a potentially devastating effect on the French, German, and British economies, while at the same time severely strain relations with the United States.

Pressure has also been brought to bear on Austria, Luxembourg, and Belgium to host the SPV, but the three governments have serious misgivings about the practical purpose of the Special Purpose Vehicle, particularly as they fear the depth of the US’ expected retaliation.

Initially, the European Commission hopes to begin closing energy contracts that are denominated in euros as a way to gradually promote the spread to other international commodities that could be traded in Europe’s common currency. At present, more than 80% of contracts for EU energy imports are priced and paid for in dollars, which currently trades at $1.13 to €1.