Politics and economics drive Iraq to the euro

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The Independent Online

Iraq will dump the hated US dollar and start using the euro this week, an official said Sunday - days after the United Nations warned the switch could cost the country millions.

Iraq will dump the hated US dollar and start using the euro this week, an official said Sunday - days after the United Nations warned the switch could cost the country millions.

"The American hatred of Arabs and humanity in general represent strong motives for the change," Iraqi Finance Minister Hikmat Mizban Ibrahim told the official Iraqi News Agency.

The government's main source of hard cash is through the U.N. approved oil-for-food program, which allows Iraq to skirt trade sanctions and sell its oil as long as most of the proceeds go to meet the needs of its citizens. The sanctions were imposed to punish Iraq for its 1990 invasion of Kuwait. Washington has been the strongest advocate of keeping them in place until Iraq proves it has surrendered weapons of mass destruction.

"Starting November 1, all oil contracts prices will be set by the euro instead of the dollar," said Ibrahim. "We requested the U.N. to start another account for the purpose."

The United Nations now has a dollar-based escrow account at the French bank BNP Paribas in New York to receive payment for oil exported by Iraq through the U.N. oil-for-food program.

The United Nations outlined a plan Friday that would meet Iraq's request for oil payments in the common European currency, but said the system could cost millions of dollars that would otherwise go to Iraqi humanitarian needs.

A report from the U.N. Treasury Department said the Security Council's sanctions committee and the U.N. secretary-general's office should study the Iraqi request further because of its significant expected costs and other technical questions.

Iraq, which exports about 2.2 million barrels of oil a day, has threatened to halt exports beginning next week if its proposal isn't accepted - a warning that spooked the oil market.

The United States and Britain, which take the hardest line against Iraq on the U.N. Security Council, have said they will not oppose creation of a euro-based account. Diplomats said Friday that the proposal would likely go ahead.

In September, when the decision was announced, the dollar was selling at little more than 2,000 dinars on the local currency market. Now the dollar is worth no more than 1,820 dinars.

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