RUSSIA - Oct. 10 - Putin's Idea To Price Oil In Euros May Hurt Dollar.

After a summit with German chancellor Schroder, Putin says Moscow could switch to the euro in pricing its oil. He adds: "We do not rule out that it (the switch from the dollar to the euro for oil) is possible. That would be interesting for our European partners". He says the switch to the euro is "taking on increasing significance". (Pricing the country's oil in euros would be a gesture towards Europe that could further drive down the value of the dollar and would have significant consequences in the oil and currency markets. The US and EU are competing for initiatives over energy co-operation in Russia as they try to diversify supplies away from the Middle East and build stronger links with the nation, the world's second largest oil producer and its largest holder of natural gas reserves. The shift would be a further boost to the euro. If Russian oil exports, which average about 5.7m b/d, are denominated in euros it would create demand for an additional 144m - $171m - every day at current prices. This is not the first time such a move has been suggested. Iraq's former dictator Saddam switched to euros as a political slight against the US. In the 1980s, when the dollar was weak, some Middle East producers considered pricing the oil they sold to Asia in yen. The idea was prompted by the weakness of the dollar at the time. A rise in the oil price has traditionally been positive for the greenback - partly because buyers of oil need to acquire dollars. Oil exporters have historically shown a marked preference for buying dollar assets with their oil revenues. If Russia makes this move, it will be a reorientation of its economy towards Europe and this would add to upward pressure on the euro. Culturally, a Russian switch would be a significant shift. But analyst at Barclays Paul Horsnell says: "There have been times in the past when the oil market has comfortably traded in lots and lots of currencies. Dollar denominated oil is very much a post-Second World War phenomenon". Russian oil is becoming increasingly important in Europe as the North Sea fields begin to mature. One Russian oligarch has even talked about a future in which the European benchmark crude oil becomes Russian Urals rather than North Sea Brent).