Greek debt and Russian oil

With crude markets bracing for more volatility on concerns about the Greek debt impact on the Eurozone, Business RT spoke with Jorge Montepeque Director Global Market Reporting of Platts about the relationships in play.

RT: Why is Greece so important to the oil price?

JM:“Thank you very much for the opportunity of being here.Greece is one of those countries which is really at the forefront of the budget deficits and all the issues in many other countries in Europe, and even the U.S.So it is a very good case study if Greece were to go officially bankrupt, and unable to pay its bonds.So if that were to happen it would send a chill all across Europe that debt from countries is no longer trustworthy.And if that happens then there would be a chill in demand because a lot of the consumption in Europe is financed through borrowing.”

RT: And this will disbalance the currency market causing the Euro to loosen.

JM:“The issues are very serious across, because it raises the questions regarding consumption, not just in Greece but across Europe, and what role the euro will play in Europe and across the world.For a country like Russia, you have a lot of your reserves in dollars and in the Euro, and if the Euro is no longer trustworthy then there is a problem that really cuts across the entire world.So a lot of people are looking at it, and are really concerned, because it will affect the price of oil, it will affect maybe negatively the price of oil but positively the price of gold, which Russia is also one of the producers of.”

RT: In the long run it is giving more of a support to the dollar, while undermining the Euro basically.But right now what we are seeing is that the dollar is going down and the Euro going up – why is that?

JM:“Well markets are always pricing in what is going to happen next, and if the market is pricing in right now that the parliament in Greece will accept essentially a major haircut in its budgets and it is also pricing in that Germany is going to support lending more money to Greece, then the natural immediate event would be for the Euro to rise and the dollar to fall on a relative basis.However, if over the next few hours or days the opposite actually happens.There are riots in Greece or the parliament doesn’t agree, then you will see the immediate opposite effect with the Euro weakening and dollar rising.”

RT: And that would obviously cause oil prices to go down, which is not very good for Russia which is a very dependent on oil and gas reserves and resources country.Do you think Russia should actually intervene in this situation – maybe hand out money to Greece on its own?

JM:“Well frankly I don’t think so, because already Europe gave a lot of money to Greece.Obviously they were not able to fix their budget in that time, they are asking for the second handout.If Russia were to come and give money I think that what would happen is what happened to the first tranche, that is it is lost.”