Prime Minister Dr Mahathir Mohamad today proposed a currency basket of the euro and the US dollar for oil trades to hedge against a weak greenback and manipulation by currency traders.

The veteran Southeast Asian leader said producing countries were feeling the impact of the weak greenback, which has fallen sharply against the euro.

"It is time that the quotation of oil prices in dollars be reviewed," he said in a speech read by his deputy Abdullah Ahmad Badawi at the opening of a two-day Asia oil and gas conference.

"Perhaps it would be better if payments for the sale of oil by producer countries are made with the euro equivalent of the US dollar. Then the appreciation of the euro would benefit the producers."

But he added: "Should the euro depreciate against the US dollar, then payment would be made in US dollars. This is a kind of hedging."

Living in fear

The proposal to dump the world's reserve currency is already being mulled by Indonesia's state oil company, Pertamina, which has said it may adopt the euro in its trades because the dollar has become too volatile.

The 77-year-old premier, who was a bitter opponent to the war in Iraq, warned that the "war on terror is far from being ameliorated" by the US coalition victory in Iraq.

"In fact, the whole word is living in greater fear ... in this state of extreme uncertainty and tension worldwide, trade must suffer. And oil trade... must suffer even more strongly," he said.

Mahathir, who blamed rogue currency traders for the 1997/98 Asian financial crisis which devastated regional economies, repeated his call for currency trading to be regulated to ensure a stable global economy.

"Governments should once again control their currency and stabilise it. Then world trade would be less risky and would grow faster. With expanded world trade, the oil business and economies generally would prosper," he said.

"This is far better than trying to stabilise the world through force of arms."

Complex issue

Abdullah, who will succeed Mahathir after he steps down in October after 22 years in power, told reporters later that details of the hedging mechanism were being worked out.

He dismissed suggestions that such a move would upset the US, which is Malaysia's key trading partner, because it would not "totally do away with the US dollar."

Experts said a euro-dollar basket could help moderate currency fluctuations but it would take a long time to implement.

Thierry Desmarest, chairman and chief executive of French oil company Total, said such a move would depend on the Organization of Petroleum Exporting Countries (Opec).

"It is a complex one and it is up to the Opec countries to decide ... they have looked into it several times and their conclusion at the end of the day was that the dollar was not that bad," he told AFP .

Asian currency basket

The Japan Bank for International Cooperation director for Asia and Oceania, Fumio Hoshi, told the conference that a mixed basket of currencies would be ideal to prevent a repeat of the 1997/98 Asian financial crisis.

"We tried after the 1997 crisis to establish an Asian Monetary Fund but it failed," he said.

"We should consider something like an Asian currency basket but we also have to bear in mind there are differences in size and strength of economies within Asia ... it will take some time."

Hoshi noted that Asia was the only region without an international oil company, and the region's oil imports have been projected to rise from 13 million barrels a day to 34 million barrels daily by 2030.

With its high dependence on Middle East oil, he said regional cooperation was the key for Asia to reinforce its bargaining power, strengthen energy security and boost efficient energy use. -- AFP