On Monday, Reuters reported that in response to renewed U.S. oil sanctions, Venezuela’s state-controlled oil company PDVSA intends to increase its use of digital currencies for oil and fuel exports.
The decision follows the reimposition of sanctions on Venezuela’s oil industry after the Biden administration last week refused to renew a license easing restrictions.
This forces companies to complete transactions by May 31 under a general license. It also makes it harder for Venezuela to export oil. The sanctions are a response to President Nicolas Maduro ‘s failure to fulfill commitments made after the election agreement.
Reuters reported that since last year, PDVSA has been quietly increasing its use of digital currency, specifically the Tether (USDT), to sell oil. According to Reuters, the move is aimed at avoiding an account freeze due to U.S. oil sanctions.
Venezuelan Oil Minister Pedro Tellechea confirmed the country’s openness to using various currencies, including virtual assets, in oil contracts.
Historically, the oil market has revolved around the US dollar. This dominance stems from the “petrodollar” arrangement created in the 1970s. As a result, oil prices are commonly quoted and invoiced in U.S. dollars, reinforcing its position as the standard currency for oil transactions.
Venezuela’s oil exports rebound despite earlier corruption scandal
Venezuela’s oil exports have rebounded under new Oil Minister Tellechei. This is despite a PDVSA corruption scandal uncovered last year involving $21 billion worth of oil export receivables (including earlier cryptocurrency transactions).
In March, exports reached their highest level in four years at 900,000 barrels per day, fueled by U.S. licenses allowing sales. To mitigate risks from potential future sanctions, PDVSA has moved to a new contract model for oil transactions. Under this model, the company requires prepayment of half the value of each cargo in Tether (USDT).
Venezuela enforces crypto wallets for oil transactions
Venezuela ‘s push for digital currency goes beyond just accepting Tether for oil sales. The company is now reportedly requiring new customers to hold a digital wallet containing cryptocurrencies. The order is also being enforced on some existing contracts that did not previously specify the use of USDT. This suggests a broader strategic shift in oil trading toward digital currencies.
Earlier this month, authorities arrested former Vice President Tareck El Aissami. He was accused of being the mastermind of a scheme to embezzle funds from oil sales via cryptocurrencies.
According to reports, El Aissami evaded capture for a year after allegedly converting cash into cryptocurrencies and potentially sending them to the Kraken cryptocurrency exchange. This high-profile corruption case has been dubbed the “PDVSA cryptocurrency incident.”
