Driven by renewed US oil sanctions, state-controlled Venezuelan oil company PDVSA intends to boost its use of digital currencies in crude oil and fuel exports, Reuters reported Monday.
The development follows sanctions reimposed on Venezuela’s oil industry after the Biden administration last week refused to renew a license easing restrictions.
This requires companies to end transactions by May 31 under general license. It also makes it more difficult for Venezuela to export oil. The sanctions are a response to President Nicolas Maduro’s failure to respect commitments made following an electoral agreement.
Reuters reported that PDVSA has quietly increased its use of digital currency, particularly Attached (USDT), for oil sales since last year. The move aims to avoid freezing accounts due to US oil sanctions, according to Reuters.
Venezuelan Oil Minister Pedro Tellechea confirmed the country’s willingness to use various currencies, including virtual assets, in oil contracts.
The oil market has always revolved around the US dollar. This dominance stems from the “petrodollar” system established in the 1970s. As a result, oil prices are universally quoted and invoiced in US dollars, reinforcing its position as the standard currency for oil transactions.
Venezuela’s oil exports rebound despite past corruption scandal
Venezuela’s oil exports have seen a resurgence under new Oil Minister Tellechea. This is despite a corruption scandal at PDVSA uncovered last year, involving $21 billion in oil export claims (including past crypto transactions).
Exports reached their highest level in four years, at 900,000 barrels per day, in March, supported by American licenses authorizing sales. PDVSA has adopted a new contract model for spot oil transactions to mitigate the risk of potential future sanctions. Under this model, the company requires that half of the value of each shipment be prepaid in Tether (USDT).
Venezuela imposes crypto wallets for oil transactions
Venezuela’s digital currency efforts go beyond just accepting Tether for oil sales. The company will now require new customers to have a digital wallet containing cryptocurrencies. The mandate is also applied to certain existing contracts that did not previously specify the use of USDT. This suggests a broader strategic shift towards digital currencies in oil trading.
Earlier this month, authorities arrested former Vice President Tareck El Aissami. He was accused of being the mastermind behind a proposed embezzlement of funds from oil sales using cryptography.
El Aissami has reportedly evaded capture for a year after allegedly converting money into cryptocurrencies and potentially transferring them to crypto exchange Kraken. This high-profile corruption case has been dubbed the “PDVSA-crypto incident.”