Nicolas Maduro’s demand for crude oil payments in Petro has taken a toll on its oil purchases. Several buyers of Venezuelan crude oil halted purchases after the Venezuelan President decreed that oil payments be in Petro.
Exports Put on Hold
The decision by the Venezuelan President,, this week brought to halt exports of at least 1 million barrels of oil. According to the new order, the maritime fees, thus far paid in euros, would have to be paid in Petros from Monday. Many buyers are worried that payments via Petro would violate sanctions as the U.S. had called the cryptocurrency a “scam”.
Coercion to Boost Petro Adoption
The Venezuelan government launched Petro about two years ago to find a way around U.S. sanctions that have alienated Venezuela to the extent that they are now entirely cut-off from international markets. The Venezuelan government has left no stone unturned to promote Petro, including adorning government buildings in downtown Caracas with cryptocurrency’s banners. However, the coin has found few takers and Venezuelans also ignore it as they don’t know how and where to buy it. The country’s oil reserves, which are the world’s largest, back the cryptocurrency.
Reducing Reliance on Foreign Currencies
The decision to make Petro mandatory for crypto payments stems from the Venezuelan government’s desire to make cryptocurrencies more mainstream. Also, it would reduce the country’s reliance on foreign currencies. Notably, oil exports had rebounded in December, going beyond the one million-barrel-a-day mark for the first time in months. Crude buyers generally pay port fees through Venezuela-based shipping agencies. Although buyers don’t involve themselves directly, a company last year included a clause forbidding shipping agents from using money transfers to purchase digital currencies in Venezuela after Petro’s sanction in March 2018.
Another reason why Petro hasn’t taken off is that most companies that purchase Venezuelan crude no longer pay cash. They instead go for swap transactions where they get crude in lieu of gasoline or diesel. Others like Repsol SA and Eni SpA procure oil against previous debts.