Venezuela’s Oil Giant Turns to Crypto as US Sanctions Bite Again

Prompted by renewed US oil sanctions, Venezuela’s state-controlled oil company PDVSA intends to boost its use of digital currencies in crude oil and fuel exports, Reuters reported on Monday.

The development follows reimposed sanctions on Venezuela’s oil industry after the Biden administration last week refused to renew a license easing restrictions.

This forces companies to wind down 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 an election deal.

Reuters reported that PDVSA has been quietly increasing its use of digital currency, particularly Tether (USDT), for oil sales since last year. The move aims to avoid frozen accounts due to US oil sanctions, according to Reuters.

Venezuelan oil minister Pedro Tellechea confirmed the country’s openness to using various currencies, including virtual assets, in oil contracts.

The oil market has historically revolved around the US dollar. This dominance stems from the “petrodollar” arrangement established in the 1970s. As a result, oil prices are universally quoted invoiced in US dollars, solidifying 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 its new oil minister Tellechea. This is despite a corruption scandal at PDVSA uncovered last year involving $21b in oil export receivables (including past crypto transactions).

Exports reached a four-year high of 900,000 barrels per day in March, buoyed by US licenses permitting sales. PDVSA has shifted to a new contract model for spot oil deals to mitigate risk from potential future sanctions. Under this model, the firm requires half the value of each cargo to be prepaid in Tether (USDT).

Venezuela Enforces Crypto Wallets for Oil Deals

Venezuela’s push for digital currency goes beyond just accepting Tether for oil sales. The firm is now reportedly mandating new customers to have a digital wallet holding crypto. The mandate is also enforced on some existing contracts that didn’t previously specify using USDT. This suggests a broader strategic shift towards digital currencies in the oil trade.

Earlier this month, authorities arrested former Vice President Tareck El Aissami. He was accused of being the mastermind behind a scheme to embezzle funds from oil sales using crypto.

El Aissami had reportedly been evading capture for a year after allegedly converting cash into cryptocurrencies and potentially transferring them to crypto exchange Kraken. This high-profile corruption case has been dubbed the “PDVSA-crypto incident.”