Venezuelan oil buyers wary of Petro payments - OhNo "WTF" Crypto

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Venezuelan oil buyers wary of Petro payments

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Since Venezuela's President Nicolás Maduro officially introduced the Petro, it has been mired in controversy. To add to the country’s economic worries and the “bumpy” Petro adoption, some oil buyers have reportedly halted purchases in fear of violating U.S. sanctions.

Petro for Oil?

Oil is Venezuela's largest export good and one of the country’s few economic lifelines. However, since the Venezuelan government announced that port fees have to be paid in the country’s controversial digital currency, Petro (PTR), some oil buyers have halted purchases.

Over 1 million barrels of oil have been put on hold after the government announced the change in payment policy for specific maritime fees, according to a report by Bloomberg. In light of the U.S. sanctions against the use of the Petro cryptocurrency, some of Venezuela's oil customers have put the breaks on purchases.

The Petro was introduced in early 2018 to circumvent U.S. sanctions that have hit the country’s already shaken economy hard. The government-issued digital coin is supposed to be backed by the country's oil and mineral reserves. “I have ordered the emission of 100 million Petros with the legal sustenance of Venezuela’s certified and legalized oil wealth. Every Petro will be equal in value to Venezuela’s oil barrel,” President Maduro stated.

However, the government has never made the effort to prove that the value of the Petro is backed by anything. Instead, the government has focused on promoting the new digital currency with banners and other forms of advertising across the country. The average person on the street, however, has reportedly not adopted the new digital currency and struggles to understand where to purchase it.

International oil buyers generally use local shipping agents when dealing in Venezuela to handle port fees. Buyers would, therefore, not be directly involved with Petro transactions. However, according to Bloomberg, at least one international company has included a clause in its contract with a local shipping agent preventing them from dealing in the new state-backed digital currency as a result of the U.S. sanctions.

Most international oil buyers no longer pay Venezuela in cash. Instead, they either swap oil for other commodities such as diesel or gasoline or they receive oil as payments for outstanding debts.

Oil today, Gold tomorrow

President Maduro does not want to stop at port fees with his Petro adventure. Early this month, he told Venezuelan newspaper El Nacional: "We will sell Venezuelan oil in exchange for Petros. We have already signed contracts for the sale of oil, steel, iron, and aluminum, and we will sell part of the gold for Petros.”

He also stated that the government has successfully introduced the digital currency into the lives of Venezuelan families, according to a report by TASS.

In light of the severe lack of trust in the Maduro government and its digital currency, it is unlikely that the Petro will succeed as a currency for international trade. Nonetheless, it offers some interesting insight into how government-backed digital currencies could function in the real world.



Alex Lielacher, Khareem Sudlow