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Business and Politics

Venezuela Uses Stablecoins in Response to Reintroduction of U.S. Oil Sanctions

Author: Roko Kalafatić

April 24, 2024

Venezuela / Image by: foto

Venezuelan state oil and gas company PDVSA reportedly plans to accelerate its use of cryptocurrencies, particularly USDT, the largest stablecoin by market capitalization, to circumvent U.S. sanctions.

The Venezuelan oil company has gradually begun integrating USDT for oil sales in 2023 and reportedly has a new policy requiring new buyers to possess a cryptocurrency digital wallet.

Venezuela Turns to USDT for Oil Exports

According to Reuters, PDVSA’s intention to accelerate the use of USDT for crude oil and fuel exports comes after the U.S. refused to renew the general license that temporarily lifted sanctions in Venezuela’s oil and gas sector, with the report citing people familiar with the matter.

The general license was issued in October following President Nicolás Maduro’s promise to allow free and fair elections in 2024. With the license permitting sales, Venezuela’s oil exports reached 900,000 barrels per day in March, marking the highest exports in four years.

However, it appears that the Maduro-led government has not fulfilled its commitments, which is why the U.S. did not renew the license and reimposed sanctions on the country.

Due to the lack of renewal, PDVSA’s buyers and service providers have until May 31 to cease transactions, which could increasingly complicate Venezuela’s oil exports, according to the Reuters report.

With the reimposition of oil and gas sanctions, Venezuelan PDVSA aims to encourage the use of USDT, which it began accepting for transactions last year, to reduce the risk of freezing profits in foreign bank accounts as a result of sanctions.

In the first quarter of 2024, the Venezuelan oil company shifted non-fungible spot oil contracts to a new contractual model requiring that half the value of each cargo be paid in USDT in advance.

PDVSA is also reportedly requiring new clients to have a digital wallet holding cryptocurrencies, a requirement that has extended to old contracts that did not specify the use of USDT.

Crypto Comes to the Rescue in Venezuela

Meanwhile, the use of cryptocurrencies for oil and gas transactions is unusual, given that the U.S. dollar is the dominant and preferred currency used in the global market.

According to a trader who spoke to Reuters, the only way to ensure the use of USDT is through intermediaries, as crypto transactions in the oil sector do not pass through any trade compliance department.

However, relying on intermediaries for such transactions, while helping PDVSA circumvent sanctions, will reduce the company’s oil revenues.

This is not the first time Venezuela has turned to crypto to bypass U.S. sanctions. In 2018, the government introduced a state-backed oil cryptocurrency called Petro.

But Petro did not enjoy widespread acceptance and faced increasing criticism both within and outside Venezuela. Nearly six years after the project’s launch, reports have emerged that the Venezuelan government decided to abolish the Petro cryptocurrency in January 2024.