As the United States reimposes oil sanctions on Venezuela, the state-run oil giant PDVSA intends to use more digital money in its fuel and crude shipments, according to three people familiar with the proposal.
Last week, the U.S. Treasury Department granted PDVSA's suppliers and clients until May 31 to conclude business under a general licence that it declined to renew because it did not include any electoral reforms. Due to the need for businesses to wait for specific U.S. authorizations before doing business with Venezuela, the measure will make it more difficult for the nation to grow oil output and exports.
PDVSA has been gradually transferring oil sales to USDT, also known as Tether, a digital currency whose value is fixed to the US dollar and intended to remain constant, since last year. According to the persons, the transition is accelerating as oil sanctions are being reinstated, a precaution against sale proceeds being blocked in foreign bank accounts as a result of the measures.
The oil minister of Venezuela, Pedro Tellechea, told Reuters last week that "we have different currencies, according to what is stated in contracts," adding that in some contracts, digital currencies might be the preferred mode of payment.
The favoured currency for transactions in the international oil market is the US dollar. Although they are still in their infancy in many nations, bitcoin payments are being accepted as payments ion some countries.
Following the revelation of over $21 billion in unpaid receivables for oil shipments in recent years, some of which were linked to earlier transactions using other cryptocurrencies, PDVSA was rocked by a corruption scandal last year.
In November of last year, a jury found the former millionaire and creator of a now-defunct cryptocurrency exchange guilty of stealing $8 billion from FTX customers. According to the prosecution, this was one of the worst financial frauds in American history.
After the controversy, Tellechea took over as Venezuela's oil minister, and since then, the country has exported more oil. Exports hit a four-year high of approximately 900,000 barrels per day in March, spurred by U.S. licences permitting sales.
PDVSA switched numerous spot oil transactions without swaps to a contract arrangement by the end of the first quarter, which required prepayment for half of each cargo's worth in USDT.
Additionally, PDVSA is mandating that all new applicants wishing to transact in oil maintain cryptocurrencies in a digital wallet. According to one of the people, the need has been applied even in certain older contracts that do not expressly mention the use of USDT.
When Washington granted a six-month licence in October for trading houses and former PDVSA clients to conduct business with Venezuela once more, the majority of them turned to intermediaries in order to fulfil the conditions for digital transactions.
"USDT transactions, as PDVSA is demanding them to be, don't pass any trader's compliance department, so the only way to make it work is working with an intermediary," one trader said, referring to how unusual it still is to pay for oil in digital currencies.
Since the United States placed secondary sanctions on Venezuela in 2020, PDVSA's ability to sell its own oil has been hampered, particularly when it comes to China. This has affected the company's relationships with major trading partners.
PDVSA may be able to avoid sanctions if it depends more and more on middlemen for transactions, but this will mean that a less share of oil earnings will go to the company.
Last week, Minister Tellechea stated that the nation anticipates continuing to sign agreements and expand its oil and gas projects during the 45-day wind-down period that the United States has established, and that following that, it will invite prospective customers to apply for specific licences.
Oil professionals predict that Venezuela's oil output, exports, and revenue will soon reach a cap, even if Washington quickly grants individual authorizations.
Tellechea disagreed, stating that PDVSA has "a big strength in trading" and is ready to deal with the reinstatement of Washington's sanctions on a business basis.
(Source:www.reuters.com)
Last week, the U.S. Treasury Department granted PDVSA's suppliers and clients until May 31 to conclude business under a general licence that it declined to renew because it did not include any electoral reforms. Due to the need for businesses to wait for specific U.S. authorizations before doing business with Venezuela, the measure will make it more difficult for the nation to grow oil output and exports.
PDVSA has been gradually transferring oil sales to USDT, also known as Tether, a digital currency whose value is fixed to the US dollar and intended to remain constant, since last year. According to the persons, the transition is accelerating as oil sanctions are being reinstated, a precaution against sale proceeds being blocked in foreign bank accounts as a result of the measures.
The oil minister of Venezuela, Pedro Tellechea, told Reuters last week that "we have different currencies, according to what is stated in contracts," adding that in some contracts, digital currencies might be the preferred mode of payment.
The favoured currency for transactions in the international oil market is the US dollar. Although they are still in their infancy in many nations, bitcoin payments are being accepted as payments ion some countries.
Following the revelation of over $21 billion in unpaid receivables for oil shipments in recent years, some of which were linked to earlier transactions using other cryptocurrencies, PDVSA was rocked by a corruption scandal last year.
In November of last year, a jury found the former millionaire and creator of a now-defunct cryptocurrency exchange guilty of stealing $8 billion from FTX customers. According to the prosecution, this was one of the worst financial frauds in American history.
After the controversy, Tellechea took over as Venezuela's oil minister, and since then, the country has exported more oil. Exports hit a four-year high of approximately 900,000 barrels per day in March, spurred by U.S. licences permitting sales.
PDVSA switched numerous spot oil transactions without swaps to a contract arrangement by the end of the first quarter, which required prepayment for half of each cargo's worth in USDT.
Additionally, PDVSA is mandating that all new applicants wishing to transact in oil maintain cryptocurrencies in a digital wallet. According to one of the people, the need has been applied even in certain older contracts that do not expressly mention the use of USDT.
When Washington granted a six-month licence in October for trading houses and former PDVSA clients to conduct business with Venezuela once more, the majority of them turned to intermediaries in order to fulfil the conditions for digital transactions.
"USDT transactions, as PDVSA is demanding them to be, don't pass any trader's compliance department, so the only way to make it work is working with an intermediary," one trader said, referring to how unusual it still is to pay for oil in digital currencies.
Since the United States placed secondary sanctions on Venezuela in 2020, PDVSA's ability to sell its own oil has been hampered, particularly when it comes to China. This has affected the company's relationships with major trading partners.
PDVSA may be able to avoid sanctions if it depends more and more on middlemen for transactions, but this will mean that a less share of oil earnings will go to the company.
Last week, Minister Tellechea stated that the nation anticipates continuing to sign agreements and expand its oil and gas projects during the 45-day wind-down period that the United States has established, and that following that, it will invite prospective customers to apply for specific licences.
Oil professionals predict that Venezuela's oil output, exports, and revenue will soon reach a cap, even if Washington quickly grants individual authorizations.
Tellechea disagreed, stating that PDVSA has "a big strength in trading" and is ready to deal with the reinstatement of Washington's sanctions on a business basis.
(Source:www.reuters.com)
