Oil in Global Economy Series: Venezuela stopped accepting dollar for oil payments

Venezuela has stopped accepting the dollar as a payment for oil exports and told oil traders in the country to stop accepting or offering USD as a means of payment in response to United States’ sanction against the country and its leader Maduro. Reports suggest that traders have moved to euro as a means of payment. Reuters reports that Venezuela suspended the sale of U.S. currency through its Dicom auction system that President Nicolas Maduro said the government will use to switch from dollars to a basket of other currencies.

The decision comes on the back of fresh U.S. sanctions that effectively aim to tie Venezuela’s hands with the issue and sale of new debt, which increases the danger of it defaulting on existing loans. As a counter move, Venezuela is moving to a combination of yuans, Russian rubles, and euros to cushion itself against the sanctions. PDVSA, according to the plan, will do half its oil and fuel trades in currencies other than the greenback. Venezuela’s Energy Minister Eulogio del Pino said PDVSA is about to start invoicing oil sales to India in rupees, and to China in yuans.

While the sanction increases the pain for Venezuela, it could be beneficial for customers in India and in China.