Venezuela Stops Accepting Dollars for Oil Payments Following U.S. Sanctions
14 September 2017 - 09:22AM
Dow Jones News
By Anatoly Kurmanaev
CARACAS, Venezuela -- The government of this oil-rich but
struggling country, looking for ways to circumvent U.S. sanctions,
is telling oil traders that it will no longer receive or send
payments in dollars, people familiar with the new policy have told
The Wall Street Journal.
Oil traders who export Venezuelan crude or import oil products
into the country have begun converting their invoices to euros. The
state oil company Petróleos de Venezuela SA, known as PdVSA, has
told its private joint venture partners to open accounts in euros
and to convert existing cash holdings into Europe's main currency,
said one project partner.
The measure is designed to bypass financial sanctions President
Donald Trump's administration leveled against Venezuela's
government last month for jailing political opponents and creating
a super body of pro-government delegates that bypasses all
institutions.
PdVSA and the country's energy ministry didn't respond to
requests for comment.
The new payment policy hasn't been publicly announced, but
President Nicolás Maduro's government had hinted it was moving in
this direction after the U.S. Treasury Department banned any U.S.
company or citizen from buying new Venezuelan debt. The government
here has begun to call the sanctions "a blockade" on its extensive
state media apparatus, mimicking the language its close ally, Cuba,
has used when referring to Washington's economic embargo against
the island.
"To fight against the economic blockade there will be a basket
of currencies to liberate us from the dollar," Vice President
Tareck El Aissami, who has been blacklisted by the U.S., said
Friday.
Venezuela has become increasingly isolated from the
international finance system as Mr. Maduro responded to
antigovernment demonstrations by ordering a crackdown that resulted
in the deaths of more than 120 people and dismantling the country's
last checks and balances. Big international banks have been
increasingly wary of doing business with his government, forcing
PdVSA to rely on banks such as Russia's Gazprombank and China CITIC
Bank to process crucial oil payments.
Experts who closely track the Venezuelan economy were perplexed
by the government's anti-dollar policy, noting that it is difficult
for the country to isolate itself from the financial system of its
biggest trading partner, the U.S. Exports of oil, primarily to the
U.S., account for about 95% of Venezuela's hard currency
earnings.
"You can say whatever you want for your domestic propaganda and
make it look like you're retaliating against the U.S.," said Nomura
debt analyst Siobhan Morden. "This political posturing will only be
to their detriment."
She said the effort would increase transaction costs for
customers to switch currencies. "You're imposing self-harm with no
practical purpose, " she said.
Henkel Garcia, an economist at Caracas-based consultancy
Econometrica, said the government fears further U.S. financial
sanctions and is worried its assets could be seized abroad.
Venezuela faces dozens of international lawsuits as foreign
companies seek compensation for projects nationalized in recent
years.
Maintaining the flow of oil revenue is a priority for Mr.
Maduro, who is facing falling crude output and about $3.5 billion
in bond payments later this year.
Mr. Maduro responded to the U.S. sanctions by accusing Mr. Trump
of waging an "economic war" against him amid an unprecedented
recession. Washington's latest sanctions prohibit any U.S. citizen
or entity buying from PdVSA any new debt of over 90 days. Some
lawyers interpret this to include oil sale contracts issued by the
Venezuelan company.
The Venezuelan president has promised to switch the country's
commerce away from the U.S. and to create a basket of currencies
from Russia, China and India that would be offered to local
companies to import goods under the country's system of currency
controls.
"Managing euros seems like their second-best choice," said Mr.
Garcia. "When they say they're moving over to rubles or yuan,
that's just anti-imperialist rhetoric."
Venezuela's government halted dollar auctions for importers on
Tuesday, citing the U.S. sanctions. The country's officials are
also in early talks with boutique financial companies in Europe and
Asia to restructure their dollar debt in different currencies, said
a person familiar with the matter.
--Kejal Vyas contributed to this article.
Write to Anatoly Kurmanaev at Anatoly.kurmanaev@wsj.com
(END) Dow Jones Newswires
September 13, 2017 19:07 ET (23:07 GMT)
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