Three weeks after the U.S. imposed financial sanctions on Venezuela in an effort to cripple its economy and choke the Maduro regime, which in turn prompted Caracas to announce it would no longer receive or send payments in dollars, Venezuela's president Nicolas Maduro proposed to expand his own personal blockade of the U.S., by proposing that all oil producing countries discuss creating a currency basket for trading crude and refined products. One which is no longer reliant on the (petro)dollar.
“Developing a new mechanism of controlling the oil market is necessary,” Maduro said on Wednesday at the Russian Energy Forum, being held in Moscow this week.
Quoted by RT, Maduro also blamed trade in crude oil paper futures as having an adverse impact on the oil market, which has undermined attempts by OPEC to stabilize prices. To counteract such "speculation", Maduro proposed an alternative currency basket, one which is based not on the world's reserve currency but includes the yuan, ruble, and other currencies, and which will mitigate the alleged adverse impact of futures trading.
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Maduro's proposal is merely the latest not so veiled hint at dedolarizing the global financial system by bypassing the petrodollar entirely, and rearranging a new currency basket determined by the world's biggest oil producer, and largest oil importer.
Of course, Maduro is merely piggybacking on what China may already have in the works: recall that a month ago, the Nikkei Asian Review reported that China is preparing to launch a crude oil futures contract denominated in Chinese yuan and convertible into gold, potentially creating the most important Asian oil benchmark and allowing oil exporters to bypass U.S.-dollar denominated benchmarks by trading in yuan.
Maduro also insisted that Venezuela is dealing with its debt to Russia, currently in the billions, and that Rosneft's deal with Venezuelan state oil producer PDVSA is “subject to negotiation.” “We fulfill all the obligations to Russia. If we get more favorable terms for restructuring the debt, this will be the result of a deal between the two governments,” said Maduro. It was unclear how Putin felt toward said proposal.
Maduro also complained that U.S. sanctions make it difficult to negotiate the debt issue with American debt holders (something the U.S. is well aware of).
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In addition to switching to a Yuan-based basket, Caracas has been framing a plan to deliver its crude to alternative markets should the White House impose sanctions on trading the country's oil, Maduro said in response to a question on the possibility of PDVSA's default. “Venezuela has plans A, B, C, and others. There are other international companies interested in buying oil and refined products. We will create the best terms for them,” he said.
It remains to be seen if a last-minute agreement by Russia and China to bailout Venezuela by revoking some or all of the petrodollar's reserve currency privileges, is in store. Needless to say, such a development would be the biggest shock to the global monetary system since Nixon killed the gold standard.
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