If the United States government believed that Venezuela would crumble in the wake of a fresh round of sanctions, it was sorely mistaken. Venezuelan President Nicolas Maduro responded to the sanctions by taking a drastic action on Friday, when the nation published its oil prices in the common currency of China, the yuan.
In case the decision wasn’t a direct enough stab at the US, Maduro doubled down on the decision by calling it an attempt to free Venezuela from the “tyranny of the US dollar.” It’s a bold move from a country that does a whole lot of oil and gas business with the United States. Maduro’s shift is enough to make some industry experts stop and take notice.
The Beginnings of Dictatorship
In recent months, the social and political climate in Venezuela has disintegrated to an alarming degree. As the economy struggles to regain its momentum, the people are becoming increasingly displeased with the current administration. In response to the criticism, Venezuelan President Nicolas Maduro has made increasingly aggressive attempts to shut down opposition and gain total control of the country.
That doesn’t sit well with the current US administration. As Vice President Mike Pence said in August, “[We] will not stand by while Venezuela collapses into dictatorship.”
Cue the aforementioned sanctions.
Maduro Was Advertising Venezuelan Oil, Plain and Simple
And cue Maduro’s reaction, which Forbes is flat-out calling “desperate.” It seems that Venezuela’s response to United States sanctions is really just an advertisement to Russia and China that Venezuela is ready to do business now that the United States is trying to effect social change.
Unfortunately for Maduro, he’s using the wrong money. Across the world, oil is traded almost exclusively in US dollars. There are a variety of reasons, most of which boil down to the dollar being stable and safe. In all the world, there’s only one exception to the USD rule.
The only other instance on Earth of an entity doing oil business in yuan is a single deal in which a Russian oil firm secured a Chinese customer by offering to sell them some crude using a currency that was easier to handle. Of course, that deal means that Russia is flush with billions of Chinese Yuan. It’s entirely possible that Russia could very well could be ready to spend some of that dough on Venezuelan oil.
At least, that’s what Venezuela’s fledgling dictator is hoping.
It’s a Half-Hearted Gesture That Won’t Work
While Venezuela is ready to do business in Euros as well as Yuan, they’ve still gone a long way toward removing any incentive to do business with them on an international level. Even if Russia takes Maduro up on his not-so-subtle offer, they’re likely ill-equipped to handle that much refining. As of 2016, The United States’ refining capability outstripped the Russians by a three-to-one margin. In other words, Russia likely has no need to buy the amount of oil Nicolas Maduro requires to get the money flowing back to his people.
Maduro isn’t likely to change the world, he’s just likely to speed up the transition to a new power in Venezuela.