At the end of August, the U.S. stepped up sanctions on Venezuela, prohibiting dealings in new debt or equity issued by state oil firm Petroleos de Venezuela SA (PDVSA) or the government. A couple of weeks later Venezuela responded to what it called an “economic blockade” by suspending trade in U.S. dollars and publishing Venezuelan oil basket prices in Chinese yuan.
Analysts believe that although it has close strategic ties to China, Venezuela would mostly just harm itself with the move to “free the nation from the oppression of the dollar,” as Nicolas Maduro put it.
Venezuela told oil traders it will no longer accept or offer U.S. dollars in payment for crude oil and fuels, the Wall Street Journal reported earlier this month, citing sources familiar with the developments. As a result, traders have started converting dollars into euros, and PDVSA’s foreign partners operating in the country may have to switch to euros as well.
Two days later, on September 15, Venezuela started publishing its oil prices in yuan. The move went against earlier reports that Maduro would favor the euro. As it is unlikely that China would ever join the U.S. on its quest to force Maduro to end his campaign to rewrite Venezuela’s constitution in what many see as a step in bringing the downtrodden country closer to dictatorship, the choice of yuan seems a safe one, if nothing else, compared to the European currency.
The European Union refused to recognize the outcome of the Venezuelan vote, but has so far stopped short of imposing sanctions. However, earlier this month, the office of German Chancellor Angela Merkel didn’t rule out EU sanctions on Venezuela.
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