Venezuela no longer accepts US Dollar for Oil payments

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Venezuela has announced to oil traders that it won’t accept U.S dollars as payment for crude oil and fuel, instead switching to accepting payments in local currencies, such as the Yuan or Ruble. This spells good news for emerging economies, and may be the first small step in breaking the U.S. dollar hegemony.

Venezuela had nothing to lose and everything to gain. At this point, the absurd U.S. sanctions obsession has begin doing what everyone has said it would do: cause the emerging economies to drift further from U.S. influence as a basic strategy for survival.

One of the early effects of the shift is that many oil traders have started converting their dollar holdings into euros as a hedge against the possible long term effects. If this play meets with even marginal success, it could spell doom for the petrodollar in the future.

Of course, the writing was on the wall the moment the IMF gave the Yuan SDR status; by throwing it into the basket of currencies held in reserve the IMF has marked the Yuan as a possible future equal of the U.S. Dollar. While many analysts, like Larry Hu and Jerry Peng played the move down as “symbolic”, they underestimate the significant threat that the Yuan poses to the Yen, which has always been a proxy of the U.S. dollar in Asia.

Anonymous sources are naturally claiming the effort is doomed, and they may be correct. But this is the first real, public step, to shirking the U.S. dollar. Even if it fails, the lessons learned will be food for thought for many emerging economies.

But if Venezuela can hold on, control sedition and agitation within its borders, and secure attractive energy trade deals (with the rising of crude prices) with emerging partners, this could get very bad for the U.S. very quickly.

If a military option were feasible, it would have already been tried. The fact of the matter is that the U.S. is isolated politically, it has made too many bad faith mistakes with the emerging world powers, and Washington D.C. is having trouble finding people insane enough to trust America at its word.

Even if America wins this round, it loses, because it pushed the envelope too far. The only victory to be had here is to out emerge the emerging market. China simply has too large a potential consumer economy, and the only hope America has, is to ramp up the breeding and radically depress wages, two things that culturally the U.S. just isn’t willing to do.

It could have gone the other way, America could have succeeded in Ukraine and the Middle-East, but their latest Afghan move smacks of desperation and it simply won’t work. The time for American aggression is past, any attempt to ramp up the war machine now will only prove that point. Fighting it out, which some in America may fantasize about doing, will simply show everyone that American influence and diplomacy doesn’t count for a hill of beans.

Venezuela’s political system notwithstanding, it’s their country and they can do what they like. Results are all that matters. Venezuela is small enough, and sitting on enough natural wealth, that a true socialist state could feed off it for quite awhile. Being an energy supplier doesn’t require much in the way of innovation or technology, and only needs moderately skilled labor. If they want to bet their lives on a coin toss between communist utopia and Pol Pot’s killing fields, more power to ’em.

  • jaxon64

    The US has overthrown many governments without “going to war”…Libya which was going to leave the US dollar and start trading their oil in gold dinars is one example.
    The legally elected, democratic government of the Ukraine was also destroyed and a US puppet government funded and selected by Victoria Nuland after the phony “uprising” of paid protestors, armed by the US govt.
    PS: Crimea was not “annexed” by Russia. The Crimeans ( and eastern ukranian provinces) are already majority Russians and had a legal vote to cede from the puppet regime of former Nazi-sympathizers that the US and NATO put in charge.
    I am amazed that Russia has been so patient and long-suffering when the US led NATO warhawks continue to destroy her closest neighbors and surround Russia with weapons and military bases. Eventually the US is gonna back Russia, China etc too far into a corner where they will have no choice but to strike.

  • Lucky Joestar

    These hairbrained U.S. sanctions will only drive up demand for yuan and other non-dollar currencies amidst other countries that want to buy oil from Venezuela. If I want your oil, and I need yuan rather than dollars to buy it, I’ll just stock up on yuan.