Venezuela is transitioning its oil sales to Tether to bypass U.S. sanctions and protect its revenues
Venezuela is accelerating the shift of its oil sales to Tether as the country prepares for the reimposition of oil sanctions. Reuters reported on Monday that the state-run oil company PDVSA is using Tether to avoid the risk of having its revenues from oil sales frozen in foreign bank accounts. This move is a direct response to orders that buyers and suppliers of PDVSA oil close out transactions in line with sanctions by the end of May.
The Venezuelan oil company, which began experimenting with Tether for oil sales in 2023, has faced increased pressure as the six-month temporary easing of sanctions came to an end on April 15. Despite the sanctions, Venezuela managed to boost its exports to about 900,000 barrels per day in March, marking a four-year high. PDVSA has now made it a requirement for new customers to maintain a digital wallet to facilitate transactions.
A trader, whose identity was not disclosed, told Reuters, "USDT transactions, as PDVSA is demanding them to be, don't pass any trader's compliance department, so the only way to make it work is working with an intermediary." This highlights the challenges that PDVSA faces in conducting oil sales through Tether, which is not typically recognized by traditional compliance departments.
The political backdrop to these developments includes upcoming elections in Venezuela, scheduled for July 28. President Nicolás Maduro has been accused of attempting to suppress opposition candidates through disqualification and arrests, casting doubt on the prospects for free and fair elections. The continuation of temporary oil sanctions relief was contingent upon such democratic standards, which the Maduro administration has been criticized for compromising.
Meanwhile, Venezuela is in new talks with Chevron to expand a joint venture in the Orinoco Belt, even as the country braces for the return of oil sanctions. Notably, the reimposition of these sanctions has not had the expected impact on oil markets. Prices have remained subdued, indicating that the market has not reacted strongly to the geopolitical tensions and the potential reduction in Venezuelan oil supply.
As of now, the situation remains fluid, with the future of Venezuela's oil industry and its use of Tether for transactions poised to have significant implications. The approach taken by PDVSA could set a precedent for how countries facing international sanctions might seek to circumvent financial barriers. However, the long-term success of this strategy and its impact on both Venezuela's economy and the global oil market remain to be seen.
