Venezuela Begins Publishing Oil Basket Price In Yuan

Tyler Durden's picture

Two days after the WSJ confirmed Maduro's earlier threat that he would stop accepting US Dollars as payment for crude oil imports, Venezuela has done just that.

As a reminder, and as we reported previously, in an effort to circumvent U.S. sanctions, Venezuela told oil traders that it will no longer receive or send payments in dollars. As a result, oil traders who export Venezuelan crude or import oil products into the country have begun converting their invoices to euros.

Furthermore, Venezuela's state oil company Petróleos de Venezuela SA, or PdVSA (whose bankruptcy is fast approaching), told its private joint venture partners to open accounts in euros and to convert existing cash holdings into Europe’s main currency, said one project partner. The new payment policy hasn’t been publicly announced, but Vice President Tareck El Aissami, who has been blacklisted by the U.S., said Friday, "To fight against the economic blockade there will be a basket of currencies to liberate us from the dollar."

Fast forward to today, when according to a statement on the Venezuela oil ministry, the country's weekly crude oil and petroleum basket "will be published in Chinese Yuan" - oddly, not in Euros as the WSJ hinted - going forward. We can only assume that Venezuela avoided the European currency on concerns that Brussels may follow in D.C.'s footsteps and impose financial sanctions on the Maduro regime next. Which meant that the only "safe" currency to transact in, was that of the country's two big sources of vendor (and commodity) financing: China and Russia. For now Venezuela has picked the former.

The ministry also unveiled a price of 306.26 Yuan per barrel for the week of Sept. 11-15, up 1.8% from the 300.91 in the previous week, saying "the more favorable outlook on world oil demand and reports of lower global production contributed to the strengthening of crude oil prices this week."

As for the more relevant topic, Venezuela's abdication of the US dollar, whether permanent or temporary - until the US finds a way to intervene and restore normalcy - Nomura debt analyst Siobhan Morden warned that "you can say whatever you want for your domestic propaganda and make it look like you’re retaliating against the U.S.... this political posturing will only be to their detriment.

It remains to be seen if president Trump will use today's official switch by Venezuela to a PetroYuan as justification for a more "aggressive" foreign policy posture.

* * *

Meanwhile, recall that the decision by the nation with the world's largest proven oil reserves to eliminate the dollar, comes just days after China and Russia unveiled the latest Oil/Yuan/Gold triad at the latest BRICS conference.

“Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.”

“To overcome the excessive domination of the limited number of reserve currencies” is the politest way of stating what the BRICS have been discussing for years now; how to bypass the US dollar, as well as the petrodollar. Clearly, Beijing is ready to step up the game. Soon China will launch a crude oil futures contract priced in yuan and convertible into gold.

This means that Russia – as well as Iran, the other key node of Eurasia integration – may bypass US sanctions by trading energy in their own currencies, or in yuan. Inbuilt in the move is a true Chinese win-win; the yuan will be fully convertible into gold on both the Shanghai and Hong Kong exchanges.

The new triad of oil, yuan and gold is actually a win-win-win. No problem at all if energy providers prefer to be paid in physical gold instead of yuan. The key message is the US dollar being bypassed.

To promote their strategic partnership, Russia and China  – via the Russian Central Bank and the People’s Bank of China – have been developing ruble-yuan swaps for quite a while now. Once that moves beyond the BRICS to aspiring “BRICS Plus” members and then all across the Global South, Washington’s reaction is bound to be nuclear (hopefully, not literally).

Washington’s strategic doctrine rules RC should not be allowed by any means to be preponderant along the Eurasian landmass. Yet what the BRICS have in store geo-economically does not concern only Eurasia – but the whole Global South.

Sections of the War Party in Washington bent on instrumentalizing  India against China – or against RC – may be in for a rude awakening. As much as the BRICS may be currently facing varied waves of economic turmoil, the daring long-term road map, way beyond the Xiamen Declaration, is very much in place.

*  *  *

Finally, having threatened China just this week with exclusion from SWIFT, we suspect Washington is rapidly running out of any great ally to sustain the petrodollar-driven hegemony (and implicitly the US war machine). So will calls for a Venezuelan invasion now commence, if for no other reason than to teach any other nation contemplating a similar move that it will simply not be allowed?

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Philo Beddoe's picture

I bet there are some children in need of protecting in Venezuela. 

Get the fuck in there Unlce Sam and save them. 

The_Juggernaut's picture

I'm sure the bus driver knows what he's doing.

yomutti2's picture

Venezuela's main problem is getting somebody to buy their oil in any currency. Orinoco oil has an extremely high molecular weight, which makes it very viscous. It also makes it a hard to crack. It's a pain in the ass to refine.

 

ParkAveFlasher's picture

good luck moving that slippery through a US-controlled canal to far-off ports-of-call.

That milkshake will be drunk.

CuttingEdge's picture

Oops.

Didn't Maduro read Saddam and Gaddafi's obituaries?

 

Wile-E-Coyote's picture

Maduro has had a butt plug installed.................nothing like forward planning.

peddling-fiction's picture

Bluffdale will soon not be able to pay its minions.

What are you going to do Wile?

Fish Gone Bad's picture

Not pricing oil in $$ is probably tantamount to an act of war.

NumNutt's picture

Dammit Wile-E-Coyote!!! You made me spit out a peice of my tuna salad sandwich when I read that, LOL!

StychoKiller's picture

Hopefully, Maduro is too busy to do any carpentry projects involving nailguns, also! :>D

IronForge's picture

That's why they're going sell via CHN.

CHN will protect deals made via their Bourse.

If they sell to IND, IND may also provide Escorts.

Checkmate.

 

PS

Next step is to see how CHN will PX to attract more Buyers and Sellers

serotonindumptruck's picture

This is the financial equivalent of an Archduke Ferdinand event.

Mr 9x19's picture

http://www.zerohedge.com/news/2017-05-18/venezuelas-oil-production-brink...

not that much..

PEMEX and the companies that produce shale oil in the US do not earn a shit...
For companies operating in shale oil, it is clear that they never earned anything.

 
If Venezuela imports American crude oil, it is because it is condensate oil, to exploit the heavy crude of the Oroonoko.

--> production plunges, refineries are operating at idle speed, some at the limit of dropping out, it is the fault of the government, the excessive expenditures, that do not allow investing? Let us forget an old reality in Venezuela, that of peak oil, of the difficulty of exploiting the heavy crude of the Oroonoko, a large reservoir, to which one knows only to put a small tap. It does not matter how much money can be put into it.

 

serotonindumptruck's picture

I was referring more to the precedent that was being established, i.e., the refusal to accept USD for oil.

Kayman's picture

The yuan is pegged to the USD. Ergo pricing in Yuan is pricing in USD,

Let China grow some balls and let the Yuan float.

Mr 9x19's picture

anyway, venezuela is dead country, just like any others willing to maintain extraction of oil for more than they will earn by selling it.

 

oil era is done.

LawsofPhysics's picture

Fiat is fiat is fiat, period.  ALL fiat are dying, doesn't matter if it is the dollar of the yuan.

 

FAIL!

rf80412's picture

China's been financing the construction of a canal through Nicaragua.

johnnycanuck's picture

Standard Oil seemed to like it. Yeah, all that long ago.

rf80412's picture

If it's cheap to buy, and the costs of the extra refining infrastructure are essentially fixed and can be amortized over time, then someone who isn't afraid of high up-front costs would consider it a bargain.

Toxicosis's picture

Why anyone downvoted you devoid of any legible explanation is a conundrum to me.  So please start spewing non-senisical shit that does not involve actual facts so that you can be liked by the other intelligentsia here on ZeroBound.

king leon's picture

Russia is buying up everybody's oil at the moment and guess what, Russia isn't buying or paying in U$D.

Slippery Slope's picture

CNN Breaking News: Maduro's troops kick out babies from incubators.

greenskeeper carl's picture

Yep, I was thinking the same thing as you an Philo. Looks like someone is just begging to be regime changed. Its been a while since the babies in the incumbators ploy was used, no reason they can't dust that one off. Sarin is pretty played out these days.

researchfix's picture

I am sure Venezuela is on Defcon. Is there any Bay of Pigs on their coast?

king leon's picture

Lots of countries now feel confident they can piss allover the US from a great height, we all know what happened to the wicked witch of the West.

peopledontwanttruth's picture

The puzzle comes together. Remember weeks ago trump said military options on the table with venuezula We were wondering why, this isn't a surprise in DC or to their masters. Heck they know when we fart. China being threatened out of swift? We're climbing in our 36,000 foot view.

spastic_colon's picture

because venezuela is the foremost bastion and leader of solid economic management??

reader2010's picture

About $30 billion Chinese investment has gone bad there. No worries.

peddling-fiction's picture

The choice of the Yuan for all of Venezuela´s oil transactions, points to the fact that they will not lose.

assistedliving's picture

why the downs?  TheMexican is right.  China and Russian buying up a jewel of S.A. right under our nose while we launch $1m cruise missiles into mud huts.

 

Anonymous_Beneficiary's picture

Weapons of mass destruction caches soon to be found in Venezuela?

serotonindumptruck's picture

The best deal that Hugo Chavez mananged to secure was probably the AK-103 rifle manufacturing facility that was purchased through the Russians.

Certainly not a WMD, but the AK-103 looks to be a fairly reliable weapon.

https://www.strategypage.com/htmw/htweap/20081026.aspx

https://en.wikipedia.org/wiki/AK-103

 

Raging Debate's picture

Yes they have new quantum fluctuation weapons that could destroy the entire universe. They must be stopped!!!

We Are The Priests's picture

Well, good thing we had a terror attack in London to keep our eyes off this little tid-bit of real news.

Better yet, good thing Irma passed through the area to give US Southern Command cover to up the numbers of "Rapid Response" teams in the area.

Slippery Slope's picture

China is going to open up Yuan Stores all over Venezuela.

DogeCoin's picture

So it looks like we're invading Venezuela next in the name of Freedom and Democracy.

saldulilem's picture

The means of settlement is still through bank transfer, i.e. dependent on SWIFT though, no?

BitchesBetterRecognize's picture

Dude- China has CIPS & BRICS Bank to bypass the dollah 

 

We Are The Priests's picture

There is CIIPS, which, along with the AIIB and the BRICS bank, is ready to process payments in place of SWIFT.  Spot on observation, though, because it is the next beat in the story.

LawsofPhysics's picture

ALL fiat are going to zero, period.  Is China ready to actually be transparent and back their currency with a fixed mass of gold?  No? Good luck then!

We Are The Priests's picture

It is the moment of truth that is coming; hopefully.  "I'll show you mine if you show me yours."

This IS the beauty of what China is doing.  They're forcing this moment of truth by making their new oil trade note redeemable in gold.

They're not bluffing.  Quite the opposite.  They're calling the US's bluff.

peddling-fiction's picture

And the U.S. only has two 3´s to show. <chuckle>

We Are The Priests's picture

Well, that may be a little overly optimistic, but you clearly understand.

A Man of Wealth and Taste's picture

Until Mnuchin follows thru on his threat to bar China from swift.

peddling-fiction's picture

Mnuchin can´t even get a jet for himself and his squeeze of a wife, without getting into hot water.

SAD