Update: India Considers Using Rupees for Venezuelan Oil, Threatening the Petrodollar

**Update: A statement released by the Azeri energy ministry said Venezuela has suspended oil exports to India. The statement was released following talks Tuesday between Azerbaijan’s energy minister and Venezuelan oil minister, Manuel Quevedo. The statement read  “At the meetin… Quevedo said in order to prevent a sharp reduction, various measures are being implemented and diversification of the export market is underway,” continuing, “Russia and China are seen as the main destinations because of the suspension of oil exports to India.”**

As the US increasingly cuts off Venezuela from the international financial system with sanctions, Indian refiners will be forced to either stop importing Venezuelan oil or turn to an alternative payment channel.

Nearly all global trade of oil is done in the US dollar, known as the petrodollar. Indian officials have said the government of India is already advising refiners to avoid payment channels controlled by the US.

The US has been pressuring India to cut imports of Venezuelan oil. During a meeting between US Secretary of State Michael Pompeo and the Indian Foreign Secretary Vijay Gokhale on March 12, Pompeo warned that India needed to avoid becoming the “economic lifeline” to the government of Venezuela.

Given the US influence on the international financial system, the most likely alternative will be for Indian refineries to start paying for Venezuelan oil in the local currency of rupees, at least to start.

Following a proposal from Venezuela and suggestion from refiners in India, the government has proposed setting up an alternative mechanism where payments will be made in rupees, similar to the one available for Iran.

India is the third largest buyer of Venezuelan oil, after the US and China, averaging around 340,000 barrels a day in 2018.

 

 

Photo: “Going for broke …” by Gopal Vijayaraghavan is licensed under CC BY 2.0

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