Venezuela Offers India 30% Discount on Oil Via Petro Cryptocurrency
In an effort to boost adoption of its petro cryptocurrency, Venezuela is offering governments a huge discount on oil. Case in point: Caracas has reportedly offered the government of India a 30% discount on oil purchases made through the state-backed petro coin.
According to various reports, India has been offered a large discount on Venezuelan oil paid for by the petro cryptocurrency. The petro is supposedly backed by Venezuelan crude, with one unit of the digital currency pegged to one barrel of oil. At the time of writing, the Indian government has not indicated whether it will accept the offer.
India’s oil imports from the South American country has fallen to the lowest in over five years. Imports averaged about 300,000 barrels per day between November 2017 and February 2018 which represents a drop of around 20% from year-ago levels. The five-year average is around 440,000 barrels per day.
Supply disruptions are largely to blame for the sharp drop-off in sales to India. The combination of lower production and obligations to other countries leaves fewer cargo avaiable. Venezuela is obliged to supply Russia and China with the lion’s share of its output to pay back existing debts.
Venezuela’s oil production plunged last year to the lowest in decades as Maduro’s socialist government contended with quadruple-digit inflation, a contracting economy and social unrest.
Roiled by a multi-year economic crisis, Venezuela is looking to harness the petro as a tool for economic growth. According to Venezuelan President Nicolas Maduro, the state-backed cryptocurrency has generated more than $3 billion in sales. He recently announced that the Central Bank of Venezuela will receive about a third of the proceeds.
Analysts have speculated that petro proceeds are a way for the Maduro government to sidestep U.S. sanctions against the socialist regime. U.S. President Donald Trump signed an executive order last month prohibiting Americans from participating in the petro sale.
Venezuela’s opposition-led congress has deemed the petro illegal and a “fraud” that is being used by Maduro to further his own interests.
Though Venezuela is the first country to issue a state-backed cryptocurrency, several others are considering a similar project including Russia (see: Cryptoruble), Kazakhstan and Estonia. Many proponents of blockchain technology believe that the concept of a state-run cryptocurrency is contradictory in nature since it lacks the fundamental component of decentralization.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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