Venezuelan Minister of Oil announced on 15 September 2017: “From this week, the average price of oil will be indicated in the Chinese yuan”. For the first time, the sales price of Venezuelan oil is no longer priced in the dollar.
This is Caracas’s response to the sanctions imposed by the Trump Administration on 25 August; sanctions far harsher than those imposed by the Obama Administration in 2014, for the Trump sanctions prevent Venezuela from cashing in the dollars received from selling oil to the United States - more than a million barrels per day. Until now, these dollars were used to import consumer goods such as foodstuffs and medicines.
The sanctions also prevent bonds issued by the PDVSA (the Venezuelan state oil company), from being purchased. Washington is seeking to achieve two objectives:
• to heighten in Venezuela a scarcity of basic necessities and thus provoke growing discontent among the people, which is exploited by internal opposition (bribed and fed by the U.S.A.) with the aim of demolishing Maduro’s government; and
• to send the Venezuelan state into default, that is, to bankrupt it, preventing it from paying its foreign debt instalments. In other words, to bankrupt the state with the biggest oil reserves in the world, reserves that are more than ten times the size of the US’s.
Caracas is seeking to dodge the stranglehold of the sanctions. It is no longer quoting the sales price of oil in the US dollar. From now on, this price will be quoted in the Chinese yuan. A year ago, the yuan had entered the IMF’s basket of currencies (joining the dollar, the euro, the yen and the sterling) and Peking is all set to launch future contracts for the sale and purchase of oil in yuan, convertible into gold. “If the new future were to gain a foothold, eroding even just partly the excessive power of the petrodollar, it would be a thundering blow for the American economy”, comments Il Sole 24 Ore.
Billboard from 2015
What is being debated by Russia, China and other countries, is not only the excessive power of the petrodollar (the currency of reserve earned from the sale of oil), but the very hegemony of the dollar. Its value is determined not by the US’s real economic capacity but by the fact that the dollar constitutes almost two thirds of the global reserve currency and is the currency used to stabilize the price of oil, gold and goods generally. This permits the Federal Reserve, the Central Bank (which is a private bank), to print thousands of billions of dollars to fund the U.S.A’s colossal debt – around 23,000 billion dollars – through purchasing bonds and other instruments issued by the Treasury.
In this context, Venezuela’s decision to free the price of oil from the dollar is causing a seismic tremor that, from the South American epicentre, is making the entire imperial palace, founded on the dollar, tremor. If the example set by Venezuela were to provoke a contagion, if the dollar were no longer to be the main currency of trade and the international reserve currency, an immense quantity of dollars would flood the market, making the value of the US currency collapse.
This is the real motive pushing President Obama to declare “a national emergency against the unusual and extraordinary threat posed to national security and US foreign policy by the situation in Venezuela” in the Executive Order of 9 March 2015 .
This is the same motive for which President Trump announces that the “military option” against Venezuela is now on the table. The U.S. Southern Command is getting ready for this. Its emblem is the Imperial Eagle that dominates Central and South America, ready to sink its claws into whoever rebels against the Dollar’s empire.