President of Venezuela, Nicolas Maduro, has made good on his promise to forsake the US dollar and publish their oil prices in yuan, which is the currency of China. This highly controversial move is likened to Venezuela giving the US “the middle finger”.
Former Venezuelan leader, Hugo Chavez has threatened this move for over 14 years, but Maduro made good on the promise in early September 2017.
While Maduro’s brazen move was done as an act of standing up to the United States government since they did not support him on his quest to dictatorship, Chavez’s motives were based purely on the fact that he felt that the US dollar would someday lose its place in the global currency ranking.
Many view Venezuela’s choice to price its oil in yuan as all bark and no bite since prior to Maduro’s announcement, it was rumoured that they would favour the Euro instead. Whilst the US is on a path to force Maduro to end his campaign to rewrite Venezuela’s constitution, it is highly unlikely that China would assist, which makes the switch to pricing in yuan a very safe one for Venezuela. It must also be noted that Venezuela borrowed approximately $60 billion from China in exchange for selling oil at a discounted price to the Asian powerhouse.
Venezuela’s energy sector and by extension it’s economy is currently a disaster. The countries state-run oil company, PDVSA is travelling downhill.
The oil that is to be used to pay back the $60 billion debt is not being produced since according to OPEC, Venezuela’s oil production has been on a decline over the past few years, from 2, 375 barrels per day in 2015, to 2, 159 barrels per day in 2016. Production fell further in 2017, with an average of 2, 057 barrels per day in the first quarter and dipping to a low of 1, 918 barrels per day in August. These figures contradict the countries massive oil reserves, which are reported as the biggest in the world.
On the Transparency International’s corruption scale, Venezuela is ranked as 166 out of 176 countries. That fact speaks for itself. While the government continues to attempt to take shots at the US sanctions, the people of Venezuela are the ones suffering since they are in the middle of a humanitarian crisis, with intensifying food and medicine shortages.