Venezuela drops petro-dollar: how meaningful?

The government of Venezuela, under growing pressure from US sanctions, is telling oil traders that it will no longer receive or send payments in dollars, Dow Jones reported Sept. 13. Oil traders who export Venezuelan crude or import oil products into the country have begun converting their invoices to euros. The state oil company Petróleos de Venezuela SA (PdVSA), has instructed its private joint venture partners to convert existing cash holdings into euros. Plugging the switch, Venezuela-based state media outlet TeleSur writes: "The petrodollar is more important for US global domination than either arms exports or Hollywood culture, because it allows the US to be the biggest exporter of the dollar bills the rest of the world needs to be able to buy oil. Venezuela has decided to start de-dollarizing its economy."

TeleSur goes on to state that "China, Russia and Iran are following a dedollarization policy to escape US domination." The account says that "during his visit to China last August" (sic), Russian President Vladimir Putin announced, "the petrodollar system should be a thing of the past." (Note sloppy journalism: Putin visited China this May and last June but not in August of either year.)

Nikkei Asian Review also reported Sept. 1: "China sees new world order with oil benchmark backed by gold." 

China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.

The contract could become the most important Asia-based crude oil benchmark, given that China is the world's biggest oil importer. Crude oil is usually priced in relation to Brent or West Texas Intermediate futures, both denominated in U.S. dollars.

China's move will allow exporters such as Russia and Iran to circumvent U.S. sanctions by trading in yuan. To further entice trade, China says the yuan will be fully convertible into gold on exchanges in Shanghai and Hong Kong.

We've noted Iran's recent similar move to dump the petro-dollar, and China's long aspiration to replace the dollar with the yuan as the world's reserve currency. 

But we've also noted how depressed oil prices—coupled with the failure of "socialist" Venezuela to diversify its economy or prioritize self-sufficiency—is at the root of the country's current crisis. We understand the instinct to cheer the decline of US world domination. But the notion that a world economy still predicated on hydrocarbon exploitation but now trading in petro-yuans rather than petro-dollars would represent any real progress is precisely the fallacy of much of what passes for "anti-imperialism" these days.

From the long-term (and perhaps even short-term) perspective of human survival, it would certainly mean little. Atmospheric carbon is still sending the global biosphere into a tailspin of destabilization, whether it originates in products traded in dollars, euros or yuans.