Venezuela Ditches the Dollar for the Euro
by John Lawrence, October 22, 2018
Venezuela has taken steps to free its economy from the "tyranny" of the US dollar. President Maduro will now sell oil for Chinese yuan. International settlements will be made in euros. Maduro blames the US for making his economy even worse because of the sanctions the US has applied. Maduro started the process of moving the country's DICOM system of official tiered exchange rates in September 2017 when he declared that Venezuela would use a "new system of international payments."
The sanctions, recently introduced by Washington against Caracas, “block the possibility of continuing to trade using the US dollar on the Venezuelan exchange market," El Aissami said, adding that the American restrictions were “illegal and against international law.”
The American “financial blockade” of Venezuela affects both the country’s public and private sectors, including pharmacy and agriculture, and shows “just how far the imperialism can go in its madness,” the vice president said.
Venezuela’s floating exchange rate system, Dicom, “will be operating in euro, yuan or any other convertible currency and will allow the foreign exchange market to use any other convertible currency," El Aissami said.
The vice president added that all private banks in Venezuela are obliged to participate in the Dicom bidding system.
The government is going to sell 2 billion euros between November and December to allow the public to purchase the European currency “at a real, non-speculative rate,” he said.
Washington isn’t hiding its desire to see Venezuela’s socialist President, Nicolas Maduro, whom it’s accusing of a crackdown on the country’s opposition, removed from power. Trump administration even spoke of the possibility of the so-called “humanitarian intervention” into the country.
Last year, the US imposed sanctions prohibiting trading new debt and equity issued by the Venezuelan government and state oil company, PDVSA. The Department of Treasury also introduced several rounds of restrictions against Venezuelan top government officials. Maduro was among those blacklisted and called it “an honor.”
The US pressure has contributed to the severe social and economic crisis in Venezuela in recent years as it was hit by hyperinflation, the devaluation of the national currency and a shortage of basic necessities.
The harsh situation forced more than 2.3 million to people leave the country this summer in search of better life in Colombia, Ecuador, Peru and Brazil, according to the UN.
There is no doubt that US sanctions hurt the people of other countries and not just high end officials and government potentates. Because of sanctions, many countries are shifting away from doing business with US dollars. In 1971 President Nixon took the US off the gold standard and made a 'deal with the devil' in Saudi Arabia that it would sell oil only for dollars and not any other currency. This made the US dollar the world's reserve currency and made it possible for the US to sanction other individuals and nations that were forced to do business with US dollars. Now that is changing after the US is using sanctions to punish other countries for their political beliefs. As institutions are being developed to bypass US sanctions and make that tool ineffective, the dollar will no longer be the world's only reserve currency. That will not portend good things for the US economy.