Venezuela’s Petro Payment Proposal Puts Russia in an Awkward Position
The Russian government was puzzled by Venezuela’s proposal to pay for spare parts for Russia-made KamAZ trucks in its state-backed cryptocurrency, the petro. What would you do if you ran a business, but all your preferred customers started asking to pay in obscure altcoins, or worse — their own ICO tokens?
Hey Friend, Would You Like Some Petro?
Earlier this week, when Russian and Venezuelan officials met to discuss mutual cooperation, the Venezuelans said they wanted to buy large amounts of KamAZ parts — but suggested paying for them in the country’s recently launched national cryptocurrency, the petro.
Typically, Venezuela would buy exports from Russia or other countries in the world’s reserve currency: the U.S. dollar. However those have been in short supply for Venezuela in recent times.
The petro proposal put Russian officials in an awkward position, as either accepting or declining the proposal would have an equally undesirable effect.
For years, Russia has supported Venezuela’s president Nicolás Maduro, just like it supported his predecessor Hugo Chávez and just like it supports a number of other rogue leaders with an anti-Western stance.
There were even media reports that Russia had allegedly taken part in launching the petro as part of a joint scheme aimed at bypassing sanctions slapped by the United States on the two countries.
Predictably, Russia denied having anything to do with the petro. And indeed, the allegations might be a little far-fetched. U.S. economic sanctions have apparently had a much more devastating effect on Venezuela than similar ones have on Russia, and Russia didn’t really need to invent a new cryptocurrency as badly as Venezuela did.
We Like Our Customers but Their Money’s No Good
By declining to receive the payment in the petro, Russia would distance itself from the Venezuelan cryptocurrency (and its questionable reputation), but relations with Venezuela, one of its few global allies, would be damaged.
On the other hand, accepting the payment would leave Russia’s Central Bank – or whichever other institution would be put in charge of handling the payment – with crypto assets that are still technically illegal in Russia, and cannot therefore be used in any way.
Furthermore, selling truck parts to Venezuela for petros would create a precedent, and Russia could eventually end up accumulating huge reserves of petros received for all kinds of exports to Venezuela.
And if other rogue regimes follow in Venezuela’s footsteps and issue their own cryptocurrencies, they will be more than happy to use them to pay for goods coming from Russia.
Petros, Bolivars, or Whatever – Does it Actually Make any Difference?
Incidentally, Venezuela already has huge outstanding debts to the Russian government and individual companies, and the sharp devaluation of its national fiat currency, the bolivar, makes the prospects of repaying those debts extremely uncertain — whatever currency it uses to pay.
At this point, Russian officials seem to be still undecided on which of the two equally unpromising options they should choose.
Russian observers, on their part, are warning against accepting the petro. The state-run business news agency Prime ran a story, quoting several experts as saying that the deal would be lucrative for Venezuela — and equally unprofitable for Russia.
Meanwhile, according to the piece, if Russia chooses to accept the petro payment, there might be other ramifications. For instance, acceptance of the petro by Russia could give at least a short-term boost to the Venezuelan cryptocurrency.
Since no national fiat currency is backed by anything other than its creator’s promise it will have value, does it even make any difference?
Maybe it’s just the word “cryptocurrency” that spooks Russia. A deal of that kind would mean a de facto acceptance by Russia of cryptocurrencies, which, in turn, would lead to the government’s moving on crypto regulation more quickly.
So, Russian officials will have to make quite an important decision for the future of crypto in the country — one way or the other.
What would you do, if you were Russia? Who’s the ultimate winner here? Let’s hear your thoughts in the comments.
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