The Trump administration's move Monday to ban the use of Venezuela-issued digital currency known as the petro is expected to have only symbolic impact in pressuring the Maduro regime. But the US continues to consider oil-sector sanctions and the significant impact they could have on US refiners, according to a White House official.
"Oil-sector sanctions would be a fairly strong step forward and would have ramifications not just for the government in Caracas but also for the people of Venezuela, stability and economy in the Caribbean, and most importantly the US economy," a senior Trump administration official said on a background call with reporters. "We are actively considering what steps we want to take and what the best timing is to maximize the effect of our actions."
Monday's executive order signed by President Donald Trump bans "all transactions related to, provision of financing for, and other dealings in by a US person or within the US, any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the government of Venezuela" on or after January 9.
The order said Venezuelan President Nicolas Maduro was attempting to circumvent US sanctions by issuing the digital currency in a process that Venezuela's democratically elected National Assembly has denounced as unlawful.
Maduro in December announced the creation of the cryptocurrency based on reserves of oil, natural gas, gold and diamonds. The government began presales February 20.
Analysts doubt whether the petro has actually been used to pay for oil sales on the international market.
Joe McMonigle, an oil analyst with Hedgeye Potomac Research and former Department of Energy chief of staff, said the idea of a petrocurrency is really only viable in Maduro's mind.
"So I think Trump's executive order is to send him a message that the walls are closing in on him as the US tightens the screws on what Maduro sees as a loophole in US sanctions," he said.
McMonigle said the order does not preclude additional energy sanctions on Venezuela.
"I expect that oil sanctions discussions have somewhat stalled due to the departures of [former Secretary of State Rex] Tillerson and [White House economic adviser] Gary Cohn, but the administration will need to regroup at least before the Summit of the Americas in mid-April that Trump has announced he will attend," he said.
Francisco Monaldi, a fellow in Latin American energy policy at the Baker Institute for Public Policy, also doubts anyone has used the cryptocurrency for oil deals. He said the executive order makes it clear to oil service companies, state-owned PDVSA's joint venture partners and suppliers of diluent and oil products that they cannot receive Petrocoins, even to recoup overdue debt.
"Even European companies will probably not take them," Monaldi said. "I am not sure that they would have accepted them anyway, for fears that it was already part of the sanctions since it seems like a debt instrument. This just makes it clearer."
US net imports of Venezuelan crude fell to 437,000 b/d in December, down from 718,000 b/d a year earlier and the lowest since Venezuela's 2002-03 oil strike, according to the latest Energy Information Administration data.
