CARACAS, Venezuela -- The government of this oil-rich but struggling country, looking for ways to circumvent U.S. sanctions, is telling oil traders that it will no longer receive or send payments in dollars, people familiar with the new policy have told The Wall Street Journal.
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, known as PdVSA, has told its private joint venture partners to open accounts in euros and to convert existing cash holdings into Europe's main currency, said one project partner.
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The measure is designed to bypass financial sanctions President Donald Trump's administration leveled against Venezuela's government last month for jailing political opponents and creating a super body of pro-government delegates that bypasses all institutions.
PdVSA and the country's energy ministry didn't respond to requests for comment.
The new payment policy hasn't been publicly announced, but President Nicolás Maduro's government had hinted it was moving in this direction after the U.S. Treasury Department banned any U.S. company or citizen from buying new Venezuelan debt. The government here has begun to call the sanctions "a blockade" on its extensive state media apparatus, mimicking the language its close ally, Cuba, has used when referring to Washington's economic embargo against the island.
"To fight against the economic blockade there will be a basket of currencies to liberate us from the dollar," Vice President Tareck El Aissami, who has been blacklisted by the U.S., said Friday.
Venezuela has become increasingly isolated from the international finance system as Mr. Maduro responded to antigovernment demonstrations by ordering a crackdown that resulted in the deaths of more than 120 people and dismantling the country's last checks and balances. Big international banks have been increasingly wary of doing business with his government, forcing PdVSA to rely on banks such as Russia's Gazprombank and China CITIC Bank to process crucial oil payments.
Experts who closely track the Venezuelan economy were perplexed by the government's anti-dollar policy, noting that it is difficult for the country to isolate itself from the financial system of its biggest trading partner, the U.S. Exports of oil, primarily to the U.S., account for about 95% of Venezuela's hard currency earnings.
"You can say whatever you want for your domestic propaganda and make it look like you're retaliating against the U.S.," said Nomura debt analyst Siobhan Morden. "This political posturing will only be to their detriment."
She said the effort would increase transaction costs for customers to switch currencies. "You're imposing self-harm with no practical purpose, " she said.
Henkel Garcia, an economist at Caracas-based consultancy Econometrica, said the government fears further U.S. financial sanctions and is worried its assets could be seized abroad. Venezuela faces dozens of international lawsuits as foreign companies seek compensation for projects nationalized in recent years.
Maintaining the flow of oil revenue is a priority for Mr. Maduro, who is facing falling crude output and about $3.5 billion in bond payments later this year.
Mr. Maduro responded to the U.S. sanctions by accusing Mr. Trump of waging an "economic war" against him amid an unprecedented recession. Washington's latest sanctions prohibit any U.S. citizen or entity buying from PdVSA any new debt of over 90 days. Some lawyers interpret this to include oil sale contracts issued by the Venezuelan company.
The Venezuelan president has promised to switch the country's commerce away from the U.S. and to create a basket of currencies from Russia, China and India that would be offered to local companies to import goods under the country's system of currency controls.
"Managing euros seems like their second-best choice," said Mr. Garcia. "When they say they're moving over to rubles or yuan, that's just anti-imperialist rhetoric."
Venezuela's government halted dollar auctions for importers on Tuesday, citing the U.S. sanctions. The country's officials are also in early talks with boutique financial companies in Europe and Asia to restructure their dollar debt in different currencies, said a person familiar with the matter.
--Kejal Vyas contributed to this article.
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(END) Dow Jones Newswires
September 13, 2017 19:07 ET (23:07 GMT)