The Trump administration’s establishment of sanctions against Venezuela’s state oil company PDVSA has reportedly left the country’s government in a bind to secure alternative payment methods for crude oil. According to reports, more than $3 billion has been lost from these payments brokered by Sunacrip, the country’s crypto watchdog. However, the documents reviewed estimate that the hole may be closer to $20 billion. As a result, Petroleum Minister Tareck El Aissami stepped down and Sunacrip’s former chief, Joselit Ramirez, was arrested as part of a corruption investigation. In addition, Sunacrip has implemented a nationwide suspension of bitcoin mining “until things calm down.”
How Venezuela used crypto to sell oil and sidestep US sanctions
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In January 2019, when Venezuela’s state-owned oil company, PDVSA, wasincluded in the U.S. government’s sanctions(as part of steps taken by Washington to frustrate Venezuelan President Nicolas Maduro’s efforts to preserve the country), crypto emerged as an alternative to coexist with these sanctions emerged as a means to coexist with these sanctions.
The use of cryptography to circumvent the massive sanctions was rumored to have occurred in the country, but recentstatementsby Alejandro Teran, a member of the local oil consulting firm ICM Proyectos 2021,
have led to PDVSA’s The recent statements of Alejandro Teran, a member of the local oil consulting firm ICM Proyectos 2021, confirm that PDVSA was using cryptography as a way to circumvent these sanctions.
In a statement to the local newspaper Ultimas Noticias, Alejandro Teran described how these transactions took place: PDVSA used an intermediary who was responsible for processing payments and finding third-party buyers interested in Venezuela’s oil The company is said to have been the first to do so. He explained:
In other words, the government’s strategy to find private operators to circumvent the blockade and get the oil to the world market was correct.
Local analyst Heber Castro explains that to sell oil, they would use these intermediaries to broker oil to international companies, which would then receive the oil in deep-sea transfers that rely on ship-to-ship unloading operations. According to Castro, this is the reality faced by countries selling sanctioned goods. According to Castro, the oil is sold at a heavily discounted price and the middleman pays after the oil is delivered.
Castrosaidthat these intermediaries made payments “in various ways, mainly in cryptography, which is liquid, autonomous, and easy to store.” And this is where Sanaclip’s role was important, using different accounts and cryptocurrency wallets to obfuscate the source of the funds, exchanging them for US dollars in cash in countries like Colombia, and also at discounted prices.
This situation is the result of PDVSA’s use of a network of lesser-known intermediaries, as it was also forced to drop its deal with the Russian oil company Rosneft, which was sanctioned by the US Treasury in 2020, and also a series of Mexican brokers This appears to be the result of a network of little-known intermediaries.
The Venezuelan government conducted a series of arrests and sabotage operations that resulted in the arrest of several prominent figures at PDVSA. Antonio Perez Suarez, the company’s former vice president of supply and trade, was arrested along with 20 other executives who worked with him.
Venezuelan Oil Minister Tarek El Aissami stepped downon March 20and pledged to cooperate with ongoing investigations. The investigation and detention is being handled by the “anti-corruption police” created in2014, led directlyby Maduro, to “dismantle these mafias that are entrenched in sectors of Venezuela’s economic, political and judicial structures.”
The first person arrested as part of this corruption investigation was Joselit Ramirez, former head of Sunacrip, who was captured on March 18. Around that time, Maduro also organized a complete reorganization of Venezuela’s cryptocurrency watchdog, naming a new board that would review the organization’s operations to date.
El Aissami and Ramirez are part of a group of 14 Venezuelan government officials indicted by the U.S. government in March 2020 on narco-terrorism, corruption and drug trafficking charges.
Nationwide Crypto Mining Ban
This whole situation has led Sanacrip’s new governing board to enact a nationwide mining ban as part of an investigation and restructuring of the organization, according to reports from {90} Beincrypto, which this week Sanacrip used Corpoelec, the state-run electricity company, shut down all registered bitcoin mining operations and disconnected them from the power grid.
The largest crypto mining operations in several key Venezuelan states, including Lara, Carabobo, Miranda, and the Capitol District, are already disconnected from the national grid. As a result, mining companies are reportedly losing between $40,000 and up to $1 million for each month without operation. The miners have been forced to suspend operations “until things settle down” pending Sunacrip’s rebuilding, and no estimated date for restarting operations has been given.
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