Venezuela’s Petro Currency Dies Amid Severe Economic Collapse

In 2018, the state-backed cryptocurrency Petro (PTR) was released as a means to advance Venezuela’s monetary sovereignty. Backed by the country’s oil, gasoline, gold, and diamond supply, it was intended to be a new means of international financing. Although the PTR was announced in February of 2018, development has been sparse. Even worse, it has been utterly ineffective in addressing any of the record-setting inflation rates the country is currently experiencing. The situation is far worse in the country than most people realize. According to the New York Times, economists say that Venezuela is undergoing the single largest economic collapse outside of war in the last 45 years. The economic collapse even surpasses Zimbabwe’s under Robert Mugabe and even the fall of the Soviet Union. Although U.S.-led international sanctions have undoubtedly crippled the nation even further, the Venezuelan state is ultimately to blame for the collapse. The Petro was billed as a means to escape the monetary domination of the United States. However, with the country increasingly isolated, the only place it can turn to is Russia.

Future of the Petro and Venezuela’s Economy

Russian and Venezuela are now looking to work together to eliminate the use of US dollars for trade between the two countries. Currently, they are mulling over two possible options: the Petro and the Russian ruble. The only update from Venezuelan authorities has been from its UN ambassador, Jorge Valero. He told reporters, “We are currently trying to transact using other currencies including the cryptocurrency El Petro, which we created.” Russian authorities, however, remain skeptical. The Petro was dead before it was even formally proposed. According to Digital Economy committee member, Arseniy Poyakov, nothing has changed about the Petro since it launched, “It wasn’t backed by anything except beautiful words then, and this hasn’t changed.”

A Deal with Russia Seems Most Likely

Therefore, it looks as though the Petro, proposed as the possible ‘savior’ to Venezuela’s crippling hyperinflation, will have little to no actual use. This poses a problem for Venezuela as the country looks to stabilize its monetary policy. It’s most likely that Venezuela will be forced to adopt the currency of its largest ally, Russia, until its economy stabilizes. Given that Venezuela’s back is against a wall geopolitically, it either must forgo its monetary sovereignty in the short-term, or its government needs to be cleaned out by its suffering people. Given that the Petro is a lost dream and Maduro’s state won’t relinquish control, a formal deal with Russia covering monetary stability and trade in rubles seems most likely. Do you believe Venezuela will end up having to strike a deal with Russia? Let us know your thoughts in the comments below.