Venezuela's offer to India: Buy crude oil at 30% discount but through cryptocurrency

Venezuela, a South American country with the largest oil reserves in the world, has offered India a deal - 30 per cent discount on crude oil only if India decides to buy it through digital currency. The 30 per cent discount on crude oil, which recently touched a whole new high of $75 a barrel, seems attractive, but India's disinterest in promoting as well as trading in cryptocurrency could pose a hurdle.

According to reports, Venezuela's blockchain-based digital Petro is the world's first state-backed virtual currency that recently tied up with a Delhi-based digital currency exchange Coinsecure. The bitcoin trading company will now sell oil-backed cryptocurrency Petro in India. Launched last year by the Venezuelan government, Petro is set to be formally recognised after the presidential elections in the country on May 20. Petro was put on pre-sale on February 20, following which the digital currency has raised over $3.8 billion so far.

Venezuela's blockchain department had sent a team of experts to India in March, after which the deal was struck with Coinsecure, reported Business Standard, quoting company's CEO Mahit Kalra saying "Venezuela wanted Petro as a cryptocurrency on Coinsecure".

Once added, Petro could be traded against the rupee and other cryptocurrencies on the online exchange. Kalra also said India has been offered a deal "to buy Petro for 30 per cent discount on oil".

The report suggests South American OPEC member Venezuela, which was declared to be in default with debt payments by credit rating agencies, is reportedly keen on promoting this in different countries due to the several economic crises in the country.

The Venezuelan government is intending to make Petro an official currency by 2020, but sanctions by countries led by the US could hurt its ambitions. The US, which has issued several sanctions against the Nicolas Maduro regime for allegedly suppressing the people of Venezuela for raising voice against hyperinflation and the shortage of basic things like food and medicine, in March, issued an executive order banning trade in Petro across the US.

Analysts suggest a major reason behind the digital currency push by the Venezuelan government was to circumvent the US sanctions. Last month, Maduro said Petro will be backed by a barrel of Venezuela's national reserve of petroleum.

The currency, tied to oil, has been called as the safest digital currency to invest by many, for Venezuela has the world's largest oil reserves of over 300 billion barrels. However, many have raised objection over its authenticity, fearing that though it would be a blockchain-based digital currency, the government would have full control over it and thus it would not be decentralised like Bitcoin.

As per Reuters, Indian imports of oil from Venezuela have fallen to their lowest levels in over half a decade. India's oil imports from Venezuela averaged around 300,000 barrels per day (bpd) between November 2017 and February 2018, a drop of about 20 per cent from the same period a year earlier and the lowest such level since 2012, according to data from shipping sources and industry.