Why Venezuela Was Never Really About Oil

Defending the dollar

In this post I will argue that the US takeover of Venezuela’s oil was not about the oil but about the continuance of US hegemony in the form of the petrodollar. I will give the background of the petrodollar, talk about its flaw, how countries have by-passed the petrodollar over the years. Then I will outline the rise of the BRICS unit as a currency, and argue that we need a global currency that is not linked to any single country’s currency.

In my previous post I explained that it was uneconomic for oil companies to spend billions upgrading the Venezuelan oil industry because the price of oil on the world market was low and dropping. And anyhow companies like Exxon had already lost billions earlier when they were in Venezuela and the oil industry was nationalised.

So I set about searching and found a great article from Eurasia Review written by a senior Indian journalist working in Sri Lanka. He explained that the dollar’s share of global foreign exchange reserves had fallen from nearly 65% at the start of 2000 to around 40% in 2025. In addition, gold prices had surged 30 percent since January 2025.

All this was going to panic the orange man in the White House. After all wasn’t it the rule that everyone pay for their oil in US dollars?

The history of the petrodollar

The petrodollar agreement was introduced in 1974, after President Nixon floated the U.S. dollar in 1971, severing its link to gold and triggering rising inflation and a decline in the dollar’s value. Then in 1973, Arab members of OPEC imposed an oil embargo on the U.S. and its allies, causing oil prices to nearly quadruple and creating global energy market turmoil.

The response was the creation of the petrodollar. This was an agreement between US and Saudi Arabia. Here I am quoting directly from an explanation by Daragh Cogley.

‘The 1974 agreement, though informal, had two critical components:

• Saudi Arabia agreed to price all its oil exports in U.S. dollars, ensuring a constant global demand for the currency.

• Saudi Arabia would invest its surplus oil revenues back into U.S. assets, primarily U.S. Treasury securities (a process known as petrodollar recycling), which provided low-cost financing for the U.S. economy.

This bilateral arrangement was subsequently expanded to include other OPEC nations by 1975, cementing the U.S. dollar’s status as the world’s primary reserve currency and the de facto currency for international oil transactions.’

The petrodollar has consequences

Apart from the fact it makes absolutely no sense at all for global trade to be transacted using one country’s currency, there is a big flaw in the petrodollar scheme.

The structure of the petrodollar system pushes the US towards chronic trade and current account deficits, so that the rest of the world has enough dollars to pay for their imports in dollars.

But Trump has been desperately trying to reduce the deficit by imposing tariffs. So that would mean the rest of the world is short of the USDs they need for buying energy. And then Trump complains that countries are finding other ways of paying for energy, using the yuan or the Euro instead. Or the newly invented BRICS currency that is 40% gold and 60% BRICS+ national currencies, using blockchain technology for secure, fast transactions. Hold that thought.

The rise of de-dollarisation

The US has always hated oil-exporting countries or leaders of countries that accept currencies other than the US dollar for their oil. Saddam Hussein of Iraq announced in 2000 that Iraq would sell oil in Euros, and in 2003 he was executed for having so-called ‘weapons of mass destruction’. In 2009, Muammar Gaddafi of Libya proposed a gold-backed African currency called the ‘gold dinar’ for oil trade. In 2011, NATO bombed Libya and Gaddafi was sodomised with a bayonet by rebel fighters before being shot multiple times. The gold dinar died with Gaddafi.

And there are many more.

1. Iran has long accepted Euros, Yuan, and other currencies due to sanctions, selling oil in Yuan to China.

2. Russia has redirected oil to Asia, accepting yuan and other currencies after being cut off from dollar systems.

3. Venezuela has increasingly used Yuan and Euros for oil sales as it aligns with BRICS.

4. Saudi Arabia has shown openness to using non-dollar currencies like the Yuan, especially with China, and is exploring digital currency projects. Yet it hasn’t answered the invitation to join BRICS.

5. The UAE accepted Indian rupees for a cargo, and Pakistan pays for Russian oil in yuan.

The Triffin dilemma

The Triffin dilemma is the structural conflict that arises when a national currency (like the US dollar) is used as the main global reserve currency, forcing its issuer to choose between domestic stability and supplying enough liquidity to the rest of the world. The only way a single-country reserve currency can meet that demand is by sending its currency abroad, typically through persistent balance‑of‑payments or current‑account deficits, expanding its external liabilities.

But people start worrying that the US is creating too much money and piling up debt. As of mid-January 2026, the U.S. national debt is approximately $38.43 trillion. Most of this money is created by banks as interest-bearing loans.

Issuing a reserve currency can pressure a country to prioritise global stability over its own economic needs. If another currency replaces the dollar, U.S. borrowing costs could rise, impacting debt repayment.

Solutions, like a new international monetary system, aim to alleviate the burden of maintaining reserve currency status.

Trump does not understand the Triffin dilemma because his tariff regime was designed to reduce the US deficit which jeopardises his desire to keep the US dollar as the world’s reserve currency and make the US so economically powerful.

Proposed alternatives for a global currency

• Over the years, there have been many proposals for a global currency. As far back as the 1940s Keynes proposed the Bancor, defined in terms of gold and countries would hold them at the International Clearing Union.

• The IMF in 1969 created Special Drawing Rights (SDR), an international reserve asset based on a basket of major currencies. These are not used much.

• Proposed by Benjamin Graham in 1937 and further developed with Frank Graham (no relation) during World War II (1944), the plan for a Commodity Reserve Currency (CRC) aimed to create a new international currency backed by buffer stocks of raw materials in fixed proportions corresponding to their weight in world production and trade.

• Based on this idea, Bernard Lietaer, a Belgian banker who had worked to design the precursor of the Euro, proposed the Terra. This appears to be the best of all proposals. It was a Trade Reference Currency based on a basket of 9-12 key commodities and services. It has a demurrage (negative interest) rate equal to the storage and insurance costs of 3-4%, discouraging hoarding and helping stabilise demand over the business cycle.

• The BRICS nations have proposed a currency called the Unit for trading that involves 40% gold and 60% in the national currencies of participating countries. It was trialled late in 2025.

Bernard Lietaer and Deirdre 2003

The return of gold as part of a global currency

2022 was the year Russia invaded Ukraine and US retaliated freezing of Russia’s international reserves. This contributed to increased central bank interest in gold—but it is one of several drivers, alongside broader geopolitical uncertainty, inflation hedging, and desires to diversify away from heavy dollar/euro exposure.

BRICS nations are buying gold primarily to reduce reliance on the US dollar, hedge against geopolitical risks like sanctions, diversify foreign reserves, and challenge Western financial dominance, creating a more multipolar system with potential for gold-backed alternatives and local currency trade. Gold serves as a stable, neutral, and sanction-resistant asset, contrasting with dollar-denominated assets vulnerable to political shifts.

BRICS originally started with Brazil, Russia, India, China and South Africa. But now has ten members, after Egypt, UAE, Iran, Indonesia and Ethiopia joined. It has invited Saudi Arabia, who has yet to accept.

China has been buying up gold for 14 straight months now and gradually selling US Treasuries.

India takes the helm at BRICS in 2026. BRICS members now control 70% of the world’s gold reserves and their new currency is being trialled now, requiring gold as part.

Summary

The fact that the BRICS unit has been in a trial phase set alarm bells going in US. Trump fears that the petrodollar will keep declining, giving US less power internationally. The petrodollar is losing its privileged position. US is losing its global hegemony. Oil exporting countries that have accepted other currencies for their oil (like Venezuela, Iran, Russia, and Pakistan) have greatly displeased Trump.

The originally two-way deal creating the petrodollar was unsustainable anyway. Other fairer international currencies have been proposed, and it is overdue for concerned global citizens to demand a currency backed by the most traded commodities. It is time to look seriously at the Terra with all its advantages. If we don’t get this, then we have years of using the BRICS Unit which gives the ten BRICS nations an unfair advantage. No one country or group of countries should have an advantage from an international currency. But the balance of global power is slowly and steadily moving from US to China and the other BRICS nations.