Analyst skeptical on Chávez's proposal for new oil-backed currency

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Friday, April 3, 2009

Venezuelan President Hugo Chávez's proposal to create a new, oil-backed common currency is being driven by low oil prices and not likely to be taken seriously, energy analyst and president of Chicago-based Brookshire Advisory and Research, Gianna Bern, told BNamericas.

"Any efforts by Chávez to promote an oil-backed currency are primarily driven by currency pressures on a devalued bolívar amid the collapse in crude oil prices," she said. "Efforts toward broad acceptance will be met with skepticism at best."

Presenting his plan at a summit of Middle Eastern and South American countries in Doha, Qatar, Chávez said the "Petro" would be similar to the long-gone gold standard but would be backed with oil reserves.

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Supporting statements made recently by Chinese and Russian authorities that called for the creation of an international reserve currency to substitute the US dollar, Chávez said the Petro could be used by countries with significant oil reserves.

Chávez said he would talk to Iran and China about the idea.

The Venezuelan leader was in Teheran on April 2 and said that the two countries had capitalized a new Venezuelan-Iranian bank with US$200mn, Venezuela's oil ministry said in a statement.