Venezuela Mafia Offer to India
There is a famous quote from the movie Godfather. The quote is about making an offer that the other party cannot refuse. This quote became wildly popular because of the movie. As a result, any offer which was too good to be refused came to be known as a mafia offer.
This is the kind of offer than India has received from Venezuela in the past week. Oil is a strategic commodity which is often imported by almost every country. A discount of even a few dollars on a barrel is considered to be a good deal given the fact that the supply of oil is concentrated with a handful of countries. However, Venezuela has offered India a whopping 30% discount on oil prices! This is certainly too good to be true and can go a long way in reducing the import bill of this developing economy. However, Venezuela has laid down one condition. It wants India to make payments for its oil imports using Petro, the cryptocurrency which has been launched by the Venezuelan government. In this article, we will have a closer look at the petro and also how India should react to this offer.
What Is The Petro?
Venezuela has been facing several economic problems.
Both the above factors have led the Venezuelan government to issue the Petro. The Petro is an oil-backed cryptocurrency. It is the first cryptocurrency which is being issued by any sovereign nation. However, because the financial situation is so bad in Venezuela, very few people are willing to invest their hard earned money in this digital currency. The digital currency is the last frantic bet being made by President Maduro in order to save the ailing economy of Venezuela.
Indias Response to the Offer
Prima facie the offer seems to be too good to resist. However, the Indian government has not responded directly to the offer. Hence, it can be assumed that India is not planning to accept the offer. This has come as a surprise to many who are aware of the oil prices situation in India.
The Indian government is facing a full-blown oil crisis because of the rapidly increasing price of oil in the nation. The taxes levied by the government on the oil are said to be the main reason behind this draconian price hike. The problem is that if the government rolls back these taxes, it will have to cut down aggressively on expenditure as well. This would mean that the government would have to stop funding many welfare schemes. This decision will make the government politically unpopular. Therefore, the Indian government cant afford to cut taxes. On the other hand, if fuel prices are not dropped, food inflation will rise rapidly. Rising food inflation is also likely to kick up a political storm in the country.
The Indian government finds itself in a catch 22 situation and Venezuela seems to be offering a viable solution. Yet, the offer has not been accepted.
Reasons behind Non-Acceptance of the Offer:
Venezuelas offer seems to be too good to be true. This is making Indian authorities cautious. The last thing they want is to be caught up in a scam.
To sum it up, the offer made by Venezuela to India is a desperate financial move of a failing economy. If India were to accept the offer, it would end up tying its fortunes with the failing economy.
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