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Venezuela’s problems are spreading to its trading partners: Cuba announced it will be cutting supplies of premium gasoline because of declines in imports from Venezuela. This puts Cuba in a difficult position as the Venezuelan fuel imports are subsidized, and replacing them will be a headache.
Although premium fuel is used by a minority of vehicles on the island – diplomats and businessmen working in joint ventures, as well as state officials – a shortage is always bad news and drivers of newer cars that use premium fuels have already been advised to stock up because starting on Saturday, premium will only be sold to tourists—and only until existing inventories run out.
Things are looking even worse in Venezuela. The country, home to the biggest crude oil reserves in the world, is sliding deeper into a recession, suffering various basic-good shortages, including, as of last week, its first motor fuel shortage in five years.
The reason for the decline in fuel exports is that Venezuelan crude is heavy and needs to be diluted with other liquids to be refined. These must be imported, but cash-strapped that it is, Caracas is finding it increasingly hard to pay for these imports.
The country recently borrowed some $55 billion from China and Russia in exchange for future oil supplies, and the deal is already backfiring – it is losing its foothold in India, a very lucrative market, because it has to meet its obligations under the loan-for-oil deals. Not only that, Caracas is finding it hard to maintain the Russian and Chinese shipments because of the ineffectiveness of PDVSA.
Related: Is Gasoline Demand On The Rise?
Meanwhile, the country seems to be moving closer to cementing the rule of Nicolas Maduro, which is widely seen as a path to dictatorship. On Wednesday, the Supreme Court of Venezuela ruled that Congress – which is dominated by the opposition – was working “outside the rule of law”, after claiming it was in contempt of earlier rulings. The Court seized the powers of parliament and declared it invalid.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.