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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Russia Ready To Seize Control Of The World's Largest Oil Reserves

The Venezuelan government is readying to hand over control over state oil company PDVSA to Russia’s Rosneft, a local newspaper has reported, citing sources from the industry.

Russian TASS reports, quoting El Nacional, that the radical move is being discussed as a way of erasing Caracas’ debt to Moscow. The debt is sizeable: at the end of June this year, money owed to Rosneft alone stood at $1.1 billion. That’s down from $1.8 billion at end-March.

Two years ago, Caracas and Moscow sealed a deal for the restructuring of another $3.15 billion debt to Russia over 10 years with minimum payments over the first six years. Since 2006, Russian loans to Venezuela have reached more than $17 billion in total.

According to the El Nacional report, Moscow had reacted positively to the suggestion, and several commissions had been set up and sent to Venezuela to evaluate the situation at PDVSA. The first feedback from these commissions was reportedly that the company was too large and it needed serious layoffs to become more competitive.

Related: Is This The End Of The Lithium-Ion Battery?

Competitiveness remains questionable, however. Most of the U.S. sanctions on Venezuela have targeted precisely PDVSA because of its vital role as the country’s—and the Maduro government’s—cash cow. Rosneft is the subject of U.S. sanctions, too.

Rosneft is active in Venezuela in joint projects with PDVSA. However, these activities appear to not be in breach of U.S. sanctions, according to the U.S. Special Envoy for Venezuela Elliott Abrams. However, Abrams said last month that sanctions may be coming for the Russian company in the future. If the El Nacional report is confirmed, these will likely come sooner rather than later

Caracas reportedly wants to hand control over to Rosneft without having to go through privatization. In any case, a change of ownership over PDVSA would need to be approved by the National Assembly, which is controlled by the opposition.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on October 17 2019 said:
    Due to intrusive US sanctions against Venezuela, the Venezuelan government reached an oil arrangement with Russia under which Russia sells Venezuelan crude oil and gets paid. This arrangement has been in force for more than a year and has been motivated by two major factors. The first is for Venezuela to defy US sanctions and continue to export its crude worldwide. The second is for Russia to get payment for billions of dollars of loans it has extended to Venezuela.

    Accordingly, Russia’s giant oil company, Rosneft, which has joint projects with PDVSA, has undertaken the job of selling Venezuelan crude worldwide and paying the proceeds to the Venezuelan government.

    Still, this is a temporary arrangement while US sanctions are in place and will never amount to a handing over of PDVSA to Rosneft or full ownership since PDVSA’s oil reserves which are the world’s largest are the property of the Venezuelan people.

    In fact, Indian Nyara Energy confirmed just yesterday that it has been buying Venezuelan crude from Rosneft and paying for it in gasoline and gasoil which Venezuela badly needs.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Jonathan Flesher on October 17 2019 said:
    This sounds like a nightmare. Better to have them in American control.
  • Bill Simpson on October 17 2019 said:
    Not seize control of, but were given control of by Donald Trump, probably in hopes of a future Trump Tower Moscow after he leaves office.
    Several people who have known Trump for years, say he ran for president for the publicity, to make more money selling his name on buildings. The fact that he kept repeating over and over for nearly a year following the election, 'that the Democrats were expected to win' the election, sort of proves that he never expected that the electoral college system would deliver him the White House. With the exception of Brad Parscale and Putin, few people saw that coming. For Putin, it was the best investment in human history, outside of the Louisiana Purchase. That is why Trump had no acceptance speech ready to go on election night, and why many positions in his administration are still unfilled. After all, he did lose the popular vote by 2,800,000 votes. In no other democracy could such a thing happen.
  • Lee James on October 17 2019 said:
    Fossil-fuel oil is too much about politics and international intervention. Better to step back from oil dependency, for world peace and cleaner international motives. World leadership needs to step-up support for clean energy -- for a wide variety of reasons, though it will be hard.
  • naveen sreedevan shitijibes unilever on October 22 2019 said:
    Russia is taking control as America Oil majors are a financial mess.

    US governemtn (texas, North dakota states -remember rocking in the baken shale oil hype of 2009?) has to explain to american tax payers about dozens and dozens of failed Oil/gas projects -
    1. Alaska (conoco has sunk $10 blns);

    2. shale oil -this is a mystery. more like a hollywood movie project gone awry after huge layout for shooting.
    utter nonsense $500 billion loaned to US E &P oil project for shale over ten years.

    too add to this problem is the financial woes of 2008 Mortgage criss/insider fraud. no action taken against big banks.

    4.Big auto -lay off trade union issues
    5. utter failure in regarding to digital security across corporate america. So many banks, evne hospitals have been hacked
    I can go on
    So USa is nt trusted by LATAM.
    Trump is doing the rigth thing by ignoring LATAM.

    Plus 2008 financial crises, 2001 contorversy;

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