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Irina Slav

Irina Slav

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Venezuela’s Oil Rival Calls For Full U.S. Sanctions

Argentina’s President, Mauricio Macri, has called on the United States to install a full embargo on Venezuelan oil shipments. In an interview for the Financial Times, Macri said that the social situation in Venezuela is rapidly deteriorating and more decisive measures are needed to topple the Nicolas Maduro government.

It’s been said before more than once that a total oil embargo against Venezuela would hurt Gulf Coast refiners in a bad way, which is perhaps the only reason why it has not been used so far and remains unlikely to be used, whatever happens in Venezuela.

What’s more, the prospects for the country are not necessarily going to become brighter if Maduro is ousted, although this would certainly relieve the pressure between Caracas and Washington.

When recently news broke that Venezuela plans to restructure its debt, sparking concern that it can no longer service its hefty debt and a default is only a matter of time, we noted that not everyone is on board with this, besides the government.

Bondholders of Venezuelan debt are just fine with the payments Caracas is making, even if they are late, as the bonds carry a quite attractive coupon. What they are not fine with is the possibility of a default followed by fights about the order of repayment of the various debts.

Related: The U.S. Export Boom Goes Beyond Crude

Another thing bondholders and creditors are not fine with are statements from opposition leaders that if there’s a regime change in Caracas, they will stop servicing certain debts—debts that include a PDVSA bond purchased by Goldman Sachs, which, the opposition claims, covertly supported the Maduro government. The bank could suffer a paper loss of several million dollars on this bond if Venezuela defaults.

Argentina’s government in the meantime has been putting a lot of efforts into accelerating the exploitation of the country’s oil resources—a lot of them heavy oil, like Venezuela’s—by inviting all big oil majors to invest in new production, offering them appealing tax incentives and other terms.

According to at least one analyst, Macri “got away from himself” with his call for a full embargo. Cynthia Arnson from the Woodrow Wilson Center’s Latin American program says that “There is a deep concern about the situation in Venezuela and there is a deep dialogue about what to do, but there is also nobody calling for that tough of a line. That was an exaggeration by Macri because generally Latin America is opposed to any U.S. unilateral action.”

By Irina Slav for Oilprice.com

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