Indian Nyara Energy has been buying Venezuelan crude oil from Rosneft and paying in fuel instead of cash to avoid a breach of U.S. sanctions against Caracas, Reuters reports, citing three unnamed sources claiming familiarity with the matter.
Nyara, which is an affiliate of Rosneft, delivered gasoil and gasoline to the Russian state giant, the sources also said.
Barter payments have emerged as the way to avoid sanction penalties as the sanctions only focus on cash, it appears. That is why Rosneft has not yet been sanctioned despite its continued partnership with PDVSA. As Reuters recalls, the latest round of sanctions that extends to non-U.S. business entities stated that oil as payment for loans was acceptable since it did not involve cash that would reach the Venezuelan government.
Exporting crude oil and getting refined products in return is another tactic Venezuela has been using since the United States began sanctioning it. This way, cash is not part of the transaction, but Caracas received fuel that it needs as local refineries struggle to operate at any meaningful rate following years of neglect and underinvestment, as well as the halt of diluent imports from the U.S. amid the sanction conflict.
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Nyara Energy is not the only Indian company buying Venezuela oil from Rosneft. Heavyweight Reliance has also been importing Venezuelan crude from the Russian company after it announced a few months ago that it would suspend all direct dealings with PDVSA to please Washington. Now, however, Reliance has said it plans to restart direct purchases of Venezuelan crude from PDVSA. The way around the sanctions? Fuels for crude.
The continued, albeit indirect, crude exports to Indian companies seem to have helped PDVSA bring down inventories of crude that last month prompted a suspension in two blending facilities. Now, these have been restarted, too, and are producing crude for export once again.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.