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The Nicolas Maduro government is directing revenues from crude oil sales to Russia’s Rosneft as a way around U.S. sanctions, Reuters reports citing documents and unnamed sources.
The Venezuelan government, according to its investigation, invoices oil sales to the Russian giant, which pays for these sales at a discount to the market price. After this, Reuters says, Rosneft sells the oil on and collects the full price. Among the companies asked to take part in this payments scheme was Reliance Industries, India’s largest refiner and PDVSA’s biggest paying client, Reuters noted.
Rosneft is one of the few foreign partners of PDVSA that have operations in the troubled country and it is also one of its largest creditors, with amounts lent since 2006 reaching US$16 billion. The loans are on a cash-for-oil basis, like a lot of PDVSA’s loan agreements with Chinese state energy players.
The payments scheme comes as Washington seeks to tighten the noose around Venezuela as it wants to topple Maduro and replace him with opposition leader Juan Guaido, who proclaimed himself interim president of the country in January and has since then been recognized as the legal leader of Venezuela by most Western countries.
Russia and China, however, have stayed away from the recognition drive, with Russia directly calling the U.S. sanctions against PDVSA illegal and saying it will continue to support the elected Venezuelan government.
China, for its part, has been more guarded in its statement, although earlier this month a spokesman for the Chinese Foreign Minister slammed U.S. Secretary of State Mike Pompeo for accusing Beijing of taking an active part in the economic collapse of Venezuela.
“The words and deeds are despicable. But lies are lies, even if you say it a thousand times, they are still lies. Mr Pompeo, you can stop,” Lu Kang said.
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.
PDVSA, the national oil company of Venezuela owes Rosneft some $16 bn offered as loans on a cash-for-oil basis. Moreover, Rosneft is a partner of PDVSA and it has the legal right to sell its share of Venezuela’s oil anywhere it desires.
Russia and China are both owed more than $30 bn by Venezuela and therefore they have vested interest in helping the country’s economy to remain afloat.
And despite the US sanctions, Venezuela has kept its oil production virtually steady with India and China as well as the European Union (EU) and Turkey continuing to buy Venezuelan crude.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London