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A Mexican firm that was instrumental in an oil-for-water swap scheme with the Venezuelan government has declared bankruptcy, saying Venezuela’s President Nicolas Maduro had terminated their deal.
Reuters reports Libre Abordo declared bankruptcy yesterday, citing a press release that said, “In recent months (we) have faced excessive challenges, from the oil price fall... to pressure from the U.S. government aimed to stop our operations.”
The contract between the Mexican firm and Caracas, which involved the swap of several million barrels of crude oil for food and water, was signed last year. Since there were no cash payments involved in the relationship, there was no danger of violating U.S. sanctions against Venezuela, Libre Abordo told Reuters earlier this year.
By late March, Libre Abordo had taken in some 14.3 million bpd of Venezuelan crude that it was to resell on international markets. The company repaid Caracas with corn and water.
And yet as international demand for oil suffered the effects of persistent and substantial oversupply coupled with national lockdowns around the world amid the coronavirus pandemic, a lot of oil became unsellable, including, apparently, the Venezuelan crude the Mexican company bought.
The South American country, which used to boast the world’s largest oil reserves as a source of its wealth, has been struggling to remain a going concern amid hyperinflation, tightening U.S. sanctions, a severe fuel shortage, and the Covid-19 pandemic.
Recently, it got a helping hand from sanction buddy Iran, which sent five tankers loaded with fuel its way. The first tanker arrived last week, with one Washington official telling Reuters the U.S. government would consider a response to the Iranian move, although what the response would be remains to be seen. Venezuela is reportedly paying for the fuel in gold as well as for Iranian help in repairing its crumbling refineries to boost local production of fuels.
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.