Russia, which stands by Nicolas Maduro in the ongoing Venezuelan political crisis, will use “all available legal mechanisms” to defend its interests in the Latin American country, in which Russian oil giant Rosneft has invested and extended loans to Venezuela’s state oil firm in exchange for crude oil deliveries.
Russia will defend its interests in Venezuela within the international law using “all mechanisms available to us,” Dmitry Peskov, spokesman for Russia’s President Vladimir Putin, told Russian media on Tuesday.
Russia has kept close ties with Maduro and has extended loans to Venezuela, including oil firm Rosneft lending money to Venezuela’s state-held firm PDVSA. Rosneft has extended US$6 billion of loans to PDVSA, which needs to be fully redeemed in crude oil supplies by the end of this year.
According to S&P Global Platts, as of November 2018, Venezuela had US$3.1 billion outstanding loan to repay to Rosneft. The Russian company also has five joint upstream projects with PDVSA in Venezuela.
However, the U.S. Treasury slapped another round of sweeping sanctions against PDVSA on Monday, in order to “help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela.”
The U.S. backed last week Juan Guaidó, the chairman of the National Assembly, as the legitimate president of Venezuela, after Guaidó declared himself interim president.
“The path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President or a subsequent, democratically elected government,” Secretary of the Treasury Steven T. Mnuchin said.
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The Kremlin considers the sanctions against PDVSA as “illegal”, a sign of “unfair competition” and an attempt to interfere with Venezuela’s internal affairs, Peskov said on Tuesday.
Russia is assessing the potential consequences of the sanctions on PDVSA for Moscow, Peskov added.
According to analysts briefed by Platts, whatever the outcome of Venezuela’s political impasse, Rosneft won’t be cut off from Venezuelan oil assets, as oil is pretty much the only hard-currency revenue the country can get. An analyst at a Western bank estimates Rosneft’s assets in Venezuela at up to US$2.5 billion, plus another US$2.5 billion in crude supplies for the loan to PDVSA.
“The worst-case scenario -- which is unlikely to materialize -- under which Rosneft loses all the money it invested in Venezuela, would be biting but not critical for the company, with quarterly free cash flow at over $4 billion,” the analyst told Platts.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.