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Venezuela Desperate For Debt Restructure

Venezuela will seek options for restructuring its debt after state-owned PDVSA pays US$1.2 billion on a bond that matured yesterday. This is what the country’s president, Nicolas Maduro, said in a statement, which has reinforced concern that Venezuela is close to defaulting on debts, whose total amount is about US$150 billion.

Any attempt at debt restructuring, AFP notes, would run into the wall of U.S. sanctions against Venezuela, which include a ban on trade in Venezuelan debt for U.S.-based entities. Since any debt restructuring and refinancing involves the issuance of new debt, the sanctions would be a problem.

A lot of Venezuela’s debt is held by Russian and Chinese entities, and these are more likely to agree to a delay in repayments, which take the form of oil shipments. But PDVSA isn’t pumping the same amount of oil that it used to, and it is unlikely to be sufficient to pay down Venezuela’s debt as promised.

Still, Russia has been gracious in modifying what it’s owed. Just yesterday, Russia’s Finance Minister Anton Siluanov said that Russia will not demand repayments of a US$1-billion loan expiring in 2017. Instead, the lender will look for ways to restructure the dues.

This is the second restructuring of Russian debt to Venezuela in as many years. In 2016, Moscow and Caracas agreed on a delay in the repayment of a US$2.84-billion debt. Now, repayments will start in 2019 and will continue for three years. The terms of this new restructuring are similar, with payments most likely to start in 2020.

Related: New U.S. Sanctions Threaten Russian Oil Projects

However, Venezuela’s debt to Russia is about US$8 billion. Payments due to China total US$23 billion. Public debt amounts to US$45 billion and PDVSA’s debt stands at US$45 billion as well. That’s quite steep a debt pile for anyone, but Venezuela has prioritized debt repayments despite the hyperinflation and shortages of basic goods, including food and medicines.

"Venezuela has always met its international obligations, in times of high oil prices and low oil prices... Our intention is to keep on meeting them, but the financial persecution of Venezuela by international banks and organizations needs to stop," Maduro said in yesterday’s statement. That’s unlikely to happen as the U.S. is clearly firm about its hard line against the Caracas government.

By Irina Slav for Oilprice.com

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