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Putin Continues to Stick His Neck Out for Maduro
Photo: MAXIM SHEMETOV/AFP via Getty Images
Igor Sechin, CEO of the Russian oil company Rosneft, decided to once again prop up Nicolás Maduro as the president of Venezuela. Since President Donald Trump signed Executive Order (EO) 13884 on August 6, which allows the United States to sanction anyone who provides goods, services, or support to the Maduro regime, Rosneft has stepped up as Venezuela's oil shipping company.
Sechin, a close ally and de facto deputy of Russian president Vladimir Putin, has come to Maduro's rescue with capital every time he has requested it because the president has always seen the relationship between Rosneft and PdVSA, Venezuela’s state-owned oil company, as a political project. Since 2015, the Russian company has made loans to and purchased crude oil futures from PdVSA for a cumulative amount of $6.5 billion, and in December 2016 it granted a loan of $1.5 billion against the collateral of 49.9 percent of Citgo's shares.
Sechin has invested $9 billion into Venezuela oil sector since 2010 but has yet to break even, according to the Russian state-controlled oil firm’s annual reports. Through Rosneft, Moscow has acquired part ownership of several Venezuela oil fields: Petromonagas (40 percent), Petroperija (40 percent), Boquerón (26.6 percent), and Junín 6 (more than 30 percent). Additionally, last June, Maduro’s regime gave Rosneft two gas fields, granting it 100 percent control of the project and all rights to extracted gasoline.
John Bolton, Trump's former national security adviser, speaking about EO 13884 on Venezuela, stressed that “[The Trump administration] is sending a signal to third parties who want to do business with the Maduro regime: proceed with extreme caution. There is no need to risk your business interests with the United States for the purposes of profiting from a corrupt and dying regime.”
In February, Maduro’s regime decided not to export more oil to U.S. refineries in the Gulf of Mexico to avoid the sanctions Trump imposed on PdVSA last January. Refineries in China and India became the largest recipients of Venezuelan crude. From February to April, Venezuela sent an average of 67 percent of its total oil exports to these two destinations.
In mid-August, Chinaoil, the commercial division of the China National Petroleum Corporation (CNPC), decided not to load any more crude oil in Venezuela until the U.S. Department of Treasury delivers new guidelines.
According to Reuters, the CNPC's decision was the result of meetings between the governments of the United States and China, in which officials from the U.S. Embassy in Beijing and high-level executives from the CNPC participated. Data recorded by Bloomberg shows that this is the first time in 10 years that China has not imported crude oil from Venezuela.
A portion of the barrels imported by China goes to paying off Venezuela's debt to the China Development Bank for the loan from the Chinese Fund, with an outstanding balance of $15 billion.
The data also show that the Indian refinery Nayara Energy has been receiving the 2 million barrels per month of Venezuelan heavy crude oil required June through October. It bears noting that Rosneft acquired 49.13 percent of the shares in Essar (Nayara Energy) in 2017 with the agreement that it would supply this amount of Venezuelan oil.
In August, Rosneft took up the task of transporting crude oil from Venezuela, challenging Trump's executive order, since Chinese and Indian refineries refused to load crude oil in Venezuela in fear of U.S. sanctions. During this month, Rosneft loaded 66 percent of Venezuela's oil exports, according to Reuters.
In July, Rosneft transported 3,420,588 barrels (1.35 million tonnes) of Venezuelan heavy crude oil to Malaysia, which were subsequently re-exported to refineries in China. At the Malaysian transshipment centers in Linggi and Tanjung Bruas, Venezuelan oil is mixed or transferred to another tanker and given another name, Singma or Mal Blend, with which the origin of the oil is covered up.
Rosneft and its CEO were sanctioned by the United States following the Russian annexation of Crimea in 2014. However, in the case of Venezuela, the Russian oil company uses the argument that it is not violating U.S. sanctions because the oil is part of PdVSA’s debt service agreements with Rosneft.
Additionally, Rosneft pays PdVSA in cash (U.S. dollar and euro) for a portion of the crude oil in order to generate circulating capital in the Venezuelan economy. Thus, Putin through Rosneft, is disputing Trump's authority in the region and the world and challenging EO 13884. Putin is once again sticking his neck out for Maduro to prove that he is a global heavyweight.
Antonio de la Cruz is a senior associate (non-resident) with the Americas Program at the Center for Strategic and International Studies in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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