Oil Companies Wind Down Venezuela Dealings as Washington Ramps Up Sanctions
The State Department has threatened foreign companies with secondary sanctions.
Mérida, September 26, 2020 (venezuelanalysis.com) – A number of multinational companies are loading their final oil cargoes from Venezuela’s state oil company PDVSA.
The moves come ahead of an expected ramp up of sanctions ahead of the US presidential election in November. Washington has reportedly given long time PDVSA customers including ENI (Italy), Repsol (Spain), Reliance (India) and Tipco Asphalt (Thailand) deadlines between October and November to wind down dealings with the Venezuelan company.
Following the first financial sanctions in 2017, the US Treasury Department imposed an oil embargo in January 2019, which was later expanded to a blanket ban on all dealings with Venezuelan state companies. Venezuelan oil output has fallen sharply from an average of 1.911 million barrels per day (bpd) in 2017 to just 340,000 bpd in August.
In 2020, Washington further escalated measures by imposing secondary sanctions against Russian energy giant Rosneft, as well as targeting shipping companies and vessels.
The measures against the Venezuelan oil industry saw companies increasingly move away from doing business with PDVSA, with transactions requiring special authorization from the Treasury Department. Other companies, such as US multinational Chevron, were granted consecutive three-month sanctions waivers to continue operating joint ventures with PDVSA.
In August, after President Trump expressed “frustration” at the sanctions’ lack of success in ousting the Maduro government, Washington moved to terminate exemptions and drive away the companies still involved with the country’s oil sector, in particular by targeting swap deals.
Repsol and ENI had crude for fuel swap deals and allegedly have final oil cargoes lined up for October. Tipco Asphalt has three cargoes scheduled for October as well and told Reuters that the State Department warned the company to wind down its oil purchases or face sanctions. Reliance Industries, once one of PDVSA’s largest customers, likewise has a final oil shipment scheduled for November.
White House Special Envoy for Venezuela Elliott Abrams praised US sanctions as “increasingly effective” in denying revenues for the Venezuelan government, adding that Washington “appreciates the cooperation” of oil corporations. Abrams is known in Washington as a neoconservative hardliner and key policy architect behind the US wars in Iraq and Central America.
The choking of crude for fuel exchanges has also exacerbated fuel shortages in the Caribbean nation. Worsening gasoline and diesel scarcity has been an explicit target of the Trump administration, which recently went as far as seizing Venezuela-bound fuel tankers in international waters.
The struggles in the oil industry have seen Caracas increasingly turn to Iran for cooperation. Tehran has offered technical assistance in reactivating Venezuelan refineries, while also sending a fuel shipment in May. Another three fuel tankers are reportedly due to arrive in the coming days.
Iran has also assisted in oil blending with a very large crude carrier (VLCC) carrying 500,000 barrels of condensate for PDVSA’s joint ventures arriving this month. The VLCC is now due to carry a two million barrel shipment of Venezuela’s Merey 16 crude back to Iran.