Russia’s Rosneft last major petrol supplier to Venezuela

Russia’s Rosneft last major petrol supplier to Venezuela

Caracas relies entirely on Russian state company for June imports

Russia’s state-owned oil company Rosneft has become the last major supplier of petrol to Venezuela, propping up President Nicolás Maduro’s regime as the US intensifies economic pressure on Caracas, according to people familiar with the shipping arrangement.

The lifeline has given Moscow unprecedented leverage over the crisis-hit South American nation, frustrating efforts by Washington and the EU to push the socialist president out and make way for opposition leader Juan Guaidó.

Data seen by the Financial Times show that Rosneft supplied Venezuela’s entire imports of petrol in June, as other suppliers fell away.

Eight cargos of petrol totalling 1.7m barrels arranged by Rosneft Trading, the company’s Geneva-based trading arm, were loaded in ship-to-ship transfers carried out offshore near Malta, Gibraltar and Aruba, the documents show.

The tankers then headed for Venezuelan ports, where the petrol was delivered to PDVSA, Venezuela’s state oil company. Publicly available satellite shipping signals, collated by oil analytics company Vortexa, confirmed that the deliveries had taken place.

It is unclear whether the companies supplying Rosneft with the cargoes, some of which originated in ports in the Netherlands as well as Greece and Turkey before being transferred at sea, were aware they were destined for Venezuela.

“Venezuela’s gasoline supplies depend on Russia,” said a person familiar with the supply deal. “The day Russia stops supplying gasoline, Venezuela grinds to a halt.”

Another person with knowledge of the shipments said they were “a purely commercial operation” based on “previously agreed contracts”.

While there is no suggestion that Rosneft has breached US sanctions against Venezuela — the measures apply to US individuals and businesses — the supply arrangement makes Rosneft, and the Kremlin, one of the single biggest hurdles to US plans to spur regime change in Caracas.

Washington and the EU have recognised Mr Guaidó, the president of the National Assembly, as Venezuela’s rightful interim leader pending free elections.

The Trump administration has imposed economic sanctions against Venezuela, including a total ban on US citizens, companies or banks dealing with PDVSA which took full effect in April this year. On Monday, Washington further increased pressure on Caracas by announcing a near total economic embargo on the country, which holds the world’s largest oil reserves.

Venezuela used to refine its own petrol but years of neglect and under-investment, as well as plunging domestic crude production, have made the country dependent on imports.

There are now supply shortages and long queues at fuel stations in most parts of the country. The 1.7m barrels supplied by Rosneft Trading in June correspond to a supply of about 56,000 barrels per day, or about a quarter of Venezuela’s petrol consumption two years ago.

In January, before the imposition of US sanctions on PDVSA, Venezuela was buying petrol from a range of overseas suppliers including Spain’s Repsol, data show. Repsol confirmed that the company had stopped supplying petrol to Venezuela.

Caracas’ main source of revenue has been hit as its crude oil production has fallen sharply. International traders, meanwhile, have become increasingly wary of supplying the country with the refined fuel it needs as US sanctions have tightened. The Venezuelan crisis has reached a stalemate largely because the authoritarian regime has received financial and material support from Russia, China and Cuba.

Under the US sanctions legislation, Washington can at its discretion punish any entity, even non-US, deemed to be providing substantial support to PDVSA.

A senior US government official told the Financial Times that Rosneft’s continued trading with PDVSA had seen the Russian company discussed as a potential target for sanctions “on multiple occasions”, but the Trump administration had refrained from hitting the company so far for fear of broader ramifications.

The US had already placed some sanctions on Rosneft in 2014 over Russia’s involvement in the Ukraine crisis, but allowed the company enough latitude to continue trading, including the ability to access short-term financing.

The Moscow-headquartered company produces almost 5m barrels a day of crude and other liquids, or approximately 5 per cent of global supply, so any disruption to its output could lead to a sharp rise in the oil price.

Since 2014 Rosneft has provided more than $7bn to Mr Maduro’s government, mainly in the form of prepayments for crude deliveries, and has invested in a number of oil and gasfields in the country.

Igor Sechin, Rosneft’s chief executive, is one of President Vladimir Putin’s longest-serving and closest aides and is seen as one of the leaders of the Kremlin’s hardline faction closely associated with its security services. He is under personal US sanctions and has made several visits to Venezuela to negotiate with the Maduro government.

The Kremlin has also directly supported Caracas with credit lines, defence deals and military advice, and a $3.15bn sovereign loan that Moscow agreed to restructure in 2017.

Rosneft declined to comment. The US Treasury department, which has responsibility for sanctions, declined to comment on the Rosneft transactions. PDVSA also declined to comment.

Michael Stott and David Sheppard in London and Henry Foy in Moscow