U.S. Imposes Sanctions on Russian Oil Company Supporting Venezuela’s Leader
The United States on Tuesday imposed tough economic sanctions against a Russian oil giant that is keeping Venezuela’s ruling government afloat, gambling that the newest penalties against President Nicolás Maduro will not roil global oil prices.
The broad sanctions were levied against Rosneft Trading, a subsidiary of the Russian state-controlled Rosneft Oil Company, and Didier Casimiro, the subsidiary’s president and board chairman. Mr. Casimiro is also identified on the Rosneft website as the parent company’s vice president for refining.
The sanctions may have only a limited impact on global markets, experts said. Venezuela’s oil exports have dwindled since the Trump administration began a campaign last year to pressure Mr. Maduro into leaving power, after his widely disputed re-election in May 2018.
Oil markets seemed to shrug off the sanctions, dipping about a half-percent in trading on Tuesday with prices at around $51.80 per barrel.
But the sanctions will lash Venezuela’s already-faltering economy. They also follow a highly public effort by Juan Guaidó, the Venezuelan opposition leader, to pressure allies to take a more aggressive stance against Mr. Maduro. On Tuesday, Mr. Guaidó called the sanctions “a victory” on Twitter, adding, “Those who support the dictator, whoever they are, wherever they come from, should assume the consequences.”
Venezuela is exporting about 70 percent of its oil through Rosneft in what Treasury Secretary Steven Mnuchin described as the “looting of Venezuela’s oil assets by the corrupt Maduro regime.”
“This is a campaign of pressure,” said Elliott Abrams, the State Department’s special envoy for Venezuela policy. “And the pressure continues to mount.”
“I would not say that any individual step can be calculated to bring an end to the crisis,” Mr. Abrams said. “But I think this is a very significant step, and I think you will see companies all over the world in the oil sector now move away from dealing with Rosneft Trading.”
Administration officials insisted that the global oil market was stable enough to withstand the new penalties against Rosneft or any entity that does business with it. Officials also said Rosneft’s customers would be given 90 days to unwind themselves from the Russian shipping company.
Mr. Maduro has led Venezuela’s economy into shambles and prompted an exodus of millions of people into neighboring South American states. The sanctions are among the biggest hits to Venezuela’s economy since the United States banned Venezuela’s state oil company last January, said Francisco Monaldi, a Venezuela energy expert at Rice University in Houston.
“Rosneft will now have to think how much Venezuela is worth from a business standpoint, compared to the costs of remaining under sanctions,” Mr. Monaldi said.
But, he added, the sanctions could misfire if Rosneft concludes that the higher costs of doing business in Venezuela are justified by the geopolitical benefit of helping out Russia’s key ally in South America.
Rosneft sells about two-thirds of Venezuela’s oil, largely to Asia, and often by obscuring the cargo’s source and destination. Officials said Mr. Maduro was taking the profits from the oil sales facilitated by Rosneft to hang onto power, in part by bolstering the Venezuelan military and its harsh crackdown against the public.
Rosneft’s trading subsidiary was created in 2011 to help its Moscow-based parent company carry out foreign projects, including shipping crude oil. In the last few years, faced with American and European sanctions, Rosneft has pushed deeply into places like Cuba, China, Egypt and Vietnam.
Its two largest customers are China and India, both of which have struggled to procure sufficient oil supplies after the Trump administration imposed sanctions against Iran. In the case of India, where Mr. Trump is scheduled to visit next week, the government in Delhi has been forced to find new suppliers — including from the United States.
Additionally, the world is currently flooded with oil since the coronavirus is cutting millions of barrels a day of demand in the Chinese market. Curtailing Venezuela’s 700,000 barrels of daily production should have little if any impact on global oil prices.
Clearview Energy Partners, a consultancy, described Tuesday’s sanctions as “somewhat limited in nature.” It can take weeks, however, for market effects from sanctions to be fully seen.
Mr. Abrams noted that global oil prices were down compared with when the Trump administration began its sanctions campaign against Mr. Maduro’s government.
“We’re not trying to raise oil prices — we’re trying to diminish the amount of money available to the Maduro regime,” Mr. Abrams told reporters at the State Department.
Trump administration officials outlined a series of transactions and planned shipments over the last year — including millions of barrels of crude oil — as evidence of Rosneft’s support to Mr. Maduro. Last month alone, officials said, Rosneft helped deliver two million barrels of crude to West Africa from Venezuela.