Venezuelan President Nicolas Maduro is funneling cash from Venezuelan oil sales through Russian state energy giant Rosneft to evade US sanctions designed to oust him from power, according to sources and documents reviewed by Reuters.
The sales are the latest sign of the growing dependence of Venezuela’s cash-strapped government on Russia as the US tightens a financial noose around Maduro, who it has described as a dictator.
With its economy reeling from years of recession and a sharp decline in oil production, Venezuela was already struggling to finance imports and government spending before Washington imposed tough restrictions on state oil company Petroleos de Venezuela SA (PDVSA) in January.
Oil accounts for more than 90 percent of exports from the OPEC nation and the lion’s share of government revenue.
Maduro has accused US President Donald Trump of waging an economic war against Venezuela.
Since January, Maduro’s administration has been in talks with allies in Moscow about ways to circumvent a ban on clients paying PDVSA in US dollars, the sources said.
Russia has publicly said that the US sanctions are illegal and it would work with Venezuela to weather them.
Under the scheme uncovered by Reuters, PDVSA has started passing invoices from its oil sales to Rosneft. The Russian energy giant pays PDVSA immediately at a discount to the sale price — avoiding the usual 30-to-90-day timeframe for completing oil transactions — and collects the full amount later from the buyer, according to the documents and sources.
Major energy companies such as India’s Reliance Industries — PDVSA’s largest cash-paying client — have been asked to participate in the scheme by paying Rosneft for Venezuelan oil, the documents showed.
Rosneft, which has heavily invested in Venezuela under Russian President Vladimir Putin, did not immediately respond to a request for comment.
PDVSA; the Venezuelan Ministry of Energy and Petroleum; and the Venezuelan Ministry of Popular Power for Communication and Information did not respond to questions.
Russia has loaned Venezuela almost US$16 billion since 2006, which is being repaid in oil shipments, and has also taken significant stakes in petroleum projects, meaning it already controls a large slice of the South American country’s production.
The unusual payment agreement with Rosneft is part of a series of schemes by Maduro’s government to gain access to cash, including selling central bank gold reserves.
The schemes have frustrated Washington officials, who have in the past few days questioned why sanctions have not had a more dramatic impact on Venezuela’s finances.
“PDVSA is delivering its accounts receivable to Rosneft,” said a source at the Venezuelan state firm with knowledge of the deals, who spoke on condition of anonymity for fear of retaliation.
“The cash ends up in Russian banks or is used for settling pending payments such as marine services or freight so that oil exports are not interrupted,” they added.
The sources said some of the money was flowing via Russian-Venezuelan bank Evrofinance Mosnarbank, which was placed under US sanctions last month.
A spokesperson for Evrofinance denied that such transactions had passed through the bank.
It was not immediately clear exactly how much of Venezuela’s oil exports of about 900,000 barrels per day were being paid for using the sale of PDVSA’s accounts receivable, because deals are being arranged on a case-by-case basis, sources said.
However, an internal PDVSA document reviewed by Reuters indicated that shipments this month to Reliance — owner of the world’s biggest refining complex — would be settled via Rosneft.
Reliance last month imported 390,500 barrels per day of Venezuelan crude, equivalent to almost 40 percent of Venezuela’s exports that month, shipping data compiled by Reuters showed.
The internal document showed that PDVSA and Reliance would pay a fee equivalent to about 3 percent of the sale price, split between them.
Rosneft’s fees are negotiated on a case-by-case basis, the sources said.
Industry sources familiar with the matter said that the Reliance transactions were going ahead, but some banks were reluctant to provide financing for the purchases, as the invoices stated that the oil came from Venezuela.
Reliance joint chief financial officer Srikanth Venkatachari on Thursday told reporters it was buying Venezuelan oil via Russian and also Chinese companies, but did not provide further details.
Some within PDVSA are concerned Rosneft’s trading arm now has been given too significant a role in decisions over cargo destinations in order to facilitate payment to the Russian company, one source said.
They are also frustrated that Venezuela is paying a heavy premium to Rosneft for imported fuel — needed because of the poor condition of domestic refineries — because only a handful of sellers have been willing to skirt US sanctions.
“Rosneft is buying our oil for cheap and selling us very expensive fuel in exchange,” the source said. “We always owe them money.”
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