Russia vows to defend its Venezuelan oil assets

Published time: 30 Jan, 2019 09:05

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FILE PHOTO: The head of Russia's Rosneft Igor Sechin, Venezuela's President Nicolas Maduro, Venezuela's Oil Minister Eulogio del Pino © Reuters

Russia will defend its interests in Venezuela within the international law using “all mechanisms available to us,” Dmitry Peskov, spokesman for Russia’s President Vladimir Putin, told Russian media on Tuesday.

Russia has kept close ties with Venezuelan President Nicolas Maduro and has extended loans to Venezuela, including oil firm Rosneft lending money to Venezuela’s state-held firm PDVSA. Rosneft has extended $6 billion of loans to PDVSA, which needs to be fully redeemed in crude oil supplies by the end of this year.

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According to S&P Global Platts, as of November 2018, Venezuela had $3.1 billion outstanding loan to repay to Rosneft. The Russian company also has five joint upstream projects with PDVSA in Venezuela.

However, the US Treasury slapped another round of sweeping sanctions against PDVSA on Monday, in order to “help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela.”

The US backed last week Juan Guaido, the chairman of the National Assembly, as the legitimate president of Venezuela, after Guaido declared himself interim president.

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“The path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President or a subsequent, democratically elected government,” Secretary of the Treasury Steven T. Mnuchin said.

The Kremlin considers the sanctions against PDVSA as “illegal”, a sign of “unfair competition” and an attempt to interfere with Venezuela’s internal affairs, Peskov said on Tuesday.

Russia is assessing the potential consequences of the sanctions on PDVSA for Moscow, Peskov added.

According to analysts briefed by Platts, whatever the outcome of Venezuela’s political impasse, Rosneft won’t be cut off from Venezuelan oil assets, as oil is pretty much the only hard-currency revenue the country can get. An analyst at a Western bank estimates Rosneft’s assets in Venezuela at up to $2.5 billion, plus another $2.5 billion in crude supplies for the loan to PDVSA.

“The worst-case scenario - which is unlikely to materialize - under which Rosneft loses all the money it invested in Venezuela, would be biting but not critical for the company, with quarterly free cash flow at over $4 billion,” the analyst told Platts.

This article was originally published on Oilprice.com