Russian President Vladimir Putin, right, shakes hands with Venezuela’s President Nicolas Maduro in the Kremlin in Moscow last year.
Russian President Vladimir Putin, right, shakes hands with Venezuela’s president Nicolás Maduro in Moscow last year © AP

Venezuelan President Nicolás Maduro has trumpeted renewed Russian backing for his embattled government, suggesting that the exit of Moscow’s state-controlled oil company Rosneft to avoid US sanctions will not affect his most important overseas ally.

Rosneft said on Saturday it had passed all its assets in Venezuela to a new state-controlled Russian entity after the US Treasury sanctioned its trading arm as part of Washington’s campaign of “maximum pressure” to oust Mr Maduro and force fresh elections.

“I received a message from brother president Vladimir Putin, who ratified his integral strategic support for all areas of our [relationship],” the Venezuelan president wrote on Twitter.

Russia’s ambassador in Caracas was more direct: “Don’t worry! It’s a transfer of Russian assets in Venezuela to the Russian government directly. We will continue together going forward.”

Russia has provided a vital lifeline for Mr Maduro’s government, allowing it to resist US sanctions despite a collapsing economy. The Kremlin has provided political support and weapons sales, while Rosneft has supplied most of the country’s gasoline and helped market Venezuelan crude overseas after regular buyers dried up when US sanctions were imposed.

Rosneft said on Saturday that the transfer to an unnamed Kremlin entity included its stakes in five joint ventures with PDVSA, Venezuela’s state oil company — Petromonagas, Petromiranda, Petroperija, Boquerón, and PetroVictoria — that hold more than 80m tonnes in oil reserves and produce about 66,500 barrels a day.

The Russian state is also taking on Rosneft’s oil services and trading operations in the country. Other assets will be “closed or liquidated,” the company added. A Rosneft subsidiary will receive 9.6 per cent of the company’s stock from the Kremlin in exchange for the assets.

“Uncoded message from the Kremlin and Rosneft’s [CEO Igor] Sechin to the Trump administration: take these sanctions and shove it,” commented Andrew S Weiss, vice-president at the Carnegie Endowment in Washington.

The US Treasury sanctioned Rosneft’s trading arm last month for transporting Venezuelan crude in violation of Washington’s campaign for regime change. Last week the Trump administration stepped up the pressure on Mr Maduro, indicting him for drug trafficking and offering a $15m reward for his capture.

Saturday’s move transfers risk from the US sanctions away from Rosneft, which is majority-owned by the Kremlin but listed in London, and counts BP and the Qatari sovereign wealth fund as large minority shareholders.

A Rosneft spokesman said the company now had “the right to expect from American regulators to fulfil their publicly given promises,” referring to statements from the US that sanctions against its trading arm would be removed if Rosneft wound down Venezuelan business.

“There are two reasons why Russia would want to hold on to Rosneft’s position in Venezuela,” said Francisco Monaldi, a fellow at Rice University’s Baker Institute and a Venezuelan energy expert. “First, to continue helping Maduro and second, most of Rosneft’s assets there were undeveloped and would be very valuable one day, so it makes sense not to lose them.”

Russ Dallen, head of boutique investment bank Caracas Capital Markets, pointed out that “previous sanctions on a joint-Russian/Venezuelan bank also led to a similar outcome, with [Russian state lenders] VTB and Gazprombank giving their shares to the Russian government to avoid further US sanctions”.

Rosneft CEO Mr Sechin’s regular visits to Caracas over the years brought him so close to the former Venezuelan president Hugo Chávez that he headed Russia’s delegation to his funeral in 2013, then inaugurated a street in Chavez’ honour in Moscow.

As US sanctions cut Venezuela off from global markets, Rosneft made Mr Maduro $6.5bn in loans between 2014 and 2018 that Caracas paid back in oil deliveries.

The Russian company was still owed $800m at the end of September 2019 and was being repaid around $400m each quarter, but has not provided an updated figure of the debt still owed at the start of 2020.

Rosneft Trading SA, the Geneva-based trading subsidiary, became Venezuela’s sole supplier of gasoline before the US sanctions hit last month.

The US also sanctioned Didier Casimiro, Rosneft Trading’s board chairman and president, but refrained from sanctioning Rosneft, the parent company, for fear of disrupting energy markets because it accounts for about 6 per cent of global oil production.

“This will benefit Rosneft’s minority shareholders, BP and Qatar, because they get rid of the cloud that was hanging over a good asset for both of them,” Mr Monaldi said. “Rosneft couldn’t have sold that asset to anyone else.”

Rosneft was marketing between half and two-thirds of Venezuela’s oil, he said, but exports were about to collapse in April due to the sanctions and the drop in demand. “For now, this won’t affect Venezuela,” said Mr Monaldi, “because there are much bigger problems. Most of Venezuela’s oil can’t be sold for more than $10 a barrel at the moment, which is beneath the cost of production.”

Additional reporting by Henry Foy in Moscow, Michael Stott in London and Gideon Long in Bogotá

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