CARACAS, Venezuela State-controlled Russian oil company Rosneft said on Saturday it would cease operations in Venezuela and sell all of its assets in the country, signaling a change in Kremlin strategy that could further shake the economy of Venezuela in ruins.
Rosneft had become the biggest economic ally of the authoritarian Venezuelan president, Nicols Maduro, representing up to two-thirds of the country’s oil trade and a significant share of crude oil production. The lifeline provided by Rosneft allowed Mr. Maduro to maintain a strong currency flow and to supply the country with gasoline.
The United States has imposed sanctions this year on two Rosneft oil trading subsidiaries for helping Maduro. The sanctions, which have hurt the company’s operations elsewhere in the world, were cited on Saturday by a Rosneft spokesperson in its description of the sale.
However, the sale of Rosnefts assets is not necessarily a move away from Mr. Maduro by Russia, one of the few donors in the country.
Rosneft said it was selling its Venezuelan assets to a public company it described as wholly owned by the Russian government. In this regard, Moscow will be more entangled in Venezuela than before because its stake in Rosneft is just over 50%.
Industry leaders said the sale appeared to be intended to disconnect Rosneft from Venezuela without substantially changing the role of Russia.
Do not worry! It is a transfer of Rosnefts’ assets directly to the Russian government, said Moscows ambassador to Venezuela, Sergey Melik-Bagdasarov, in a message on Twitter.
Rosneft employees in Caracas were not informed of any change in their employment status on Saturday, which also suggests that operations may continue as usual.
Some analysts have warned, however, that although Russia will likely continue to hold an important position in the Venezuelan oil industry after today’s announcement, the new holding company Kremlins may not have the financial muscle, network trade or the desire to maintain oil trade and investment at the level desired by Mr. Maduro.
They’re probably not going to want to put money aside, said Antero Alvarado, a Caracas-based oil consultant.
They will keep the assets and wait to see what happens, he said, referring to the volatility of world oil markets and political instability in Venezuela.
David L. Goldwyn, the top energy diplomat for state departments in the first Obama administration, said the move would further limit Venezuelan revenues from oil exports.
Rosneft traded Venezuelan oil to small refineries in China, in violation of U.S. sanctions. While in theory another Russian company could do the same, it could not do it immediately without sophisticated Rosnefts trading systems that would stifle a source of revenue for Mr. Maduros’ government.
Goldwyn called the sale a victory for the US sanctions. Coupled with a collapse in world oil prices, he said, the sanctions had made Venezuelan crude trade unnecessary for Rosneft.
Rosneft spokesman Mikhail Leontyev said in an interview with Russias Interfax news agency that the sale was necessary for his company to continue doing business internationally.
As a public and international company, we have made a decision in the interest of our shareholders, said Mr. Leontyev. Now, we have the right to expect US regulators to keep the promises they made publicly.
Rosneft is controlled by the Russian government but is partly owned by private investors. Its shares are listed on the London Stock Exchange. BP, the British oil giant, owns around 20% of the company’s capital and has representatives on the board of directors.
Rosnefts’ investments in Venezuela had become deeply linked to Russia’s goal of regaining a geopolitical bridgehead in South America, restoring the influence that Moscow had lost in the region after the collapse of the Soviet Union.
Many investments were launched as commercial enterprises by a private Russian oil company, before being taken over by Rosneft. The state-controlled company traded Venezuelan oil and sank large investments in fields that produced less oil than expected and were constantly losing money.
Although the Venezuelan economy has collapsed, causing an exodus of millions of its inhabitants, and the United States has increased pressure, Mr. Maduros’ government has endured. Thursday, the United States has charged Mr. Maduro and members of his entourage with drug trafficking.
The oil industry has struggled to cope not only with tougher US sanctions, but with falling world oil prices.
Venezuela was the biggest loser in the world oil price war unleashed by Putin this month, which forced the already struggling South American nation to sell its biggest export at a loss, or almost. Mr. Putin’s decision to break an oil production agreement with other major producers without consulting Mr. Maduro underlined the limits of Russia’s alliance with Venezuela, which is mainly motivated by practical considerations rather than by a deep ideological or personal affinity.
The sanctions imposed on two Rosneft subsidiaries that transported Venezuelan oil have led China and India to slow down their purchases, causing an almost total overflow of oil storage tanks in Venezuelan ports.
This put additional pressure on Venezuelan production, which had stabilized at 750,000 barrels at the start of this year, but is now shrinking as the coronavirus reduces energy demand and forces Venezuela to sell what it can at very reduced prices.
The Trump administration sanctioned TNK Trading International, a subsidiary of Rosneft, this month after stepping up shipments of Venezuelan crude.
Anatoly Kurmanaev reported on Caracas, Clifford Krauss in Houston and Andrew E. Kramer in Moscow. Ivan Nechepurenko and Andrew Higgins contributed to the Moscow reports.
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