While the energy sector was focused on the Oil Price War between Saudi Arabia and Russia, interesting news came from Venezuela.
On February 18, 2020, The United States had imposed sanctions on Rosneft Trading SA to cease the support of the Venezuelan president Nicolas Maduro. The sanctioned company was a subsidiary of Russia’s state-controlled oil company Rosneft, and it had a crucial role in trading Venezuelan oil.
On March 28, 2020, the company announced that it had ended its operations in Venezuela. However, what they did was selling their shares to a company that is controlled by the Kremlin.
After the announcement, the newly appointed Moscow’s ambassador to Venezuela, Sergey Melik-Begrasarov, tweeted as followed: “Don’t worry! This is about a transfer of Rosneft’s assets directly to the Russian government.”
According to The New York Times, Rosneft employees in Caracas have not been notified of any changes in their job status on Saturday, which also suggest operations may continue as usual.
The Russian government gambled to gain essential advantages. First of all, the government manages to secure the Russian assets from the volatile oil market in Venezuela by acquiring them in an aggressive manner, which would have been created tensions in the typical oil market. Since due to Cornavirus and Oil Price War, this operation did not receive enough attention. Second of all, sanctions in Venezuela against Russian involvement over Rosneft automatically lifted.
In the future, if the United States decides to impose any further sanctions against Russians, they will have to target the Russian government directly.
On the other hand, the Chair of Atlantic Council Energy Advisory Group, David Goldwyn, has a different opinion. He tweeted as followed: “Now when Putin wants to play that chit, Sechin (Rosneft CEO) doesn’t have to pay for it. Russia will hold the upstream assets, but its trading days are over for now. Victory for US Sanctions.”
Upcoming days will show us which of the mentioned thoughts are correct. However, for Russia having control of Venezuela’s heavy oil reserves remains a vital asset.
In January, Rosneft was accounted for about 440,000 barrels a day of exports, according to Bloomberg data. Last year Rosneft’s 57% of trade was between India (to Russian refineries), and 41% was between China. So, it was helping the Venezuelan oil to flow these countries. Furthermore, the Venezuelan government was still owed around $800 million to Rosneft of the $6.5 billion loans.
Alongside that, as the most reliable ally to Russia and China among South American countries, Venezuela is a key factor in balancing the power of American hegemony in the region.
Both countries are continuing to support the Maduro government by providing constant humanitarian aid to the country. Recently, a medical team from China also went to Venezuela to help them deal with Coronavirus incidents.