Repsol will begin to send crude oil from Venezuela to Europe | Economy

A worker at Repsol's Cartagena refinery.
A worker at Repsol’s Cartagena refinery.Francisco Bonilla (REUTERS)

Spanish oil company Repsol and Italy’s Eni will begin shipping Venezuelan oil to Europe from next month to offset the ban on Russian crude, five people familiar with the matter told Reuters. In this way, the oil-for-debt swaps suspended two years ago, when Washington intensified sanctions against Venezuela, will be resumed.

The change in position comes after the US authorized European oil companies to operate in Venezuela, exempting them from sanctions. The US authorities communicated the news to the companies last month, but the details and the resale restrictions had not been communicated until now. The volume of oil that Eni and Repsol are expected to supply from Venezuela is not high, according to one of the sources, who specifies that the impact on world oil prices will be modest. Eni and Repsol did not immediately respond to requests for comment. The president of Venezuela, Nicolás Maduro, confirmed through a tweet on the social network that the United States has authorized Chevron, Eni and Repsol to exploit their gas and oil deposits in Venezuela to export them to their natural markets.

The green light from Washington to resume flows of frozen oil from Venezuela to Europe could provide a symbolic boost for Venezuelan President Nicolás Maduro. The US State Department gave the two European companies the go-ahead to resume shipments in a letter, the sources said. The administration of US President Joe Biden hopes that Venezuelan crude can help Europe reduce reliance on Russia and redirect some of Venezuela’s cargoes from China.

One of the goals of the US-approved measure is to convince Maduro to resume political talks with Venezuela’s opposition, two of the sources told Reuters. The two European energy companies, which have joint ventures with Venezuela’s state oil company PDVSA, can offset crude shipments with unpaid debts and overdue dividends, the sources said.

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A key condition, according to one of the sources, is that the oil received “has to go to Europe. It cannot be resold elsewhere.” Washington believes that PDVSA will not benefit financially from these non-cash transactions, unlike Venezuela’s current oil sales to China. Beijing has not signed Western sanctions against Russia and has continued to buy Russian oil and gas despite the Western bloc.

US exception

Washington has not made the same concessions to the US oil company Chevron Corp, India’s Oil and Natural Gas Corp Ltd (ONGC) and France’s Maurel & Prom SA, which have also pressured the US State and Treasury Departments to be able to operate in Venezuela and trade oil for billions of dollars in accumulated debt. The five oil companies suspended the oil-for-debt swap in mid-2020 amid former US President Donald Trump’s “maximum pressure” campaign, which cut Venezuela’s oil exports but failed to oust Maduro.

Venezuela’s state oil company PDVSA has not yet scheduled any shipments this month for Eni and Repsol. Venezuelan Vice President Delcy Rodríguez tweeted last month that she hoped the US proposals would “pave the way for the total lifting of the illegal sanctions that affect all of our people.”

Reach Caracas

The Biden Administration held talks at the highest level with Caracas last March. Venezuela then released two of at least 10 jailed US citizens and promised to resume talks with the opposition.

Maduro has yet to agree on a date to return to the negotiating table. Republican lawmakers and some of Biden’s fellow Democrats who oppose any US appeasement of Maduro have criticized the approach to Venezuela as too one-sided. Washington maintains that further sanctions relief on Venezuela will be conditional on progress toward democratic change as Maduro negotiates with the opposition.

Last month, the Biden administration authorized Chevron, the largest US oil company still operating in Venezuela, to enter into talks with the Maduro government and PDVSA about future operations in Venezuela. It was at this time, Reuters sources reckon, that the State Department sent the confidential clearances to Eni and Repsol saying that Washington “would not object” if they resumed the oil-for-debt deals and brought the oil to Europe. In the letters, the United States assured European companies that they would not face sanctions if they took shipments of Venezuelan oil in exchange for collecting outstanding debt, two people in Washington said.

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