Venezuela skirts US sanctions by funneling oil sales via Russia

CNBC

Reuters

KEY POINTS
  • President Nicolas Maduro is funneling cash flow from Venezuelan oil sales through Russian state energy giant Rosneft as he seeks to evade U.S. sanctions designed to oust him from power.
  • The sales are the latest sign of the growing dependence of Venezuela’s cash-strapped government on Russia.
  • Under the scheme uncovered by Reuters, Venezuelan state oil company PDVSA has started passing invoices from its oil sales to Rosneft.
RT: Venezuela's President Nicolas Maduro 180302
Venezuela’s President Nicolas Maduro talks to the media after a meeting for signing an agreement on guarantees for the vote at the National Electoral Council (CNE) headquarters in Caracas, Venezuela March 2, 2018.
Marco Bello | Reuters

President Nicolas Maduro is funneling cash flow from Venezuelan oil sales through Russian state energy giant Rosneft as he seeks to evade U.S. sanctions designed to oust him from power, according to sources and documents reviewed by Reuters.

The sales are the latest sign of the growing dependence of Venezuela’s cash-strapped government on Russia as the United States tightens a financial noose around Maduro, who it describes as a dictator.

With its economy reeling from years of recession and a sharp decline in oil production, Venezuela was already struggling to finance imports and government spending before Washington imposed tough restrictions on state oil company PDVSA in January.

Oil accounts for more than 90 percent of exports from the OPEC nation and the lion’s share of government revenues. Maduro has accused U.S. President Donald Trump of waging economic war against Venezuela.

Since January, Maduro’s administration has been in talks with allies in Moscow about ways to circumvent a ban on clients paying PDVSA in dollars, the sources said. Russia has publicly said the U.S. sanctions are illegal and it would work with Venezuela to weather them.

Under the scheme uncovered by Reuters, Venezuelan state oil company PDVSA has started passing invoices from its oil sales to Rosneft.

The Russian energy giant pays PDVSA immediately at a discount to the sale price avoiding the usual 30-to-90 day timeframe for completing oil transactions and collects the full amount later from the buyer, according to the documents and sources.

“PDVSA is delivering its accounts receivable to Rosneft,” said a source at the Venezuelan state firm with knowledge of the deals, who spoke on condition of anonymity for fear of retaliation.

Major energy companies such as India’s Reliance Industries – PDVSA’s largest cash-paying client – have been asked to participate in the scheme by paying Rosneft for Venezuelan oil, the documents show.

Rosneft, which has heavily invested in Venezuela under President Vladimir Putin, did not immediately respond to a request for comment.

Venezuela’s oil ministry, its information ministry, which handles media for the government, and PDVSA did not respond to questions.

Asked about the transactions, a spokesperson for Reliance said it had made payments to Russia and Chinese companies for Venezuelan oil. The spokesperson said the payments were deducted from money owed by Venezuela to those countries, but did not provide further details.

“We are in active dialogue with the U.S. Department of State on our dealings on Venezuelan oil to remain compliant with U.S. sanctions,” the spokesperson said.

Venezuela oil-backed cryptocurrency to launch in days, government says

CNBC

  • Venezuela’s cryptocurrency will launch within days and be backed by 5.3 billion barrels of oil worth $267 billion
  • The launch is a bid to offset a deep financial crisis, the socialist government said on Thursday
  • President Nicolas Maduro surprised many earlier this month when he announced the “petro” cryptocurrency

Venezuela's President Nicolas Maduro (C) gestures as he speaks during a rally supporting him and opposing U.S. President Donald Trump, in Caracas, on August 14, 2017.

Carlos Becerra | Anadolu Agency | Getty Images
Venezuela’s President Nicolas Maduro (C) gestures as he speaks during a rally supporting him and opposing U.S. President Donald Trump, in Caracas, on August 14, 2017.

Venezuela’s cryptocurrency will launch within days and be backed by 5.3 billion barrels of oil worth $267 billion, in a bid to offset a deep financial crisis, the socialist government said on Thursday.

President Nicolas Maduro surprised many earlier this month when he announced the “petro” cryptocurrency, to be backed by OPEC member Venezuela’s oil, gas, gold and diamond reserves.

Despite the skepticism of cryptocurrency experts who do not think Venezuela has the wherewithal to pull it off, communications minister Jorge Rodriguez said the first petro offering would come within days.

“Camp one of the Ayacucho block will form the initial backing of this cryptocurrency,” Rodriguez told reporters, referring to part of Venezuela’s southern Orinoco Belt.

“It contains 5.342 billion certified barrels of oil. We’re talking about backing of $267 billion,” said Rodriguez, adding that that differentiated the petro from other cryptocurrencies such as Bitcoin.

Miners were already lined up, he said, without giving more details. Cryptocurrencies are obtained by users setting up computers to do complex mathematical calculations in a process known as mining.

Cryptocurrencies are decentralized and their success relies on transparency, clear rules and equal treatment of all involved. Venezuela gave no technical details about the petro.

The government appears to be hoping the petro will offset a collapse in Venezuela’s currency – 97 percent in one year against the U.S. dollar on the black market – and isolate the country from the U.S. dollar and Washington.

Rodriguez also hopes to use the petro as part of a mechanism to pay international providers, many of whom have stopped supplying to Venezuela given its inability to pay its debts.

With Venezuela’s 30 million people suffering shortages, runaway prices and a fourth year of recession, Maduro has long blamed the U.S. government for an “economic war” against it. Critics say incompetent policies are to blame for Venezuela’s economic mess.

Earlier on Thursday, Maduro blamed U.S. pressure on Portugal for blocking imports of pork leading to a shortage over Christmas in Venezuela.

U.S. President Donald Trump’s administration has imposed various political and financial sanctions on Maduro’s government, accusing senior officials of rights abuses and corruption.

“It will be materially impossible for the dictatorial financial centers of the world to intervene against this initiative,” said Rodriguez, citing the Portugal case.

“It will allow us to overcome any financial blockade.”

Cryptocurrencies have grabbed global attention partly because of the remarkable rise in the price of Bitcoin, making millionaires of many early investors, including some in Venezuela who used Bitcoin and other cryptocurrencies to shield themselves from strict foreign exchange controls which economists blame for the crisis.