Russian Oil Giant Rosneft and the Economy of Venezuela

Venezuela, officially the Bolivarian Republic of Venezuela, has the largest proven oil reserves in the world. Nevertheless, the vast majority of the local population is struggling to meet ends meet. The country’s economy can be described as underperforming, to say the least, due to various factors. Recently, one of the main supporters of the local government, the Russian Federation decided to ease the pressure on oil giant Rosneft.

Last week, Russia’s largest oil producer Rosneft sold the assets linked to its operations in Venezuela. Russian oil giant sold its assets to an unnamed company owned by the Russian government.

Sanctions imposed by the United States created numerous challenges for the local economy. Moreover, the U.S. not only continues to monitor the situation but even decided to take additional measures. The U.S. has ramped up pressure on the regime of Nicholas Maduro, and to accomplish this goal, imposed sanctions on Swiss-based Rosneft’s units.

According to U.S. authorities, Rosneft Trading and TNK Trading International help the Venezuelan state company evade sanctions. Companies stated-above served as intermediaries and this helped state-owned company PDVSA to sell oil. As a reminder, PDVSA stands for Petroleos de Venezuela S.A. It used to be one of the largest oil exporters in the world. However, it is hard to determine whether PDVSA retains this status or not.

Rosneft, new owner, and local economy

It is worth mentioning that, from now on any future U.S. sanctions on oil operations in Venezuela, would target the Russian government directly, instead of Rosneft.

In the case of Rosneft, slightly over 50% of the oil giant belongs to Rostneftegaz, which is a state-owned company. Moreover, another oil giant BP owns 19.75% and Qatar QH Oil Investments LLC owns another 18.93%.

Interestingly, a close ally of Russia’s President Vladimir Putin, Igor Sechin is the head of Rosneft. The decision to sell its assets to an unnamed Russian company is a serious move as Rosneft transferred the risk factors to the Russian government.

Importantly, neither the oil giant nor the Russian government declined to say which company bought assets from Rosneft.

It is worth mentioning that, Swiss-based Rosneft Trading and TNK took more than a third of Venezuela’s oil shipments in 2019. Thanks to the companies mentioned-above PDVSA was able to continue crude oil shipments of U.S. sanctions.

Several years ago, the U.S. imposed sanctions on Russian companies including Rosneft. This happened after Moscow annexed Ukraine’s Crimea region. It means that Rosneft and TNK may remain on the list even after the deal.

Based on the information provided by the Rosneft, the Venezuelan assets sold by the company include all joint ventures. The most important one is the 40% of Petromonagas.

Time will show whether the U.S. Treasury Department will remove Rosneft from the list. However, it won’t be easy to convince U.S. authorities.