India became the No 1 buyer of Venezuelan crude in the first half of February 2019, as the country has increased imports to 66 percent to 620,000 oil barrels per day, according to India’s New Delhi Television (NDTV).
On January 28, the U.S. Department of Treasury imposed sanctions against PDVSA and proceeded to freeze assets worth $7 billion to the Venezuelan state-owned oil company. This has also translated in the future loss of about $11 billion. This was all a move to pressure President Nicolas Maduro – who the U.S. government no longer recognizes – to give up power.
After an electoral process that the Venezuelan opposition, the United States, the European Union, and the Lima Group described as “fraudulent” in 2018, Maduro was sworn in in January for the 2019-2025 presidential term. After this, more than 55 countries announced they did not recognize him as president and called for free and transparent elections. The socialist leader has said on several occasions that he will not go to new elections.
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Indian companies as an alternative for Venezuela
“While flows to the U.S. came to a halt, India became the No. 1 buyer of Venezuelan crude,” stated the New Delhi news station.
India is planning to develop a future energy cooperation with Venezuela, as the nation’s foreign ministry told Sputnik news agency in late January.
In the meantime, Venezuela is seeking alternative payment mechanisms with India, such as bartering in order to boost oil sales to the world’s third-largest oil consumer.
India maintains a cooperation agreement with Venezuela for the supply of medicines and other goods.
Venezuelan crisis worsens with U.S. sanctions
Venezuela’s battered economic situation continues to worsen after the sanctions that the U.S. Treasury Department imposed on Petroleos de Venezuela. As a result of these restrictions, Indian refineries Reliance Industries and Nayara Energy, backed by Rosneft Oil Co PJSC, have captured 55 percent of the Venezuelan state-owned company’s production.
Under the restrictions on PDVSA, countries cannot pay for Venezuelan crude in U.S. dollars. This allows the Maduro regime to partially pay its debt to Beijing and Moscow. In view of this, Venezuela is using other channels, such as India. However, this means less liquidity for the South American country’s public finances.
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This situation is added to the dramatic production drop seen in the Venezuelan oil sector. According to the latest report published by the Organization of Petroleum Exporting Countries (OPEC), the nation’s production fell to 1.1 million barrels per day in January, down by 31 percent from the same month last year.
If experts’ forecasts are met, the Venezuelan oil industry could reach 500,000 barrels per day by the end of 2019. This was confirmed by Elliott Abrams, special envoy of the United States for Venezuela before a hearing in the Senate Chamber.
Impact on the global market
A few months ago, experts agreed that the price of the barrel would not see drastic variations due to political unrest in Caracas. However, the OPEC’s programmed production cut and the sanctions against PDVSA have reduced supply in the market.
The supply drops are already affecting the United States. This month, the American nation received only 415,000 barrels per day from Saudi Arabia. Additionally, it has halted operations at its Valero Energy Corp and Chevron Corp refineries, as they are specifically designed to process the heavy fuel extracted from the Orinoco Belt.
There are fewer and fewer buyers of Venezuelan oil. While India’s income would give a break to the Venezuelan regime, its access to liquidity is fairly limited.
For more information, check Energía16