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Ongoing shifts in Venezuela’s relationships with Russia, Iran

Russia’s entry into the ranks of countries sanctioned by the US appears to be damaging ties with Venezuela – and giving Venezuela reasons to expand its existing co-operation with Iran

WHAT: A state-owned Russian company is withdrawing from Venezuela, while Russian oil exporters are competing for tankers that once carried Venezuelan crude.

WHY: Russia and Venezuela have a track record of co-operation in the oil sector.

WHAT NEXT: Venezuela may seek to step up its existing ties to Iran.


When the US government began imposing sanctions on Venezuela’s oil industry in 2019, Moscow made a show of standing by Caracas.

It made it clear that it recognised Nicolas Maduro’s re-election in late 2018 as legitimate, even as officials in Washington cited allegations of fraud as the reason for the decision to introduce new restrictions on trade. Russia maintained trade relations with Venezuela, and at least initially, Russia’s state-owned oil major Rosneft maintained its stakes in joint ventures with Venezuela’s national oil company (NOC) PdVSA.

Rosneft also served as Venezuela’s main link to world oil markets in 2019, as it handled the majority of the PdVSA’s crude exports via various subsidiaries in that year. However, it backed down in early 2020 after the US government sanctioned two little-known Rosneft affiliates that were reported to be covertly shipping Venezuelan crude to Asia and disguising its origins. In March of that year, it handed all of its Venezuelan assets over to Roszarubezhneft, an entity fully owned by the Russian government, and formally left the country.

Ongoing links with Russia

These manoeuvres do not seem to have done much good on the upstream front. The US sanctions regime has deprived Roszarubezhneft of access to the financing and equipment it needs to keep its joint ventures going, so it has not been able to produce much oil since it replaced Rosneft in Venezuela. (The nature and extent of that replacement are debatable, by the way, since both are state-owned entities that answer to the Kremlin.)

Further down the value chain, the picture is not clear. Russian interests have been able to stay involved in the business of moving Venezuelan oil to market, in the sense that a number of obscure companies headed by, established by or linked to Russian nationals have reportedly played a role in moving crude from Venezuela to Asia by tanker in ways that are designed to conceal or obscure the origin of their cargos. Some of these companies have known connections to Rosneft, while others do not.

In any event, these Russian entities continued to provide PdVSA with an invaluable service through 2020 and 2021. That is, they continued to deliver Venezuelan oil to willing customers, most of them in Asia, in a manner that incorporated just enough plausible deniability that the US government did not make too much of a fuss about sanctions. After all, Washington was, by then, quite distracted with matters related to the coronavirus (COVID-19) pandemic, the economic fallout resulting from public health restrictions and a contentious presidential election.

Moreover, the amount of Venezuelan oil hitting world markets was also down in 2020 and for most of 2021 too. This was partly because US sanctions were doing a decent job of preventing PdVSA from accessing the parts and equipment it needed to keep its production infrastructure in good repair and partly because the pandemic dragged global energy downward in 2020.

Late 2021: Iran steps in

Conditions have changed since late 2021, however.

In practical terms, Venezuelan oil output and export volumes started going up in late 2021 thanks to a series of agreements that Caracas signed with Tehran. Under those agreements, Iran has been providing PdVSA with some of the things it needs the most – lightweight blendstocks such as gas condensate that can be combined with Venezuela’s extra-heavy crude to make a lighter synthetic oil that is easier to sell on international markets, parts and equipment that can be used to repair decrepit refineries and production facilities, technical assistance from Iranian experts and periodic deliveries of Iranian petroleum products for distribution on Venezuela’s fuel-starved domestic market.

Iran’s generosity in this realm is not difficult to understand. Both Tehran and Caracas are targets of US sanctions, and officials in both capitals have spoken frequently of the need for and benefits of co-operation in the face of Washington’s efforts to discourage investment in the industry that is their largest source of revenue.

Now that Russia has joined the ranks of countries sanctioned by the US, however, it is not showing the same sort of generosity. On the one hand, Russia is not maintaining its upstream presence in Venezuela. Rather, Argus Media has reported recently that Roszarubezhneft is quietly withdrawing from its joint ventures with PdVSA.

On the other hand, Russian oil exporters are reportedly stepping up the competition for “dark fleet” tankers – that is, crude and fuel carriers operated by obscure companies that are willing to move liquid cargoes from sanctioned countries – in order to ensure that their production reaches the market. This competition is reportedly having a direct and negative impact on the volume of Venezuelan (and Iranian) oil available to buyers in Asian markets such as India and China.

Tighter Iran-Venezuela ties?

For Iran, the result of this development has been an increased reliance on vessels owned by National Iranian Tanker Co. (NITC) to export the country’s crude production. But for Venezuela, the outcome could be a move toward greater co-operation with Iran – especially if the latter is willing to offer even more of the fuel, blendstock, parts, equipment and technical assistance it agreed to provide in November 2021.

Meanwhile, Iranian deliveries to Venezuela certainly don’t seem to be slowing down. Reuters reported earlier this week, citing documents from PdVSA, that two Iranian tankers were due to dock at the Jose terminal on Venezuela’s coast within the next few days to deliver 1.22mn barrels of crude oil and 2mn barrels of gas condensate. One of the tankers has been identified as the Huge, a very large crude carrier (VLCC) owned by NITC, while the other ship has the name of a vessel that is reported to have been scrapped, Reuters said, citing the PdVSA documents.

Both of the cargoes were supplied by NaftIran Intertrade Co. (NICO), a state-owned Iranian firm.

PdVSA materials show that Iran took delivery of around 4.8mn barrels of Iranian crude and condensate in July and August of this year, Reuters noted. The two shipments referenced above will bring the total up to 8.02mn tonnes.