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Russia gets oil from clammem Venezuela News

Monday, August 14th, 2017 | Economy

The government in Moscow provides the Venezuelan leadership with urgently needed money to prevent a state bankruptcy, as several persons of the news agency Reuters say. In return, it receives oil. In this context, the Russian company Rosneft has become an important agent for selling oil from Latin America on the world market.
At least since the beginning of the year, the Venezuelan oil company PDVSA has been negotiating behind closed doors with Rosneft about holdings in up to nine of the most productive oil fields, as a high-ranking government representative from Caracas and industry insiders say. In April alone, Rosneft paid more than a billion dollars in exchange for a promise to later oil deliveries, according to a senior PDVSA employee. Russian money had been used on at least two occasions in order to prevent a loss of payment.
PDVSA and the Venezuelan government did not want to comment on the Reuters information. The Russian government and Rosneft also rejected an opinion.
Oil production drops after drastic cuts in investment
Venezuela has the world's largest oil reserves and generates almost all of its revenues from the sale of the raw material. However, in the face of the fall in prices over the past few years, President Nicolas Maduro and his government have been in a miserable situation and can barely pay for the generous subsidies for food, fuel or medicine introduced by Maduro's predecessor, Hugo Chavez. The currency of the country is now almost worthless; inflation is expected to rise to 700% this year according to a forecast by the International Monetary Fund. Investments in the oil business are also declining significantly, which slows down the subsidy: in the first half of the year it was as low as in 27 years.
In the opposition, the approach to Russia is met with criticism. "Rosneft is definitively benefiting from this situation," says Elias Matta, parliamentary deputy. "They know that it is a weak government that they desperately look for money – and they are sharks." Rosneft has now positioned itself as an agent for Venezuelan oil exports, as well as from internal documents. A large part of this oil goes to the USA despite the existing Russian sanctions. This is possible because intermediaries are switched on. On a daily basis, according to PDVSA's commercial documents, Rosneft deposits about 225,000 barrels of Venezuelan oil, equivalent to 13 percent of the total exports and the amount that a country like Peru needs every day.
The government in Caracas recently expressed its confidence in Russian investments in its oil sector. In particular, over the past two years, Maduro has been closer to Russia, after China's support for corruption and payment problems, as analysts and representatives of the oil sector explain. Western companies have also cut back their investments in Venezuela's oil sector. "The Russians now get Venezuela at the lowest price," says a Western diplomat. And while other companies are giving up their offices, Rosneft has recently rented another floor and hired new employees. Currently, Rosneft is already a major player in five Venezuelan oil projects. The nine new projects that are now under discussion are, according to industry insiders, five occurrences in the oil-rich Orinoco basin, three in the Maracaibo lake and one in the Gulf of Paria.
What is the risk for Russia?
The Venezuelan financial hardship also plays a role in the violent protests, according to the high-ranking government representative. In the country is a power struggle between President Maduro and the opposition burned. In the mass protests more than 120 people have been killed since the beginning of April, several thousand have been arrested. With the election of a constitutional assembly, Maduro has undermined the parliament in which the opposition has the majority – and the majority is against new oil agreements with Russia. "Pressure from Russia has played an important role in Maduro's decisions," said the government's representative. According to Reuters calculations Russia and Rosneft Venezuela since 2006 have granted at least 17 billion dollars of loans. Venezuela itself does not provide any data on Russian loans.
But the Russian strategy is risky. Many Western oil companies had suffered a setback when Maduro's predecessor Chavez nationalized the industry in the country. Should the opposition come to power, Rosneft could be similar.
(Reuters)

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