Venezuela’s state-run oil firm PDVSA has bought nearly $440 million worth of foreign crude and shipped it directly to Cuba on friendly credit terms — often at a loss, according to internal company documents.
The shipments are the first documented instances of the OPEC nation buying crude to supply regional allies instead of selling them oil from its own vast reserves. Venezuela has the largest known oil reserves in the world but its production capacity has been crippled by the country’s economic crisis.
Venezuela made the discounted deliveries, which have not been reported by local media, despite its dire need for foreign currency to bolster its collapsing economy and to import food and medicine amid widespread shortages.
The open-market oil purchases to subsidize one of Venezuela’s few remaining allies underscores its increasing global isolation and the disintegration of its energy sector under socialist President Nicolas Maduro.
The purchases came as Venezuela’s crude production hit a 33-year low in the first quarter — down 28 percent in 12 months. Its refineries are operating at a third of capacity, and its workers are resigning by the thousands.
PDVSA bought the crude for up to $12 per barrel more than it priced the same oil when it shipped to Cuba, according to prices on internal documents reviewed by Reuters. But Cuba may never pay cash for the cargoes because Venezuela has long accepted goods and services from Cuba in return for oil under a pact signed in 2000 by late presidents Hugo Chavez and Fidel Castro.
PDVSA, the Venezuela government and the Cuba government did not respond to requests for comment.
Venezuela’s government has previously said it only imports oil to blend with its own tar-like crude to improve quality and create an exportable product, or to feed its refinery in Curacao. But hundreds of PDSVA documents examined by Reuters News detailing imports and exports, dated from January 2017 to May of this year, show the company is now buying crude at market prices to deliver to allies — in shipments that never pass through Venezuela.
The subsidized deliveries are aimed at maintaining political support from Cuba, one of a dwindling group of Venezuela allies, according to diplomats, politicians and PDVSA executives.
“Maduro is giving away everything he can because these countries’ backing, especially from Cuba, is all the political support he has left,” said a former top Venezuelan government official who declined to be identified.
Caracas has come under increasing international pressure as the United States, the European Union and Canada have sanctioned Venezuela for what they see as Maduro’s attempts to cement a dictatorship.
Credit: Reuters News