Italy based Eni and Spain-based Repsol SA could begin shipping Venezuelan oil to Europe as soon as next month, reports Reuters. The move would help make up for the absence of Russian crude. Oil-for-debt swaps from Europe were halted two years ago when the US toughened its sanctions on Venezuela.
The volume of oil Eni and Repsol are expected to receive is not large and any impact on global oil prices will be modest, said Reuters, citing one unnamed source of five. However, the US giving the go-ahead would be symbolic good news for Venezuelan President Nicolas Maduro, who could turn out to be a fortunate side-effect beneficiary of Russia’s invasion of Ukraine.
President Biden’s administration hopes that the Venezuelan crude will help Europe cut its dependence on Russia, as well as re-direct some of Venezuela’s cargoes from China.
The two European energy companies, which have joint ventures with Venezuelan state-run oil company PDVSA, will be able to count the crude cargoes toward unpaid debts and late dividends, sources said.
A key condition, one of the people said, was that the oil received “has to go to Europe. It cannot be resold elsewhere.”
Washington has not made similar allowances for US oil major Chevron Corp, India’s Oil and Natural Gas Corp Ltd (ONGC) and France’s Maurel & Prom.
All five oil companies halted swapping oil for debt in mid-2020 as the previous US administration decided to put “maximum pressure” on Venezuela’s oil exports.
PDVSA has not scheduled Eni and Repsol to take any cargoes this month, according to a June 3rd preliminary PDVSA loading program seen by Reuters.
Washington has recently maintained that further sanctions relief on Venezuela would be conditional on progress toward democratic change as Maduro negotiates with the opposition.
Last month, the Biden administration authorized Chevron,the largest U.S. oil company still operating in Venezuela, to talk to Maduro’s government and PDVSA about future operations in Venezuela.
About that time, the U.S. State Department secretly sent letters to Eni and Repsol saying Washington would “not object” if they resumed oil-for-debt deals and brought the oil to Europe, one of the sources told Reuters.
