In October 2016, the head of Russia’s largest oil company traveled to the birthplace of Hugo Chávez, the former president of Venezuela.
Rosneft chief executive officer Igor Sechin brought with him a singing group from Moscow to celebrate the presentation of a huge statue of the former leader. Chávez had died three years earlier.
Sechin’s visit marked a turning point in the relationship between Russia and Venezuela. He spoke to a crowd of government supporters in Spanish, which he learned in his days working for the Soviet military in Africa.
“We have no choice between victory or death,” said Sechin, repeating the words of a Venezuelan independence hero. He was describing the deepening ties between Russia and Venezuela in their competition with the United States. ”We must achieve victory,” he said.
Now the U.S. government wants to break up that growing partnership as part of its campaign to remove Chávez’s replacement, Nicolás Maduro.
U.S. government sanctions
Earlier this month, the U.S. Treasury Department barred American companies from doing business with Rosneft Trading SA. It accused the company, the subsidiary of Russia’s state-owned oil business, of supporting Maduro as he seeks to avoid U.S. sanctions.
For months, U.S. officials have been warning foreign companies that they could face action if they continue to do business with Maduro and his government. Those warnings have been directed mainly at Russia.
The U.S. government made it illegal for Americans to buy crude oil from Venezuela a year ago. And government officials say Russia has processed about 70 percent of Venezuelan oil sales since that time.
Francisco Monaldi is a Venezuelan oil expert at Rice University in Houston, Texas. He told The Associated Press the latest actions should cause concern among companies in countries that continue to partner with the Venezuelan state-operated oil company PDVSA.
The U.S. action could also lead to the ending of a special license for Chevron. The permit has so far kept the California-based company from having to pull out of Venezuela. Chevron is a partner in joint operations with PDVSA. Together they are responsible for about a fourth of Venezuela’s total oil production.
In a statement, PDVSA condemned the U.S. government for what it called “economic assassination” aimed at taking control of Venezuela’s oil industry. Foreign Minister Jorge Arreaza said the new actions would support Venezuela’s case against the administration of U.S. President Donald Trump. Venezuela is accusing the administration of crimes against humanity and is taking the case to the International Criminal Court.
Rosneft operates several oil fields with PDVSA that it has controlled since Chavez’s government forced U.S. companies out of the country.
But oil experts say that as the new, go-to supplier of the country’s crude oil supplies, Rosneft wins two ways. First, Rosneft buys Venezuela’s high quality Merey 16 crude at a greatly reduced cost. It then uses money from sales of Merey 16 to pay down $6.5 billion lent to PDVSA since 2014 for the purchase of Russian-made weaponry and other goods.
Venezuelan oil exports
To avoid problems for buyers in China and India, Rosneft has been using oil transport ships that try to hide what they are carrying. They turn off their required tracking systems and carry out risky ship-to-ship exchanges off the coast of West Africa and other areas.
In the short term, Francisco Monaldi expects Maduro will have to pay more to find someone else to take on the added risk of moving the country’s oil. That means Venezuela will have even less money to import food and medical supplies or repair its failing electricity infrastructure. And with storage centers already full, production that is already at a 70-year low is likely to fall even further, he added.
Still, nobody expects oil sales from Venezuela to dry up completely. That is unless the U.S. navy blocks all of the country’s ports. The Trump administration has refused to deny it will do so, but has shown no sign of taking that action.
The United States leads a group of now nearly 60 nations that recognize Venezuelan opposition leader Juan Guaidó as the country’s rightful leader. The group considers Maduro’s 2018 re-election illegal. In turn, Russia has accused the Trump administration of spreading false information to engineer an overthrow of the government.
Richard Nephew is an energy researcher at Columbia University in New York. He helped design the U.S. sanctions policy while at the State Department during the presidency of Barack Obama. Nephew said by not dealing with Rosneft itself, and only going after one of its many parts, the effect on Russia’s continued support for Maduro will likely be limited.
“This seems more like a warning shot designed to look bigger than it actually is,” he noted. “It’s shooting someone who is Russian sounding without really punishing the Russians themselves.”
Several pro-Putin lawmakers were dismissive of the Trump administration’s efforts. They said they would appeal to the World Trade Organization to remove what they described as unlawful U.S. actions.
“I think this issue can be resolved,” Vladimir Dzhabarov, a member of Russia’s upper house of parliament, told RIA Novosti news agency. “They’re smart over there (in Rosneft) and they will find a way to get around it.”
I’m Dorothy Gundy.
And I’m Pete Musto.
Joshua Goodman and Daria Litvinova reported on this story for the Associated Press. Pete Musto adapted the report for VOA Learning English. George Grow was the editor. We want to hear from you. Write to us in the Comments Section.
Words in This Story
turning point – n. a time when an important change happens
replacement – n. a person or thing that takes the place of someone or something else
subsidiary – n. a company that is owned or controlled by another company
sanction(s) – n. an action that is taken or an order that is given to force a country to obey international laws by limiting or stopping trade with that country or by not permitting economic aid for that country
license – n. an official document that gives you permission to do, use, or have something
pull out – p.v. to leave a place or position or to cause someone or something to leave a place or position
assassination – n. the act of killing someone, usually for political reasons
tracking – n. the act of following or watching the path of something
infrastructure – n. the basic equipment and structures, such as roads and bridges, that are needed for a country, region, or organization to function properly
smart – adj. showing intelligence or good judgment