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Venezuela Buys Oil for Cuba as Venezuelans Suffer


Opposition supporters take part in a protest against upcoming presidential elections, in Caracas, Venezuela, May 16, 2018. (REUTERS/Marco Bello)
Venezuela Buys Oil for Cuba as Venezuelans Suffer
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Venezuela’s state-operated oil company reportedly has bought nearly $440 million worth of foreign crude oil and shipped it directly to Cuba.

The Reuters news agency says this information comes from company documents. It said the Venezuelan business, PDVSA, purchased the oil on friendly credit terms and often at a loss.

The shipments are said to be the first documented example of Venezuela buying oil for its nearby allies. Usually, the country sells them oil from its own supply.

For years, Venezuela has been a major oil exporter and member of OPEC, the Organization of the Petroleum Exporting Countries.

Now the country needs money from overseas to help its collapsing economy and to fight widespread shortages of food and medicine.

The oil purchases point to Venezuela’s increasing isolation in the international community and the weakness of its energy industry under President Nicolas Maduro.

Maduro is seeking re-election in a vote on Sunday.

FILE PHOTO: A general view of the Amuay refinery complex which belongs to the Venezuelan state oil company PDVSA in Punto Fijo, Venezuela November 17, 2016. REUTERS/Carlos Garcia Rawlins/File Photo
FILE PHOTO: A general view of the Amuay refinery complex which belongs to the Venezuelan state oil company PDVSA in Punto Fijo, Venezuela November 17, 2016. REUTERS/Carlos Garcia Rawlins/File Photo

Falling production, shrinking imports

The purchases came as Venezuela’s crude production hit a 33-year low during the first three months of 2018. Its production is down 28 percent over the past 12 months. Its oil processing centers are operating at one third of their usual rate, and its workers are resigning from their jobs by the thousands.

Reuters reports that PDVSA bought the crude oil for up to $12 per barrel more than the price for the same oil when it was shipped to Cuba. But Venezuela may never receive payments for the shipments. The country has long accepted goods and services from Cuba in exchange for oil under an agreement signed in 2000.

PDVSA, the Venezuelan government and the Cuban government did not answer Reuters’ requests for comment.

In the past, Venezuela’s government has said it only imports oil to mix with its own oil to improve quality and create an exportable product. The government has also purchased foreign oil to feed its processing center in Curacao.

But hundreds of PDVSA documents examined by Reuters show the company is now buying oil at market prices for its allies. The documents show that the oil never passed through Venezuela.

Diplomats, politicians and PDVSA officials say the shipments are aimed at keeping political support from Cuba. Cuba is one of a shrinking number of Venezuelan allies.

A former top Venezuelan government official said, “Maduro is giving away everything he can because these countries’ backing, especially from Cuba, is all the political support he has left.”

The former official did not want to be identified in the Reuters story.

Workers wait for information about their jobs outside the Kellogg's factory in Maracay, Venezuela, May 15, 2018.
Workers wait for information about their jobs outside the Kellogg's factory in Maracay, Venezuela, May 15, 2018.

Venezuela’s government has come under increasing international pressure. The United States, the European Union and Canada have all announced sanctions against Venezuela for what they see as Maduro’s attempts at dictatorship.

As Venezuela spends on oil imports, it has imported less of everything else its citizens need. Venezuela’s spending on non-oil imports dropped from nearly $46 billion in 2011 to $6 billion in 2017. These numbers come from Venezuela’s Central Bank and Ecoanalitica, an economic research organization.

The documents show that PDVSA bought the crude oil for Cuba from Chinese, Russian and Swiss businesses. But the Venezuelan company did not make payments. Instead, PDVSA promised that it would provide other oil shipments at a later time.

That adds to Venezuela’s debts of oil to state-owned companies in Russia and China. In total, Venezuela’s government has more than $60 billion in oil-for-loan deals.

Motorists line up for fuel at a gas station of Venezuelan state-owned oil company PDVSA in Caracas, Venezuela, Sept. 21, 2017.
Motorists line up for fuel at a gas station of Venezuelan state-owned oil company PDVSA in Caracas, Venezuela, Sept. 21, 2017.

Oil diplomacy

Venezuela’s socialist government has long used oil for political purposes, taking the money earned from oil sales to lower costs for goods and services at home. The government has won friends across Latin America by providing oil on generous terms.

Venezuela’s oil supply agreements have helped ease international political criticism of Maduro’s government.

Last year, the Organization of American States (OAS) considered a proposal aimed at pressuring Venezuela to hold free elections, free political prisoners and declare a humanitarian crisis.

But the effort was defeated when 12 OAS members opposed the plan or refused to vote. That represents about one third of the group’s membership. All 12 countries have imported oil from Venezuela in recent years. Eventually, the OAS passed another proposal urging free and fair elections.

I’m Jonathan Evans.

Marianna Parraga and Jeanne Liendo reported this story for the Reuters news agency. Jonathan Evans adapted their report for VOA Learning English. George Grow was the editor.

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Words in This Story

sanction – n. a measure or action aimed at forcing a country to obey international rules or laws

generousadj. unselfish; kind-hearted; liberal

barreln. a large container used as a form of measurement

isolation – n. the action of separating someone or something from other things

crudeadj. unprocessed; untreated

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