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Russian State Oil Company Rosneft, in Sudden Move, Sells Assets in Venezuela Russian State Oil Company Rosneft, in Sudden Move, Sells Assets in Venezuela
(about 2 hours later)
CARACAS, Venezuela — The Russian state-controlled oil firm Rosneft said Saturday it was ceasing operations in Venezuela and selling all of its assets in the country, a sudden move that could damage Venezuela’s already collapsing economy. CARACAS, Venezuela — The Russian state-controlled oil firm Rosneft said Saturday it was ceasing operations in Venezuela and selling all of its assets in the country, signaling a shift in Kremlin strategy that could further rattle Venezuela’s crumbling economy.
The United States had imposed sanctions on two Rosneft oil trading subsidiaries this year for helping Venezuela’s authoritarian president, Nicolás Maduro, stay in power. Those sanctions have hurt the company’s business elsewhere in the world. Rosneft had emerged as the biggest economic ally of Venezuela’s authoritarian president, Nicolás Maduro, accounting for up to two-thirds of the country’s oil trade and a significant share of crude production. The lifeline provided by Rosneft has allowed Mr. Maduro to maintain a flow of hard currency and supply the country with gasoline.
By late 2019, Rosneft had emerged as the biggest economic ally of Mr. Maduro, accounting for up to two-thirds of the country’s oil trade and a significant share of crude production. The lifeline provided by Rosneft has allowed Mr. Maduro to maintain a flow of hard currency and supply the country with gasoline. The United States imposed sanctions this year on two Rosneft oil trading subsidiaries for helping Mr. Maduro. The sanctions, which have hurt the company’s business elsewhere in the world, were cited by a Rosneft spokesman Saturday in describing the sale.
In a statement, Rosneft said it had agreed to sell its Venezuelan assets to an unnamed company that it described as wholly owned by the Russian government. Still, the sale of Rosneft’s assets is not necessarily a move away from Mr. Maduro by Russia, one of the country’s few foreign backers.
“Being a public international company, we took a decision that was in the interest of our shareholders,” Mikhail Leontyev, Rosneft’s spokesman, told Interfax, a Russian news agency. “Now, we have the right to expect American regulators to deliver on the promises that they have publicly made.” Rosneft said it was selling its Venezuelan assets to an unnamed company that it described as wholly owned by the Russian government. In that respect, Moscow will be more entangled in Venezuela than before because its ownership stake in Rosneft is just over 50 percent.
Rosneft’s withdrawal from Venezuela could deal a blow to the country’s declining oil industry, which has struggled to deal with tightening American sanctions and, more recently, the fall of global oil prices. Industry executives said the sale appeared intended to disconnect Rosneft from Venezuela without substantially changing Russia’s role. But the move could have negative consequences for the Venezuelan economy nonetheless.
It is unclear, however, whether the announcement would really result in Rosneft’s exit from Venezuela. David L. Goldwyn, the State Department’s top energy diplomat in the first Obama administration, said that while the Russian government would retain its interests in Venezuelan oil fields, the move would further limit Venezuelan revenue from oil exports.
The lack of publicly disclosed details on the sale, combined with an unusual compensation structure and the involvement of a Russian state-owned buyer, may allow Rosneft to continue doing business with Mr. Maduro under a different name to bypass American sanctions. Rosneft has been trading Venezuelan oil to small refineries in China, in violation of United States sanctions. While in theory another Russian company could do the same, it could not do so immediately in the absence of Rosneft’s sophisticated trading systems — which would choke off a source of revenue for Mr. Maduro’s government.
Industry executives with interests in Venezuela said Rosneft appears to want to take its name out of the Venezuelan headlines without substantially changing Russia’s role in Venezuela. Mr. Goldwyn called the sale a “victory for U.S. sanctions.” Coupled with a crash in global oil prices, he said, the sanctions had made it “worthless for Rosneft to trade in Venezuelan crude.”
The Trump administration this month sanctioned TNK Trading International, a subsidiary of Rosneft, after it stepped up shipments of Venezuelan crude to circumvent American sanctions against Venezuelan oil. A spokesman for Rosneft, Mikhail Leontyev, said in an interview with Russia’s Interfax news agency that the sale was necessary for his company to continue doing business internationally.
Sanctions on two Rosneft subsidiaries that were shipping Venezuelan oil have led China and India to slow purchases, leading to a near-overflow of petroleum storage tanks in Venezuelan ports. That has put further pressure on Venezuelan production, which had stabilized at 750,000 barrels early this year but is now falling as the coronavirus is reducing energy demand and forcing Venezuela to sell what it can at highly discounted prices. “Being a public, international company, we took a decision that was in the interest of our shareholders,” Mr. Leontyev said. “Now, we have the right to expect American regulators to deliver on the promises that they have publicly made.”
Anatoly Kurmanaev reported from Caracas, and Clifford Krauss from Houston. Ivan Nechepurenko in Moscow contributed reporting from Moscow. Rosneft is controlled by the Russian government but partly owned by private investors. Its stock is listed on the London Stock Exchange. BP, the British oil giant, has held a roughly 20 percent stake in the company and has had representatives on the board.
Rosneft’s investments in Venezuela had become deeply entangled with Russia’s goal of regaining a geopolitical beachhead in South America, restoring influence that Moscow had lost in the region after the collapse of the Soviet Union.
Many of the investments were begun as commercial ventures by a private Russian oil company, before being taken over by Rosneft. The state-controlled company traded Venezuelan oil and sunk large investments into fields that yielded less oil than expected and consistently lost money.
Venezuela’s declining oil industry has struggled to deal with tightening American sanctions and, more recently, the fall of global oil prices.
Sanctions on two Rosneft subsidiaries that were shipping Venezuelan oil have led China and India to slow purchases, leading to a near-overflow of petroleum storage tanks in Venezuelan ports.
That has put further pressure on Venezuelan production, which had stabilized at 750,000 barrels early this year but is now falling as the coronavirus is reducing energy demand and forcing Venezuela to sell what it can at highly discounted prices.
The Trump administration this month sanctioned TNK Trading International, a subsidiary of Rosneft, after it stepped up shipments of Venezuelan crude.
Anatoly Kurmanaev reported from Caracas, Clifford Krauss from Houston, and Andrew E. Kramer from Moscow. Ivan Nechepurenko ad Andrew Higgins contributed reporting from Moscow.