The logo of Venezuelan state-owned oil company PDVSA is seen at a gas station in Caracas.LUIS ROBAYO/AFP/Getty Images
Venezuela’s state-run oil company PDVSA is seeking to sidestep Trump administration sanctions restricting payments for its oil by asking major buyers, including U.S. refiners, to renegotiate contracts, four sources involved in the talks said.
The U.S. government on Monday issued an executive order freezing PDVSA assets and requiring U.S. firms to pay for PDVSA oil using accounts controlled by the country’s congress head and self-proclaimed President Juan Guaido, a move to pressure socialist Nicolas Maduro into stepping down.
PDVSA began calling customers ahead of the sanctions, urging them to swap foreign fuel and other products for its Venezuelan crude cargoes, the sources said. It is also considering asking trading houses to act as intermediaries for a portion of its crude sales to indirectly supply customers in the United States and elsewhere.
“We are trying to redo the contracts. It is not yet entirely clear how because customers are being individually called, but we are studying alternatives,” said a PDVSA source familiar with the efforts.
The proposals were still being offered, but it was unclear on Tuesday whether the approach of using intermediaries or swaps would avoid violating U.S. sanctions, the sources said.
Oil accounts for more than 90 per cent of Venezuela’s export revenue. Falling output, corruption and mismanagement have battered the nation’s economy, leading to hyperinflation and malnutrition that have sparked an exodus of 3 million people.
The South American country exports 1.25 million barrels per day (bpd.) of crude, including 500,000 bpd. to the United States, and imports over 200,000 bpd. of refined products, according to Refinitiv Eikon data. As recently as 2012, it exported 2.57 million bpd. of oil and fuel.
FREEZING PDVSA PROCEEDS
Washington on Monday said proceeds from PDVSA’s sales to companies in the United States will be frozen until a new government can take control of the accounts.
The sanctions did not directly mention swaps and indirect trade with PDVSA that began in recent years with customers including PDVSA’s U.S. unit Citgo Petroleum, India’s Reliance and Russia’s Rosneft.
Oil firms that had sent tankers to Venezuela to lift crude bound for the United States were ordered by PDVSA on Monday to pay for cargoes before departure, sources told Reuters. Such prepayment could be in violation of the sanctions, setting the stage for a standoff at Venezuelan ports.
PDVSA did not immediately reply to a request for comment.
Several U.S. refiners, including Chevron Corp, Phillips 66 and Valero Energy said they were studying the sanctions and would comply with U.S. laws.
Valero, the second-largest buyer of Venezuelan crude after Citgo, said it will “re-optimize” its crude supply to minimize any impacts.
Washington’s fast action on Venezuela and efforts by Maduro’s government to defend its grip on PDVSA have sent shock waves around the world, triggering higher global oil prices and angry responses from China and Russia.