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The Kremlin will be able to capitalize on the collapse of Venezuela

Сможет ли Кремль заработать на крахе Венесуэлы

Russia sharply increased its oil supplies to the U.S. in February. As reported by investment Bank Caracas Capital in the last week of February deliveries of Russian oil and petroleum products in the U.S. rose to the highest since 2011.

So, from 23 February to 1 March at least nine tankers delivered 3.19 million barrels. oil and oil products of Russian origin in ports of the United States. How to write Bank analysts, is a consequence of the “adaptation of U.S. markets to the loss of Venezuelan oil”, the supply of which the American government imposed an embargo.

3.19 million barrels. — “this is the largest amount of Russia that we see in 2011,” wrote managing partner of Caracas Capital Russ, Dallen. “Ironically, the Russians benefit from the collapse of Venezuela: one hostile to the sanctioned country replaces another hostile subjected the country to supply the United States,” he writes.

Before that import Russian oil and oil products in the United States was approximately 1.8 million barrels. a week, which was 2.8% of total imports. Most of the “dropped out” of the Venezuelan volume was replaced by supplies from Mexico and Saudi Arabia.

In fact, American authorities have given their companies a transition period until 28 April, during which they can continue to buy oil in Venezuela. But since all payments must be sent to the Bank account in the United States, funds for which are blocked from Venezuelan companies, of course, there is no interest in continuing deliveries. Instead, they try to increase exports to India and the EU.

At the same time, Russia began to supply oil products to the most Venezuela. According to Bloomberg, Rosneft, for the first time since the introduction of sanctions against Venezuelan state-owned PDVSA in late January sent a party of heavy naphtha to Venezuela. It is necessary to dilute viscous Venezuelan oil to enable it to move through pipelines to the coast for export.

It would seem that Russia may use the situation to increase its exports to USA and other countries, replacing the volume dropped. However, as the Director of the national energy security Fund Konstantin Simonov, such benefits are almost nothing compared to the losses that Rosneft and Russia as a whole can suffer because of the situation in Venezuela. Only in December 2018 was signed contracts guaranteeing investments in the amount of more than five billion dollars, not counting loans and investments of previous years. In addition, Rosneft has for several years actively invested and gave loans to the country. Therefore, to displace it from the market is not in the interests of Moscow.

It is naive to think that our oil industry as a whole will benefit from the crisis in Venezuela, — says Konstantin Simonov. Why? Yes, because the company “Rosneft” too much money invested in this country. Only officially in the financial statements of the company indicates that it needs 2.7 billion dollars. But we understand that actually taking into account investments and other investments debt much more. If Venezuela is to be filled up, she can’t give the money.

You can, of course, to consider all superficial. Venezuela before this crisis was mining at 2.2 million barrels a day, then it fell by more than a million, was recently news that they have lost 300-400 thousand barrels./day. exports. If you think that we will place these 300-400 thousands and get this money, this is a very shortsighted approach.

“SP”: — Why?

Yes, some niches can for us to open. But in reality, there is a feeling that the problems Venezuela is now our problem. When people owe the Bank 10 dollars, it is human problems, but when he owes the Bank 10 million — this is the Bank’s problem. What Venezuela owes us a few billion dollars — this is our problem. You need to think ahead before you invest in this politically problematic and risky country.

So the situation is not favorable for us. Yes, in the moment opportunities open up. Delivery from Venezuela impossible, and we can send your tankers to the US. But the numbers that are called now, are ridiculous. From 23 February to 1 March we sent three million barrels. Yes, Russia is a day produces 11 million. And the daily consumption of the U.S., according to some estimates, is 19 million barrels. That’s the kind of market share we there took. So when someone in the US, yelling that the Russians sell their oil, it’s just a political statement.

Well, we put a small fraction of the daily consumption of the US and something to make money. But those 2.7 billion that Venezuela is officially “Rosneft” (a total debt of Caracas, taking into account the debt for supplies of weapons, food and so on, is estimated at $ 17 billion), is not compensated.

Let’s see what happens. Last week, the company PDVSA has moved its European office from Lisbon to Moscow. So they continue to sell oil and try to attach it to other countries, to China, somewhere else. That is, we are help to sell Venezuelan oil, where to turn, hoping that then some money and we will return to the framework of debt repayment.

So we have a completely different strategy. We’re not trying to finish Venezuela and the oil to replace their own. Although if we had not invested that kind of money in this country, it would be possible to do so. We could take this niche. But since they owe us a lot of money, the situation is quite different. We have to get them somehow out of the mud.

— Friendship is friendship, and money separately, says analyst CC “Finam” Alexey Kalachev. Russian companies, including “Rosneft”, which was supported by Venezuela, took advantage of the situation and increased the supply in the United States. In fact, it is a sin not to take advantage of when on the market there are such opportunities, it is normal market behavior. In addition to the US heavy Venezuelan crude supplied to India. In this country, “Rosneft” also have interests, respectively, here, too, we will be able to fill this gap.

“SP”: — Why is the US buying our oil, what about the sanctions?

— U.S. sanctions on trade in Russian oil do not apply. The oil embargo Washington imposed only against Iran and Venezuela. Against our oil industry sanctions imposed limits on funding and technology transfer, but not to trade.

“SP”: — whether Rosneft supplies to compensate for losses due to the Venezuelan crisis?

— In principle, the supply of Venezuelan oil is a big advance. It turns out, the money Rosneft paid, and to obtain raw materials in full volume is not obtained. Replacement of these supplies, our company is trying to cover some lost revenues.

On the other hand, it is clear that the Maduro regime is absolutely unsustainable and, in my opinion, doomed. Moreover, its retention increases the risk that the money will never return. These regimes always need more and more, and their impact do not exist, because they are very inefficient. We fear a regime change that Russia will not be able to influence. But from an economic point of view this is not a losing option, as the chances that the new government will return the debt is much higher than getting them from friends, which they occasionally have to just write off.

That is, it is a political loss, but economically more promising option. Another thing is that the period of dual power in Venezuela does create some opportunities. The huge Venezuelan oil reserves are virtually eliminated from the market, and it enhances our oil delivery companies. In particular, the growth of supply in the United States — one result of this uncertainty, which is economically beneficial to us.

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