Russia looks set to be buying Venezuela’s oil. Like, all of it.
According to rumors in the market and one confirmed recently by Venezuelan daily El Nacional, Russia’s state-owned oil giant Rosneft is going to take control of PdVSA, the bankrupt Venezuelan oil company that explores for and produces most of the country’s oil.
Rosneft is a big lender to PdVSA, and PdVSA is broke so Rosneft wants to be paid. So it makes sense that the Venezuelan government would sell something. Rosneft owns a large stake in Citgo, essentially a PdVSA subsidiary and a well-known gasoline station brand here in the States.
Imagine if you will the raucous sound of hysteria you would get from many newsrooms if, say, Exxon, was buying PdVSA instead of the Russians.
Let me give you a hint of the headlines and then the following hot takes that would flow on social media by the Hands Off Venezuela activists and their sympathizers.
Headline: Exxon Buys Venezuelan Oil Giant PdVSA.
Subhead: As Washington Crushes Country With Sanctions, Socialists United Unable To Pay Its Bills, Must Sell Prized Possession.
American Twitter: Another regime change for oil. This is pure theft of the resources of the Venezuelan people by greedy corporations backed by Washington! #HandsOffVenezuela
Latin America Twitter: Imperialistas! Yankees go home! Trump es $%@! #VenezuelaLibre!
Russia might buy PdVSA …
Two years ago, Russia and Venezuela signed an agreement on debt restructuring of $3.15 billion over a period of 10 years with minimum payments in the first six years. The state debt includes payments twice a year—in March and September. It is unclear if Venezuela has made those payments. Bondholders have been defaulted on for over a year now.
Both Russia and China are key financiers to the Socialists United government of Nicolas Maduro.
According to the El Nacional article, Venezuela’s government is ironing out the legal ways in which it could hand control over to a foreign entity. The move would have to be approved by Venezuela’s parliament, the National Assembly, which is under control of the opposition. It is unclear whether Maduro, should he really want to go through with this, will let the National Assembly rule on this or his so-called Constituents Assembly, a parallel assembly of sorts which is packed with Maduro loyalists.
The U.S. imposed sanctions on PdVSA in January 2019 in hopes to pressure Maduro to step down at a time when hundreds of thousands of Venezuelans were either taking to the streets in protest, or fleeing the country’s economic depression and drug gang violence.
PdVSA’s assets in the U.S. are valued at $7 billion and cannot be repatriated under the current sanctions regime. Those restrictions are supposed to be in place so long as Maduro is in power. It is also unclear if a Rosneft purchase would keep those restrictions in place.
For Wall Street, a Rosneft acquisition would assume all debt and therefore likely be an easier pathway for bondholders to recover some of their lost value.
Whether or not Maduro goes through with selling his country’s flagship enterprise to “his brothers,” the Russians, remains to be seen. If the rumor was of an American company buying it, we may still have heard about it. Washington has a penchant for making Russia a dramatic centerpiece. If Rosneft does take it over, Washington policy makers will likely treat it as PdVSA with a new name.
In other Venezuelan news, the New York Times wrote an extensive feature on the quality of water in Maduro’s country. Hint: It’s disgusting. (The water, not the article. The article is serious journalism.)
And the United Nations, despite Venezuela’s lousy water and its increasing levels of violence and all the protests and the mass migration out of the country, in its infinite wisdom, has made Venezuela a member of the Human Rights Council.
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