Venezuelan oil production is dropping rapidly and the government has no money to buy food, medicines or consumer goods, but there is one item that the socialist regime of President Nicolás Maduro seems unwilling to sacrifice under any circumstances: oil subsidies to Cuba.
News reports that a shipment of 500,000 barrels of crude was on its way this week to the port of Matanzas in northwestern Cuba sparked indignation among many in Venezuela, a country suffering under the worst economic crisis of its history.
The oil that Venezuela supplies to Cuba equals about 55,000 barrels per day and costs about $1.2 billion per year, money that could help the country curb inflation, import urgently needed medicines or provide food to the 9 million Venezuelans who say they eat only once per day.
But Maduro has made it clear that he prefers to keep supermarkets empty rather than suspend the shipments to Cuba, said Antonio De La Cruz, executive director of the Washington-based consultancy firm Inter American Trends.
“Because Cuba today is the real mainstay of his power,” said De La Cruz. “Without the Cuban support, Maduro would have been gone a long time ago. Havana today is supplying him with the instruments of repression and the intelligence apparatus that allows him to stay in power despite the tornado he faces.”
The late President Hugo Chávez initiated the cooperation program with Cuba, in which Caracas used crude to pay for the services of the tens of thousands of Cuban medical personnel assigned to work in Venezuela.
But the program, which at one point cost Venezuela more than $5 billion per year, also paid for Cuban assistance with intelligence and national security issues, according to documents from the U.S. State Department and Stratfor, a private intelligence agency, published by Wikileaks.
“The capacity of Venezuelan intelligence got a strong push after Chávez allied with Cuba,” one Stratfor analyst wrote in a private email. “That’s the reason why Chávez is in debt with (Cuba). … His regime can detect every plot beforehand and keep watch on the opposition because of the large number of Cubans involved in intelligence collection.”
“What we must remember is that SEBIN (Venezuela’s intelligence service) has never been as effective if not for the Cubans. If Cuba at some point decides to withdraw its cooperation, Chávez would have to quickly develop an intelligence capability, because otherwise he would be in trouble,” the analyst added.
Maduro, who supported Chávez and has the closest ties to Havana, has been forced to reduce crude supplies to Cuba as Venezuela’s finances and oil production tanked.
Yet the continuing level of supplies has amounted to a great sacrifice for Venezuela in recent months, when production dropped from 2 million barrels per day to 1.3 million.
Production could drop further, said Horacio Medina, a former administrator at the state oil company PDVSA. “All analysts concur that by year’s end — and this seems to be irreversible — Venezuela’s total production will not be more than 1 million barrels per day,” he said.
“At this time they (PDVSA) don’t know how to increase production and don’t have the means to do it,” Medina added.
Other experts agree.
“Crude production in Venezuela has been falling at practically 10 percent every three months since the middle of 2017. The possibility that the country could lose another 500,000 barrels in production by the end of the year is not far-fetched,” Adrian Lara, an oil and gas analyst with the company GlobalData, warned in a recent report.
The collapse of Venezuela’s oil production, which stood at 3.2 million when Chávez came to power, has been aggravated by the recent legal embargo slapped on PDVSA by ConocoPhillips as the company tries to recover a $2 billion investment confiscated by the Venezuelan government.
One report by the Reuters news agency noted that more than 80 oil tankers were anchored off Venezuelan territorial waters at one point, waiting to load, after fears of new ConocoPhillips legal moves paralyzed PDVSA oil sales.
PDVSA has managed to ease the restrictions somewhat, but it lacks sufficient light crude required to mix with heavy Cuban crude so it can be processed on the island, forcing Venezuela to buy light crude abroad in order to meet its commitments to Havana.
“There have been purchases of light crude in the open market, Russian crudes, and these are sent to Cuba,” said Juan Fernandez, former PDVSA executive director of planning.
That’s extremely expensive, Fernandez added, “but Maduro’s commitment to the Cuban regime is indestructible. Venezuela goes hungry before he stops sending barrels to Cuba.”
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