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Caracas asks Opec, Russia to counter US sanctions

11 Jun 2018 23:52 (+01:00 GMT)
Caracas asks Opec, Russia to counter US sanctions

Caracas, 11 June (Argus) — The Venezuelan government has asked its fellow Opec members in writing to discuss the impact that US financial sanctions on Venezuela are having on the operations of state-owned PdV and oil market stability at the group's 22 June meeting.

Venezuelan energy minister and PdV chief executive Manuel Quevedo signed the letter sent around two weeks ago to all Opec members urging that the June meeting in Vienna prioritize a discussion of "the restrictive effects of the unilateral sanctions imposed by the United States of America that represent an extraordinary aggression, financially and economically, for the operations of our national oil industry and the stability of the market."

A copy of Quevedo's letter shown to Argus by a PdV executive in Caracas invokes Opec's foundational statutes to request Opec's official support for Venezuela in rejecting the financial sanctions imposed against PdV and Venezuela's government in August 2017 by US President Donald Trump. Parts of the letter shown to Argus, including the date, were redacted.

President Nicolas Maduro ordered Quevedo to seek Opec's support in opposing the US financial sanctions against Venezuela after Iran's government shared with the Venezuelan energy and foreign ministries a similar letter that Tehran recently sent Opec, the PdV executive said.

The executive said Maduro has also asked Russia, a party to the current Opec/non-Opec agreement to restrict oil production, to support Venezuela's efforts to secure Opec's unanimous support against US financial sanctions.

Caracas blames the sanctions for accelerating Venezuela's sharp production decline by choking off the company's access to international credit.

"The US sanctions have hurt PdV and Venezuela very significantly," the executive said. "PdV currently is unable to pay or refinance its debts because banks worldwide are very reluctant to extend even short-term commercial financing to PdV for fear of violating the US sanctions."

Russia supported Maduro's re-election last month in an election process that the US, the EU, the Organization of American States, the 12-member Lima Group and other countries condemned as fraudulent.

But it is unclear if Moscow, itself a target of western sanctions over Ukraine, will back Venezuela's efforts to enlist the support of Opec and large non-Opec producers against the US financial sanctions, a local European diplomatic official said.

The "general perception" among EU country diplomats in Caracas is that Russian state-controlled "Rosneft appears to be trying to leverage PdV's crisis to expand its own upstream operations in Venezuela," the diplomat said.

Quevedo's letter to all Opec members reflects the Maduro government's "increasing desperation at PdV's failure to stop the country's output decline," according to the PdV executive.

The Maduro government also hopes that Quevedo's appeal for unanimous Opec solidarity against the US financial sanctions will counter what it sees as US pressures on Saudi Arabia to raise its crude production at a time when the majority of the group's other members are unable to boost their individual output levels, the PdV executive added.

Iraq's oil minister Jabbar al-Luaibi made a strong statement today against raising production quotas within the Opec, non-Opec output constraint deal.