US to end Rosneft sanctions if Venezuela exit confirmed

The US will lift sanctions on Russian state-controlled Rosneft's trading arm if it has effectively withdrawn from Venezuelan business, US special envoy for Venezuela Elliott Abrams said today.

"If Rosneft Trading has nothing to do with Venezuela" and has legally transferred its activities to another Russian entity, the sanctions would be lifted, Abrams said. "We will judge this on the ground."

Abrams also said if the facts show Rosneft Trading is no longer involved, the sanctions on it would be lifted.

The US imposed sanctions on Rosneft Trading in February, and another Rosneft commercial subsidiary, TNK, in March, for their role in Venezuelan oil trading.

Abrams did not mention TNK in his briefing with reporters this morning.

Abrams confirmed that the US government has been in contact with Russia over its proposal, unveiled on 31 March, that lays out a step-by-step political transition plan for Venezuela, under which sanctions would be gradually eased. Oil sanctions in particular would be "suspended" once a plural Council of State was formed, and definitely lifted once elections that were certified free and fair take place, Abrams said today.

Rosneft emerged as the top lifter of Venezuelan crude in the months after the US imposed oil sanctions in late January 2019.

At least part of the Venezuelan supply handled by Rosneft went toward paying down oil-backed debt from Venezuelan state-owned PdV. At the end of third quarter 2019, Rosneft reported that PdV had $800mn left to pay. It is not clear if any of the debt is still outstanding.

Rosneft announced on 28 March that it would sell 100pc of its Venezuelan oil assets to another entity wholly owned by the Russian state. The identity of the new entity has not been disclosed, but after Rosneft's announcement, the Russian government announced the creation of a new state oil company, Roszarubezhneft.

Rosneft is a minority partner in several PdV-led projects, led by the PetroMonagas integrated heavy crude joint venture.

The company has preliminary rights to two shallow-water natural gas fields that were not mentioned in Rosneft's withdrawal announcement.

After unveiling the transaction, Rosneft pressed the US to lift the sanctions on its subsidiaries. "We took this decision in the interests of our shareholders, as a publicly traded international company," Rosneft spokesman Mikhail Leontyev told Russian state-owned Tass news agency on 28 March. "And we have a right to expect, indeed, that the US regulators fulfill their public promises (to lift sanctions)".

The US sanctions on Venezuela are aimed at removing President Nicolas Maduro to make way for a transition government and new elections. Russia as well as China and other countries still recognize the Maduro presidency, in contrast to the US and Western allies that recognize opposition leader Juan Guaido as interim president instead.

By Patricia Garip