As Venezuelans suffer, Maduro buys foreign oil to subsidise Cuba

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HOUSTON: Venezuela’s state-run oil firm PDVSA has bought nearly US$440 million worth of foreign crude and shipped it directly to Cuba on friendly credit terms – and often at a loss, according to internal company documents reviewed by Reuters.

The shipments are the first documented instances of the OPEC nation buying crude to supply regional allies instead of selling them oil from its own vast reserves.

Venezuela made the discounted deliveries, which have not been previously reported, despite its dire need for foreign currency to bolster its collapsing economy and to import food and medicine amid widespread shortages.

The open-market oil purchases to subsidise one of Venezuela’s few remaining allies underscores its increasing global isolation and the disintegration of its energy sector under socialist President Nicolas Maduro. The purchases came as Venezuela’s crude production hit a 33-year low in the first quarter – down 28 per cent in 12 months.

Its refineries are operating at a third of capacity, and its workers are resigning by the thousands.

PDVSA bought the crude for up to US$12 per barrel more than it priced the same oil when it shipped to Cuba, according to prices on internal documents reviewed by Reuters.

But Cuba may never pay cash for the cargoes because Venezuela has long accepted goods and services from Cuba in return for oil under a pact signed in 2000 by late presidents Hugo Chavez and Fidel Castro. PDVSA, the Venezuela government and the Cuba government did not respond to requests for comment.

Venezuela’s government has previously said it only imports oil to blend with its own tar-like crude to improve quality and create an exportable product, or to feed its refinery in Curacao.

But hundreds of PDSVA documents examined by Reuters detailing imports and exports, dated from January 2017 to May of this year, show the company is now buying crude at market prices to deliver to allies – in shipments that never pass through Venezuela.

The subsidised deliveries are aimed at maintaining political support from Cuba, one of a dwindling group of Venezuela allies, according to diplomats, politicians and PDVSA executives.

“Maduro is giving away everything he can because these countries’ backing, especially from Cuba, is all the political support he has left,” said a former top Venezuelan government official who declined to be identified.

Late Tuesday, a leader of the political opposition to Maduro, Henrique Capriles, reacted to Reuters’ disclosure of the oil shipments to Cuba by tweeting: “Venezuelans are suffering the worst crisis without food or medicine, our oil is about to be seized due to PDVSA’s debts, and they continue irresponsibly buying oil to give it away to other countries. They don’t care!”

Caracas has come under increasing international pressure as the United States, the European Union and Canada have sanctioned Venezuela for what they see as Maduro’s attempts to cement a dictatorship.

As Venezuela spends on oil imports, it has imported less of everything else its citizens desperately need. Venezuela’s spending on non-oil imports plunged from nearly US$46 billion in 2011 to US$6 billion in 2017, according Venezuela Central Bank data and Ecoanalitica, a Caracas-based economic research organization.

The oil PDVSA procured for Cuba was Russian Urals crude, the documents show, a variety well-suited for Cuban refineries constructed from Soviet-era equipment.

PDVSA bought the crude from Chinese, Russian and Swiss firms – not for cash, but a pledge that PDVSA would deliver other oil shipments later, the documents show. — Reuters