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Exclusive: As Venezuelans suffer, Maduro buys foreign oil to subsidise Cuba

Reuters  |  HOUSTON 

By and Jeanne Liendo

HOUSTON (Reuters) - Venezuela's state-run firm has bought nearly $440 million worth of foreign crude and shipped it directly to on friendly credit terms - and often at a loss, according to internal company documents reviewed by

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

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 and medicine amid widespread shortages.

The open-market purchases to subsidize one of Venezuela's few remaining allies underscores its increasing global isolation and the disintegration of its under socialist

The purchases came as Venezuela's crude production hit a 33-year low in the first quarter - down 28 percent in 12 months. Its refineries are operating at a third of capacity, and its workers are resigning by the thousands.

(For a graphic on Venezuela's rising and falling exports, see: https://tmsnrt.rs/2wHCTUF )

bought the crude for up to $12 per barrel more than it priced the same oil when it shipped to Cuba, according to prices on internal documents reviewed by But may never pay cash for the cargoes because has long accepted goods and services from in return for oil under a pact signed in 2000 by late presidents and

PDVSA, the government and the did not respond to requests for comment.

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 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 subsidized deliveries are aimed at maintaining political support from Cuba, one of a dwindling group of Venezuela allies, according to diplomats, politicians and 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 who declined to be identified.

Late Tuesday, a of the political opposition to Maduro, Henrique Capriles, reacted to Reuters' disclosure of the to Cuba by tweeting: "Venezuelans are suffering the worst crisis without 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!"

has come under increasing international pressure as the United States, the and 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 plunged from nearly $46 billion in 2011 to $6 billion in 2017, according data and Ecoanalitica, a Caracas-based economic research organisation.

The oil PDVSA procured for Cuba was Russian 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 later, the documents show.

That adds to Venezuela's already towering debts of oil to state-owned firms in and China, which together have extended more than $60 billion in that have propped up its budget amid declining exports and

"It's nonsense to to keep subsidized exports flowing," said

PETRO-DIPLOMACY

Venezuela's socialist government has long used oil for domestic and international political ends, subsidizing goods and services at home and currying favour across the region with on generous terms.

Venezuela's have helped soften international political censure of

The (OAS), which includes most Western Hemisphere nations, last year took up a motion seeking to pressure Venezuela to hold free elections, liberate political prisoners and declare a humanitarian crisis.

The effort was defeated when 12 countries that have received from Venezuela in recent years - about a third of the OAS membership - opposed it or refused to vote. Eventually, the OAS passed a watered-down motion urging free and fair elections.

Venezuela has avoided formal OAS condemnation "thanks to the support of the bloc of nations that have benefited from its and development programs for years," said Michael Fitzpatrick, in the U.S. State Department's Bureau of Western Hemisphere Affairs, said on April 30 during a talk at the Atlantic Council, a foreign policy think tank in

Most of those countries are members of Venezuela's trade pact, launched in 2005, which has granted up to 16 and Central American states with on favourable terms.

OAS declined to comment through

El Salvador's Economy Minister, Luz Estrella Rodriguez, said and other pacts promoted by Venezuela had played an important role in her country's development.

"Our country is very grateful," she said. "The government of El Salvador, of course, is a friend and an ally of the "

refused to vote last year on the OAS motion to condemn Venezuela.

Venezuela also supplied fuel last year to Nicaragua, the Dominican Republic, and Dominica, the documents show.

In total, members of with Venezuela last year received at least 103,000 bpd of crude and refined products from PDVSA, the documents show, or about 6 percent of Venezuela's exports.

FALLING OUTPUT, SHRINKING IMPORTS

The falling output of Venezuela's refineries has also left the country increasingly dependent on fuel imports to meet domestic consumption.

The internal PDVSA data reviewed by Reuters shows Venezuela last year purchased some 180,000 barrels per day of foreign crude and refined products from <601857.SS>, , , Reliance Industries and other suppliers, 17 percent more than in 2016.

Those companies did not respond to requests for comment.

The purchases totalled more $4 billion, according to PDVSA records.

Last year, total oil-industry purchases, including equipment and services, consumed 45 percent of Venezuela's total import spending, up from 13 percent in 2011, data shows. totalled $5.4 billion out of $11.9 billion.

The resulting scarcity of food, medicine and employment has caused thousands of citizens to flee Venezuela. The pay of PDVSA workers now can't cover the barest essentials because of the collapse of its currency, the bolivar.

"A worker's salary is not even enough for a box of eggs," said Hector Bertis, a PDVSA "We go to the bank, and they give us 10,000 bolivars - less than what a "

(Reporting by in Houston and in Calgary; additional reporting by in Washington, Paula Rosales in San Salvador, in Houston and Mircely Guanipa in Punto Fijo; Editing by Gary McWilliams, and Brian Thevenot)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, May 16 2018. 06:36 IST
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