The U.S. is stepping up efforts to cripple Venezuela’s oil industry, this time by targeting the petrochemicals the country’s state-owned oil company needs to keep its crude exports flowing.
The U.S. Treasury’s Office of Foreign Assets Control said Thursday in a notice that sanctions on Venezuela’s petroleum industry will no longer exclude the export or re-export of diluents, a class of hydrocarbons blended with heavy, viscous types of crude oil to make them lighter and more marketable.
Most of Venezuela’s remaining oil production is low-quality crude that needs to be either diluted with lighter grades or partially refined before it can be sold on the global market. The U.S. move may complicate Petroleos de Venezuela SA’s plans to convert heavy-crude upgrading facilities, which have been beset by operational problems, into simpler blending facilities that are easier to operate.
The ruling is also a sign that President Donald Trump’s administration continues to push for regime change in Venezuela, even though his counterpart there, Nicolas Maduro, has managed to withstand U.S. sanctions and international isolation. Recent talks in Oslo between Maduro’s regime and the Venezuelan opposition haven’t produced any breakthrough.
Read more U.S. on Sidelines as Allies Struggle for New Venezuela Strategy Why Venezuela Has Two Presidents, One Thorny Standoff: QuickTake PDVSA Plans to Scale Back Hugo Chavez’s Signature Oil ProjectThe amendment from OFAC targets U.S. citizens, but it also cautions non-Americans against trading diluents with PDVSA. That “appears to threaten, if not impose, secondary sanctions on non-U.S. entities” that operate in Venezuela’s oil sector or materially assist PDVSA, Clearview Energy Partners LLC said in a research note.
“Secondary sanctions targeting third-party crude transactions with PDVSA could create contagion problems due to interactions between Russian and Chinese companies operating in Venezuela,” Clearview said.
This year PDVSA has imported almost 1 million barrels of Agbami crude from Nigeria to be used as a diluent by blending it with Orinoco sludge oil, making it acceptable to foreign refiners. Venezuela’s oil production fell to 768,000 barrels a day in April, according to OPEC calculations based on secondary sources.
Additional measures against Venezuela could be on the way. Waivers allowing Chevron Corp. and four U.S.-based oil services suppliers to continue operating in Venezuela are set to expire July 27. If the U.S. doesn’t renew those waivers, and implements other measures such as secondary sanctions against non-U.S. companies, it could reduce output by another 300,000 barrels a day in the country, said David Voght, managing director of energy consultancy IPD Latin America.