Maduro bought $440 million worth of foreign crude to subsidise Cuba

Vastavam web: Venezuela’s state-run oil firm PDVSA has bought nearly $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.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.

The open-market oil purchases to subsidize 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 percent 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 $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.

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.“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!”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 $46 billion in 2011 to $6 billion in 2017, according Venezuela Central Bank data and Ecoanalitica, a Caracas-based economic research organisation.

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.That adds to Venezuela’s already towering debts of oil to state-owned firms in Russia and China, which together have extended Venezuela’s government more than $60 billion in oil-for-loan deals that have propped up its budget amid declining exports and lower oil prices.