CARACAS, Venezuela – State-controlled Russian oil company Rosneft said on Saturday it would cease operations in Venezuela and sell all of its assets in the country, signaling a change in Kremlin strategy that could further shake the economy of Venezuela in ruins.
Rosneft had become the biggest economic ally of the authoritarian president of Venezuela, Nicolás Maduro, representing up to two-thirds of the country’s oil trade and a significant share of crude oil production. The lifeline provided by Rosneft allowed Mr. Maduro to maintain a strong currency flow and to supply the country with gasoline.
The United States has imposed sanctions this year on two Rosneft oil trading subsidiaries for helping Maduro. The sanctions, which have hurt the company’s operations around the world, were cited on Saturday by a Rosneft spokesperson in his description of the sale.
However, the sale of Rosneft’s assets is not necessarily a move away from Mr. Maduro by Russia, one of the country’s few foreign donors.
Rosneft said it was selling its Venezuelan assets to a public company it described as wholly owned by the Russian government. In this regard, Moscow will be more entangled in Venezuela than before because its stake in Rosneft is just over 50%.
Industry leaders said the sale appeared to be intended to disconnect Rosneft from Venezuela without substantially changing the role of Russia.
“Don’t worry! This is a transfer of Rosneft assets directly to the Russian government,” said Moscow’s ambassador to Venezuela, Sergey Melik-Bagdasarov, in a message on Twitter.
Rosneft employees in Caracas were not informed of any change in their employment status on Saturday, which also suggests that operations may continue as usual.
Some analysts, however, have warned that although Russia will likely continue to occupy a major position in Venezuela’s oil industry after today’s announcement, the new Kremlin holding company may not have the financial muscle , the commercial network or the desire to maintain oil trade and investments on a global level. level desired by Mr. Maduro.
“They’re probably not going to want to put money aside,” said Antero Alvarado, a Caracas-based oil consultant.
“They will keep the assets and wait to see what happens,” he said, referring to the volatility of the world oil markets and the political instability in Venezuela.
David L. Goldwyn, the state’s top energy diplomat in the first Obama administration, said the move would further limit Venezuelan revenues from oil exports.
Rosneft traded Venezuelan oil to small refineries in China, in violation of U.S. sanctions. While in theory another Russian company could do the same, it could not do it immediately without Rosneft’s sophisticated trading systems – which would stifle a source of revenue for Mr. Maduro’s government.
Goldwyn called the sale a “victory for US sanctions.” Coupled with a collapse in world oil prices, he said, the sanctions had made the Venezuelan crude trade “worthless for Rosneft”.
Rosneft spokesman Mikhail Leontyev said in an interview with Russian news agency Interfax that the sale was necessary for his company to continue doing business internationally.
“As a public and international company, we made a decision that was in the interest of our shareholders,” said Mr. Leontyev. “Now we have the right to expect US regulators to keep the promises they made publicly.”
Rosneft is controlled by the Russian government but is partly owned by private investors. Its shares are listed on the London Stock Exchange. BP, the British oil giant, owns around 20% of the company’s capital and has representatives on the board of directors.
Rosneft’s investments in Venezuela were deeply entangled in Russia’s goal of regaining a geopolitical bridgehead in South America, restoring the influence that Moscow had lost in the region after the collapse of the Soviet Union.
Many investments were launched as commercial enterprises by a private Russian oil company, before being taken over by Rosneft. The state-controlled company traded Venezuelan oil and sank large investments in fields that produced less oil than expected and were constantly losing money.
Although the Venezuelan economy has collapsed, causing an exodus of millions of its inhabitants, and the United States has increased pressure, Mr. Maduro’s government has endured. Thursday, the United States charged Mr. Maduro and members of his entourage on charges of drug trafficking.
The oil industry has struggled to cope not only with tougher US sanctions, but with falling world oil prices.
Venezuela was the biggest loser in world oil price war unleashed by Mr. Putin this month, who forced the already struggling South American nation to sell its largest export at a loss, or almost. Mr. Putin’s decision to break an oil production agreement with other major producers without consulting Mr. Maduro underlined the limits of Russia’s alliance with Venezuela, which is motivated mainly by practical considerations rather than by a deep ideological or personal affinity.
The sanctions imposed on two Rosneft subsidiaries that transported Venezuelan oil have led China and India to slow down their purchases, causing an almost total overflow of oil storage tanks in Venezuelan ports.
This put additional pressure on Venezuelan production, which had stabilized at 750,000 barrels at the start of this year, but is now shrinking as the coronavirus reduces energy demand and forces Venezuela to sell what it can at very reduced prices.
The Trump administration sanctioned TNK Trading International, a subsidiary of Rosneft, this month after stepping up shipments of Venezuelan crude.
Anatoly Kurmanaev reported on Caracas, Clifford Krauss in Houston and Andrew E. Kramer in Moscow. Ivan Nechepurenko and Andrew Higgins contributed to the Moscow reports.