Venezuela petrol crisis worsens as US orders supply cuts

Petrol shortages in Venezuela are worsening after United States officials told foreign firms to refrain from supplying fuel to the sanctioned South American nation and only provide diesel, five people familiar with the situation told Reuters News Agency.

Since late 2019, US officials have asked most of Venezuela’s fuel suppliers to avoid sending petrol to the crisis-stricken nation. In the latest round of calls in early March between US officials and oil firms, they repeated the ban, despite worsening humanitarian conditions in the country, one of the sources said.

The US Treasury Department sanctioned Venezuela’s state-run Petroleos de Venezuela (PDVSA) more than a year ago as a measure to overthrow socialist President Nicolas Maduro, who US President Donald Trump’s administration considers a dictator usurping power.

A handful of foreign companies – including Russia’s Rosneft, Spain’s Repsol SA, Italy’s Eni SpA and India’s Reliance Industries – continued to supply fuel to PDVSA under swap arrangements for Venezuelan crude oil, which was allowed by the US Treasury.

“They underlined the message of no petrol as part of oil swaps,” said the source familiar with last month’s calls, adding that his firm has only supplied diesel and gas oil since September.

While the officials did not explain why they were distinguishing between the two fuels, diesel is mainly used for power generation and bulk transport of cargo including food, while petrol is mostly used for personal travel.

With the coronavirus pandemic wreaking havoc across the world, Washington has come under pressure from the United Nations human rights chief and US legislators to relax sanctions on countries like Venezuela and Iran to facilitate the shipment of humanitarian goods.

A senior Trump administration official said Maduro alone was responsible for the humanitarian toll in Venezuela and the US would continue its campaign to cut his lifelines.

The restriction on crude oil-for-petrol swaps with Venezuela is being maintained as the country’s own once-formidable refining industry collapses, with almost no petrol produced in recent months, leading to chronic shortages across the country.

To increase the pressure on Caracas, the US this year sanctioned PDVSA’s main trade partners Rosneft Trading and TNK Trading International, both subsidiaries of Rosneft.

Rosneft stopped direct trade with PDVSA in March and weeks later announced it would transfer all its Venezuelan assets to an undisclosed entity controlled by the Russian government.

“The swaps were working quite well,” said Francisco Monaldi, an energy economist at Rice University, adding that the recent escalation in sanctions would spook suppliers. “In these circumstances, it is unlikely that established companies will take the risk.”

A US official acknowledged pressure has been exerted on some oil firms in line with efforts to get them to unwind their business in Venezuela or else face US secondary sanctions.

The official, speaking on condition of anonymity, said Washington was prepared to accept a limited level of diesel supplies but wants to see a curtailing of petrol shipments to Venezuela as part of Trump’s “maximum pressure” campaign to overthrow Maduro.

US officials have said privately Trump is frustrated at the failure of his Venezuela policy to break Maduro’s grip on power.

In statements, both Repsol and Eni said they send PDVSA diesel, not petrol, as part of their swaps. In March, Eni delivered two diesel cargoes, while Repsol sent one and Rosneft did not send any, according to internal PDVSA documents seen by Reuters and Refinitiv Eikon data.

Reliance did not immediately reply to a request for comment. In March, the refiner shipped two gas oil cargoes to Venezuela according to exports data, which have not yet unloaded.

The US State Department said US sanctions do not restrict humanitarian aid “like food, medicine, and other donations intended to relieve human suffering.”

PDVSA did not reply to requests for comment.

Long-standing problems

Fuel shortages began well before the sanctions because of plunging refining in Venezuela, which has a total capacity of 1.3 million barrels per day (bpd) of crude processing.

Of that, PDVSA only refined 101,000bpd of crude in March, according to an internal PDVSA document seen by Reuters, increasing the crisis-stricken nation’s dependence on imports.

The vast majority of that went to producing diesel and jet fuel. The refineries produced just 7,000bpd of 91-octane petrol in March and 28,000 bpd in the first three months of the year. The 310,000bpd Cardon and the 187,000bpd Puerto la Cruz refineries remained completely halted.

Venezuela’s government blames US sanctions for restricting imports of additives and spare parts needed to run the facilities and has pledged to restart fuel output at the 146,000bpd El Palito refinery.

The resulting shortages of motor fuel have disrupted shipments of food and prevented doctors from arriving at their hospital shifts.

Ana Veronica Herrero, a 32-year-old resident of the western city of Maracaibo, said she could not find petrol to transport her mother to the hospital after she had a heart attack last Thursday.

“She died in my arms,” Herrero said in a telephone interview, adding that she later had to spend $45 to buy petrol on the black market to bring her mother’s body from the morgue to the cemetery.