The US State Department allowed Italian company Eni and Spanish Repsol to resume oil supplies from Venezuela to Europe due to restrictions on Russian oil.
Companies are allowed to trade in exchange for deductions from outstanding Venezuelan debt and overdue dividends, Reuters reported. Washington has promised not to impose fines on companies that transport Venezuelan oil cargo.
Supply in this format could resume as early as next month, but the volume of oil Eni and Repsol will receive in Venezuela will be small and thus supplies will not significantly affect world oil prices.
The administration of US President Joe Biden hopes that Venezuelan oil will help Europe reduce its dependence on Russian energy. Washington’s main condition oil “must go to Europe, cannot be sold elsewhere”.
At the same time, the US believes that the Venezuelan state oil company PDVSA cannot derive financial benefits from these operations, unlike oil sales to China. Beijing has become the largest buyer of Venezuelan oil, with up to 70% of the monthly supply to its refineries.
Previously, the US Treasury allowed US companies to transact with PDVSA until December 1, 2022. However, the permit concerned a limited range of transactions and was applied to only five companies in the United States.
Former White House press secretary Jen Psaki reported in April that the United States is not considering easing sanctions on Venezuela to replace Russian oil with Venezuelan oil in the face of scarcity of market energy resources.
Washington imposed sanctions on Caracas in 2019. One of the most painful restrictions was the $7 billion blocking of assets of PDVSA, the oil and gas company under US jurisdiction. In 2020, Venezuela filed a complaint with The Hague Court about US restrictions on the country.
Who will supply Europe with oil?
Middle Eastern countries can act as alternative energy suppliers for EU countries. France is negotiating with the UAE.
“We are looking for someone to replace Russian gas supplies. For example, the UAE could be the solution. Also, the United Arab Emirates can replace Russian oil. We are already talking to them about this. “We must find an alternative to Russian oil,” said Bruno Le Maire, Minister of Economy and Finance.
It also called for increased investment to accelerate the transition to carbon-neutral energy.
The New York Times reported on the visit of US President Joe Biden to Saudi Arabia in June. While in Riyadh, Biden will meet with Crown Prince Mohammed bin Salman, as well as other Arab leaders such as Egypt, Iraq, Jordan and the UAE.
As a presidential candidate, Biden has pledged to punish Saudi Arabia for the 2018 murder of journalist Jamal Khashoggi. But now the US president is trying to restore relations with the oil-rich kingdom in order to lower energy prices and at the same time “isolate Russia on the world stage,” according to experts. According to analysts, the next visit means: realpolitik’s victory over moral concerns.
Lifting sanctions on Iran
Bloomberg has learned that Iran is preparing to increase its oil exports amid progress in negotiations with the United States on the nuclear deal and lifting of sanctions.
According to agency sources, the state-owned National Iran Oil Co. It is engaged in the preparation of oil fields for return to market and increase sales. Tehran is also negotiating with potential customers should it reach an agreement with Washington soon.
It was noted that Iran could return to pre-sanction oil production (4 million barrels per day) in 3 months.
In any case, Bloomberg cautions, the country’s return to the market will be gradual, including as the pandemic has drastically reduced global oil demand.
Russia’s exclusion from OPEC+
In response, The Wall Street Journal reported that some OPEC member states are considering the option of suspending Russia’s participation in the OPEC+ oil production deal.
According to the publication, such an idea arose against the background of the introduction of anti-Russian sanctions and the approval of the European Union a partial embargo on the import of Russian oil.
The restrictive measures are said to be “starting to undermine Moscow’s ability” to produce more oil. The WSJ estimates that production in Russia could drop 8% by the end of the year.
At the same time, the newspaper points out that no concrete steps have been taken so far to increase production or keep Russia out of the agreement.
“OPEC+ is a voluntary initiative. We do not invite or exclude. Equatorial Guinea’s Minister of Mines and Hydrocarbons, Gabriel Mbega Obiang Lima, commented on the WSJ publication, which is why all statements of the initiative refer to “voluntary contribution”.
In the face of falling world energy prices, an agreement to limit oil production was signed between OPEC countries and 11 non-cartel member countries on 10 December 2016. In May 2022, Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud told the Financial Times that he hoped to create a new OPEC+ deal that would include Russia despite the sanctions.