The US State Department has allowed Italian energy group Eni and Spanish firm Repsol to resume pulling Venezuelan oil to European shores, a move tied to broader limits on Russian crude. This shift came as exchanges were permitted in return for settling portions of Venezuela’s outstanding debt and overdue dividends, according to Reuters. Washington signaled it would not levy penalties on companies transporting Venezuelan cargo under these terms.
EU sanctions on Russian oil
Europe unveiled its sixth package of penalties against Russia on June 3. The core aim was to phase out Russian oil with a planned cessation of imports within six months for crude and eight months for oil products, with transport restricted to sea routes. Deliveries via the Druzhba pipeline remain outside these restrictions.
Such a framework could allow limited Venezuelan oil resupply as soon as next month. The expected volume for Eni and Repsol would be modest, unlikely to move global oil prices significantly.
President Joe Biden’s administration hopes Venezuelan oil can help Europe lessen its reliance on Russian energy. A central condition remains that oil must flow to Europe and not be diverted elsewhere.
Meanwhile, the US believes PDVSA, the state oil company, should not personally benefit financially from these operations, unlike shipments to China. Beijing has emerged as a major buyer of Venezuelan crude, importing roughly seven tenths of Venezuela’s monthly output.
Previously, the US Treasury permitted certain transactions with PDVSA through December 1, 2022, but the authorization covered only a narrow set of activities and a handful of American companies.
Former White House press secretary Jen Psaki noted in April that Washington is not considering easing sanctions on Caracas to substitute Russian oil with Venezuelan crude amid energy scarcity.
U.S. sanctions on Caracas were imposed in 2019, including a freeze of about $7 billion in PDVSA assets. In 2020, Venezuela filed a case with The Hague Court challenging those measures.
Who will supply Europe with oil?
Alternative energy suppliers in the Middle East could help Europe diversify away from Russian oil. France has been engaging with the United Arab Emirates as part of those discussions.
Officials indicate a need to find a replacement for Russian gas and oil. For example, the UAE has been cited as a potential solution for both gas and crude supply. Economic ministers have underscored the urgency of discovering viable substitutes as part of a broader energy transition strategy.
There have also been calls for accelerated investment to speed up the shift toward carbon-neutral energy. The New York Times reported President Biden’s planned discussions with Arab leaders during an upcoming visit to the region, including meetings with Saudi Crown Prince Mohammed bin Salman and other leaders from Egypt, Iraq, Jordan, and the UAE.
During his candidacy, Biden pledged to scrutinize Saudi actions in relation to the 2018 Khashoggi killing. In the current context, however, the president seeks to stabilize energy markets and reduce Russia’s global influence by strengthening ties with key producers—an approach some observers describe as pragmatic realpolitik balancing moral considerations.
Lifting sanctions on Iran
Bloomberg reports that Iran is preparing to boost its oil exports as negotiations advance on a possible nuclear agreement and sanctions relief. The National Iranian Oil Company is coordinating steps to ready fields for market return and to expand sales, with discussions ongoing about potential buyers should a deal with Washington be reached soon.
Analysts warn that Iran’s reentry to pre-sanction production levels could occur within roughly three months. Even so, any return is expected to be gradual, given lingering demand fluctuations following the pandemic.
Russia’s exclusion from OPEC+
The Wall Street Journal notes that several OPEC members are considering suspending Russia’s role in the OPEC+ alliance in response to tightened sanctions. The discussions come as the EU moves toward a partial Russian oil embargo and attempt to recalibrate global supply dynamics.
Observers warn that these tensions could curb Moscow’s ability to raise production, with some estimates suggesting an eight percent drop in Russian output by year’s end. Yet, no decisive steps have been announced to exclude Russia from the framework or to alter production levels decisively.
OPEC+ is described as a voluntary coalition. Equatorial Guinea’s energy minister emphasized that participation is framed as a voluntary contribution, rather than a binding exclusion. In the broader context of fluctuating energy prices, the 2016 agreement that set production caps remains a reference point, while interest in a broader pact that includes Russia has persisted among some leaders since 2022.