Russian State Oil Company Rosneft, in Sudden Move, Sells Assets in Venezuela

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A photo released by the Office of the Venezuelan President shows President Nicolás Maduro with Rosneft officials in 2013. The U.S. had imposed sanctions on two Rosneft oil trading subsidiaries this year for helping Venezuela’s authoritarian president. (Office of the Venezuelan President via The New York Times) **EDITORIAL USE ONLY**

Anatoly Kurmanaev, Clifford Krauss and Andrew E. Kramer

c.2020 The New York Times Company

 

CARACAS, Venezuela — Russian state-controlled oil firm Rosneft said Saturday it was ceasing operations in Venezuela and selling all of its assets in the country, signaling a shift in Kremlin strategy that could further rattle Venezuela’s crumbling economy.

Rosneft had emerged as the biggest economic ally of Venezuela’s authoritarian president, Nicolás Maduro, accounting for up to two-thirds of the country’s oil trade and a significant share of crude production. The lifeline provided by Rosneft has allowed Maduro to maintain a flow of hard currency and supply the country with gasoline.

The United States imposed sanctions this year on two Rosneft oil trading subsidiaries for helping Maduro. The sanctions, which have hurt the company’s business elsewhere in the world, were cited by a Rosneft spokesman Saturday in describing the sale.

Still, the sale of Rosneft’s assets is not necessarily a move away from Maduro by Russia, one of the country’s few foreign backers.

Rosneft said it was selling its Venezuelan assets to an unnamed company that it described as wholly owned by the Russian government. In that respect, Moscow will be more entangled in Venezuela than before because its ownership stake in Rosneft is just over 50%.

Industry executives said the sale appeared intended to disconnect Rosneft from Venezuela without substantially changing Russia’s role.

“Don’t worry! This is about a transfer of Rosneft’s assets directly to the Russian government,” Moscow’s ambassador to Venezuela, Sergey Melik-Bagdasarov, said in a Twitter posting.

Rosneft employees in Caracas have not been notified of any changes in their job status Saturday, which also suggest operations may continue as usual.

Some analysts, however, have cautioned that while Russia is likely to continue holding a major position in Venezuela’s oil industry after Saturday’s announcement, the Kremlin’s new holding company may not have the financial muscle, commercial network or desire to maintain oil trade and investment at the level desired by Maduro.

“They will probably not want to put the money down,” said Antero Alvarado, a Caracas-based oil consultant.

“They will guard the assets and wait to see what happens,” he said, referring to volatility in the global oil markets and political instability in Venezuela.

David L. Goldwyn, the State Department’s top energy diplomat in the first Obama administration, said that the move would further limit Venezuelan revenue from oil exports.

Rosneft has been trading 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 so immediately in the absence of Rosneft’s sophisticated trading systems — which would choke off a source of revenue for Maduro’s government.

Goldwyn called the sale a “victory for U.S. sanctions.” Coupled with a crash in global oil prices, he said, the sanctions had made it “worthless for Rosneft to trade in Venezuelan crude.”

A spokesman for Rosneft, Mikhail Leontyev, said in an interview with Russia’s Interfax news agency that the sale was necessary for his company to continue doing business internationally.

“Being a public, international company, we took a decision that was in the interest of our shareholders,” Leontyev said. “Now, we have the right to expect American regulators to deliver on the promises that they have publicly made.”

Rosneft is controlled by the Russian government but partly owned by private investors. Its stock is listed on the London Stock Exchange. BP, the British oil giant, has held a roughly 20% stake in the company and has had representatives on the board.

Rosneft’s investments in Venezuela had become deeply entangled with Russia’s goal of regaining a geopolitical beachhead in South America, restoring influence that Moscow had lost in the region after the collapse of the Soviet Union.

Many of the investments were begun as commercial ventures by a private Russian oil company, before being taken over by Rosneft. The state-controlled company traded Venezuelan oil and sank large investments into fields that yielded less oil than expected and consistently lost money.

Though Venezuela’s economy has crumbled, prompting an exodus of millions of its people, and the U.S. has ratcheted up pressure, Maduro’s government has endured. On Thursday, the U.S. indicted Maduro and members of his inner circle on drug trafficking charges.