While Venezuelans die of hunger and lack of medicines, Maduro government buys foreign oil to subsidize Cuba (Graphics)
Venezuelan state oil company PDVSA has bought about 440 million dollars in foreign oil this year and has sent it directly to Cuba under flexible credit conditions, which often involved losses, according to internal documents of the company to which Reuters had access.
Shipments are the first documented evidence that the OPEC member country purchases crude to supply its regional allies instead of selling oil from its own reserves.
Venezuela made the deliveries with discounts, which had not been previously reported, despite its great need for foreign currency to sustain its economy and import food and medicines amid widespread shortages.
The purchases of oil in the open market to subsidize Cuba, one of Venezuela's few remaining political allies, reveal the deep deterioration of its energy sector under the government of President Nicolás Maduro.
The purchases came after Venezuela's crude production hit a minimum of 33 years in the first quarter, down 28 percent in 12 months. The nation's refineries operated in that period at one third of their capacity and workers have resigned by thousands in recent months.
PDVSA bought the crude up to $12 per barrel more expensive than it was billing when it shipped the same oil to Cuba, according to prices in internal documents reviewed by Reuters.
But it is possible that Cuba never pays in cash for shipments, since Venezuela has always accepted goods and services from the island in exchange for oil under a pact signed in 2000 by the late leaders Hugo Chávez and Fidel Castro.
PDVSA, the Venezuelan government and the Cuban government did not respond to requests for comment.
The Venezuelan government has said in the past that it only imports oil to mix it with its own extra-heavy crude, to improve its quality and create an exportable product, or to feed its refinery in Curaçao.
But hundreds of PDVSA documents examined by Reuters that detail imports and exports from January 2017 to May this year, show that the company is now buying crude at market prices to deliver it to its Cuban allies in shipments that never pass through Venezuela.
The subsidized deliveries seek to maintain the political support of Cuba, part of the waning group of allies in Venezuela, according to diplomats, politicians and PDVSA executives.
Maduro is giving everything he can because the support of these countries, especially Cuba, is all the political support he has left, said a senior Venezuelan government official who did not want to be identified.
Venezuela has been under increasing international pressure because the United States, the European Union and Canada have sanctioned the nation and government officials for what they consider Maduro's attempts to cement a "dictatorship."
While Venezuela spends on oil imports, it has been buying less abroad from the rest of the products that its citizens lack and demand at home.
Venezuela's spending on non-oil imports declined from almost 46,000 million dollars in 2011 to 6,000 million in 2017, according to data from the Central Bank of Venezuela and Ecoanalítica, an economic research entity based in Caracas.
The oil that PDVSA acquired for Cuba was crude Russian Urals, according to the documents, a very suitable variety for Cuban refineries built with Soviet-era equipment.
PDVSA bought the crude from Chinese, Russian and Swiss firms, not with cash, but under the promise that the state company would deliver other oil shipments later, according to the documents.
That adds to the huge debts of Venezuela with Russian and Chinese state companies that are paid with oil, after the South American country received more than 60,000 million dollars in loans that offset their budget gaps amid the fall of their exports and of oil prices.
It does not make sense to import oil to maintain the flow of subsidized exports, said Ecoanalitica president Asdrúbal Oliveros.
The Venezuelan government has used oil for a long time for domestic and international political purposes, subsidizing goods and services in the country and calling for favors throughout the region while shipping oil in generous terms.
The Organization of American States (OAS), which includes most of the nations of the Western Hemisphere, presented a motion last year to pressure Venezuela to hold free elections, release political prisoners and declare a humanitarian crisis.
But the effort was defeated when 12 countries that received regular shipments of oil from Venezuela in recent years - about a third of the OAS members - opposed or refused to vote. Months later, the OAS approved a diluted motion urging free and fair elections.
Venezuela has avoided the formal condemnation of the OAS "thanks to the support of the bloc of Caribbean nations that have benefited from its subsidized oil and development programs for years", said Michael Fitzpatrick, deputy assistant secretary of the Western Hemisphere Affairs Bureau. US State Department on April 30 in a talk with a group of foreign policy experts in Washington.
Most of these countries are members of the Venezuelan Petrocaribe trade pact, launched in 2005 and which has granted oil on favorable terms to up to 16 Caribbean and Central American states.
The president of the OAS, Luis Almagro, declined to comment through the press office representative, Monica Reyes.
The Minister of Economy of El Salvador, Luz Estrella Rodríguez, said that Petrocaribe and other pacts promoted by Venezuela had played an important role in the development of their country.
"Our country is very grateful", he said. "The government of El Salvador, of course, is a friend and an ally of the Venezuelan government".
Production fall, imports decline:
The drop in oil refining in Venezuela has also made the country increasingly dependent on imported fuels to meet domestic consumption.
PDVSA's internal data reviewed by Reuters show that Venezuela bought about 180,000 barrels per day of foreign oil and refined products from PetroChina, Rosneft, Lukoil, Reliance Industries and other suppliers last year, 17 percent more than in 2016.
Those companies did not respond to requests for comments.
The purchases totaled more than 4,000 million, according to the PDVSA records.
Last year, total imports from the oil industry, including equipment and services, consumed 45 percent of Venezuela's total import spending, compared to 13 percent in 2011, according to Ecoanalítica data. The purchases made by the energy sector totaled 5,400 million dollars out of a total of 11,900 million dollars.
The resulting shortage of food, medicine and employment has caused thousands of citizens to flee Venezuela. The salary of PDVSA workers no longer covers basic products due to the collapse of their currency, the bolívar.
"A worker does not have enough salary for a carton of eggs". said Hector Bertis, worker and PDVSA union leader. "We are suffering for cash. We go to the bank and they give us 10,000 bolivares, less than what a ticket costs".
Venezuela's falling exports, rising imports
With its own oil production falling fast, OPEC member Venezuela has been buying foreign crude to continue supplying political allies such as Cuba with oil on friendly credit terms and in exchange for goods and services instead of the cash it desperately needs. In 2017, the Venezuela’s state-run oil firm PDVSA bought 180,250 barrels per day of crude and refined products and reshipped a portion of it to regional allies.
Thank you for reading.
Excuse my English.