Exclusive: US will allow two companies to ship Venezuelan oil to Europe

HOUSTON/WASHINGTON (Reuters) – Italian oil company Eni SpA and Spain’s Repsol may start shipping Venezuelan oil to Europe as soon as next month to replace Russian crude, five people familiar with the matter said. Debt swaps were halted two years ago when Washington intensified sanctions on Venezuela.

One person said that Eni and Repsol are expected to get oil not great, and any impact on global oil prices would be modest. But Washington’s green light to resume long-frozen Venezuelan oil flows to Europe could provide a symbolic boost to Venezuelan President Nicolas Maduro.

The sources said the US State Department gave permission for the two companies to resume shipments in a letter. The administration of US President Joe Biden hopes that Venezuelan crude will help Europe reduce dependence on Russia and redirect some Venezuelan shipments from China. Another goal, two people told Reuters, was persuading Maduro to resume political talks with the Venezuelan opposition.

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People said the two European energy companies, which have joint ventures with the state-run PDVSA, could count crude shipments as unpaid debts and late earnings.

The main condition, one person said, was that the oil received “must go to Europe. It cannot be resold elsewhere”.

That person said Washington believed that PDVSA would not benefit financially from these cashless transactions, unlike Venezuela’s current oil sales to China. China has not signed off on Western sanctions against Russia, and has continued to buy Russian oil and gas despite American pleas.

The licenses came in last month, but details and resale restrictions had not previously been reported.

where are you (ENI.MI)He declined to comment, citing a policy of not commenting “on issues of potential trade sensitivity.” Repsol (REP.MC) He did not respond to requests for comment.

Others are excluded

Washington did not give similar bonuses to the US oil company Chevron Corp(CVX.N)India Oil and Natural Gas Company Limited (ONGC) (ONGC.NS) The French Maurel & Prom SA(MAUP.PA)which also pressured the US State Department and the US Treasury to take oil in exchange for billions of dollars in debt accrued from Venezuela.

All five oil companies halted debt-to-debt oil swaps in mid-2020 in the midst of former US President Donald Trump’s “maximum pressure” campaign that halted Venezuelan oil exports but failed to oust Maduro.

PDVSA has not scheduled Eni and Repsol to move any shipments this month, according to PDVSA’s June 3 initial loading program seen by Reuters.

Venezuelan Vice President Delcy Rodriguez tweeted last month that she hopes the US initiatives will “pave the way for the complete lifting of illegal sanctions affecting our entire people.”

Connect with Caracas

The Biden administration held its highest-level talks with Caracas in March, and Venezuela released two of the at least 10 imprisoned US citizens and promised to resume electoral talks with the opposition. Maduro has yet to agree on a date to return to the negotiating table. Read more

Republican lawmakers and some fellow Democrats in Biden who oppose any relaxation of US policy toward Maduro have criticized the US approach to Venezuela as too biased.

Washington insists that further sanctions relief on Venezuela will be conditioned on progress toward democratic change while Maduro negotiates with the opposition.

Last month, the Biden administration allowed Chevron, the largest US oil company still operating in Venezuela, to speak to the Maduro government and PDVSA about future operations in Venezuela. Read more

One of the sources told Reuters that at the time, the US State Department secretly sent letters to Eni and Repsol saying that Washington “would not object” if they resumed oil-for-debt deals and brought oil to Europe.

Two people in Washington said the letters assured them that they would not face any sanctions for taking Venezuelan oil shipments to collect outstanding debts.

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Chevron’s request to the US Treasury to expand its operations in Venezuela came as the State Department issued letters of no objection to Eni and Repsol. The person familiar with the matter in Washington declined to say whether Chevron’s application was still being considered.

The US oil giant has received a six-month continuation license that preserves its assets and US approval to speak with Venezuelan government officials about future operations. Read more

It was not immediately clear whether Washington had agreed to the crude-for-fuel swaps that European companies made with PDVSA through 2020, the exchanges that have provided relief to gasoline-starved Venezuela.

China has become the largest customer of Venezuelan oil, with up to 70% of monthly shipments going to its refineries. Read more

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(Additional reporting by Mariana Baraga in Houston and Matt Spitalnik in Washington); Writing by Gary McWilliams; Editing by David Gregorio and Lisa Schumaker

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