Venezuela, at crisis point, is giving oil away to Cuba
Facing the risk of losing oil production capacity, Nicolas Maduro’s regime has developed a seemingly counterintuitive solution to keep the wells pumping: give away crude to Cuba.
Petroleos de Venezuela’s trouble selling to international markets because of US sanctions is Havana’s windfall, amid Maduro’s decision to increase oil shipments to the island to free up space in the country’s filled-tothe-brim storage tanks.
‘‘Suddenly Christmas came early in Cuba due to the situation in Venezuela as a result of the sanctions imposed by the United States. This is a windfall, a gift that they are getting suddenly and was unexpected,’’ said Jorge Pinon, director of the Latin American Energy Program at the University of Texas at Austin.
Washington’s sanctions have led PDVSA to lose clients, forcing the state-run company to store crude. But the tanks are now full, and given the risky choice of stopping production, the regime is choosing to send more oil to Cuba, even though that does not provide any hard currency to state coffers. ‘‘Now they are using Cuba to store Venezuelan crude and refined products, maybe thinking that they can use the installations on the island as a transshipment point,’’ Pinon said.
But those oil shipments to Cuba – that as of now total 3 million barrels – will end up becoming a gift, said Juan Fernandez, PDVSA’s former executive director of planning. It may be that Maduro is asking Cuba to store those millions of barrels on the island for him, or that he is asking Havana to help resell oil to bypass the sanctions, but in the end the gains will remain in Cuban hands, he said.
‘‘In the oil shipments to Cuba, Venezuela earns absolutely nothing. There are commitments to provide Cuba, but they only paid hard currency for the first shipments . ... What has been sent to the island for years covers the intelligence services that (Cuba) provides the regime,’’ Fernandez said.
The Caribbean island, which for years benefited from billions of dollars in oil provided yearly by Venezuela, began to suffer fuel shortages after Caracas began cutting down its aid, from 120,000 barrels per day at its peak to less than 50,000 by early this year.
Venezuela faces serious production problems that have cut output to 1 million barrels per day from a peak of 3.3 million barrels when former President Hugo Chavez, the founder of Maduro’s socialist movement, took power in 1999.
Washington’s sanctions on PDVSA earlier this year were a knockout blow to the already stumbling oil company, closing down access to the US market and forcing friendly countries like China to turn down Venezuela’s oil.