©Reuters. Archive image of an employee working at the Repsol YPF refinery plant in Cartagena, southeastern Spain. January 29, 2008. REUTERS/Francisco Bonilla/File
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By Marianna Parraga and Matt Spetalnick
HOUSTON/WASHINGTON, June 5 (Reuters) – Italian oil company Eni (BIT:) SpA and Spain’s Repsol SA (BME:) could start shipping Venezuelan to Europe as early as next month to offset Russian crude, five people said. familiar with the matter, resuming oil-for-debt swaps interrupted two years ago when Washington tightened sanctions on Venezuela.
The volume of oil Eni and Repsol are expected to receive is not large, one of the people said, and any impact on global oil prices will be modest. But the green light from Washington to resume frozen oil flows from Venezuela to Europe could be a symbolic boost for Venezuelan President Nicolás Maduro.
The US State Department gave the two companies the go-ahead to resume shipments in a letter, the people said.
The administration of US President Joe Biden hopes that Venezuelan crude can help Europe reduce its dependence on Russia and redirect some of Venezuela’s shipments from China. Convincing Maduro to restart political talks with Venezuela’s opposition is another goal, two of the people told Reuters.
The two European energy companies, which have joint ventures with Venezuela’s state oil company PDVSA, may count the crude shipments as payment of outstanding debts and overdue dividends, the people said.
A key condition, one of the people said, is that the oil received “has to go to Europe. It cannot be resold elsewhere.”
Washington believes that PDVSA will not benefit financially from these cashless transactions, unlike Venezuela’s current oil sales to China, that person said. China has not adhered to Western sanctions on Russia, and has continued to buy Russian oil and gas despite calls from the United States.
The clearances came last month, but details and resale restrictions have not been previously reported.
Eni and Repsol did not immediately respond to requests for comment.
OTHERS EXCLUDED
Washington has not made similar authorizations for the US oil company Chevron Corp (NYSE:), India’s Oil and Natural Gas Corp Ltd (ONGC) and France’s Maurel & Prom SA, which also pressured the US State Department and Treasury Department to take oil in exchange for billions of dollars in accumulated debts of Venezuela.
The five oil companies stopped swapping oil for debt in mid-2020 amid former US President Donald Trump’s “maximum pressure” campaign, which cut Venezuela’s oil exports but failed to topple Maduro.
PDVSA has not scheduled Eni and Repsol to take any cargoes this month, according to a June 3 preliminary PDVSA cargo schedule seen by Reuters.
Venezuela’s Vice President Delcy Rodriguez tweeted last month that she hoped the US overtures would “pave the way for the total lifting of the illegal sanctions that affect all of our people.”
APPROACH TO CARACAS
The Biden administration held its highest-level talks with Caracas in March, with Venezuela freeing two of at least 10 jailed US citizens and promising to resume election talks with the opposition. Maduro has not yet agreed on a date to return to the negotiating table.
Republican lawmakers and some of Biden’s fellow Democrats, who oppose any easing of US policy toward Maduro, have criticized Washington’s approach to Caracas as too one-sided.
Washington maintains that further sanctions relief on Venezuela will be conditional on progress toward democratic change as Maduro negotiates with the opposition.
Last month, the Biden administration authorized Chevron, the largest US oil company still operating in Venezuela, to talk to the Maduro government and PDVSA about future operations in Venezuela.
Around that 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 took the oil to Europe, one of the sources told Reuters.
The letters assured them they would not face sanctions for taking shipments of Venezuelan oil to collect outstanding debt, two people in Washington said.
CHEVRON CONSIDERATION
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 request was still being considered.
The US oil company did receive a six-month extension of an asset-preserving license and US approval to speak with Venezuelan government officials about future operations.
It was not immediately clear whether Washington had approved previous oil-for-fuel swaps that European companies made with PDVSA through 2020, swaps that provided relief to a gas-hungry Venezuela.
China has become the largest customer for Venezuelan oil, with up to 70% of monthly shipments going to its refineries.
(Reporting by Marianna Parraga in Houston and Matt Spetalnick in Washington; Writing by Gary McWilliams; Editing in Spanish by Ricardo Figueroa)
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