Iran and Venezuela secretly extend oil cooperation, defy Washington sanctions

PDVESA and NIOC signed 'in pectore' a six-month contract to swap lots of crude oil, Reuters has revealed
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Tehran and Caracas have teamed up to address the sanctions that have been weighing down their respective economies for months. The two countries' state-owned oil companies, Petróleos de Venezuela (PDVESA) and National Iranian Oil Company (NIOC), signed a contract committing Venezuela to exchange its heavy oil for Iranian condensate, a substance capable of accelerating production, according to a Reuters investigation.

The duration of the preliminary contract expires in six months, although it could be extended. In return, Iran will have more supply to market in Asia. The terms are a testament to the close Venezuelan-Iranian cooperation in recent years in international waters, which will continue into the future. Neither appears to be moving towards a rapprochement with the Washington axis.

Indeed, Iran and Venezuela are aligned against the US in a pact that could violate sanctions imposed by Washington. The Treasury Department has threatened to deploy so-called "secondary sanctions", punitive economic rules aimed at any person or entity that maintains commercial ties with oil companies. Such sanctions take the form of freezing assets on US soil or outright fines.

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The Biden administration has so far made no moves. Washington is waiting to verify the reports and to see what happens in the coming months. They intend to tread carefully, especially given their intention to revive the stalled nuclear deal with Tehran. Whereas his predecessor Donald Trump opted last year to seize Persian ships bound for Venezuela. These were carrying supplies and fuel.

For Caracas it would be a shot in the arm for negotiations with the opposition. It is in its best interest to be as well prepared as possible for the first elections with minimal guarantees in decades, and that means lifting a devastating economic situation. The Venezuelan foreign minister, Jorge Arreaza, spoke along these lines at the UN General Assembly in New York, where he expressed his commitment to strengthening bilateral trade, despite US attempts to block it.

Venezuelan oil exports fell 38% in 2020, their lowest level in nearly eight decades. Trump's sanctions mortally wounded the Latin American country's economy, dependent on 'black gold'. Biden's arrival at the White House did not alter events, as his administration has maintained unchanged the restrictive regime not only with Venezuela, but also with Iran.

Operations began last week with the shipment of 1.9 million barrels of Venezuelan heavy crude oil to Iran. The vessel, not included in the schedule organised by PDVESA, was identified by the Tanker Trafickers website. According to Reuters, it is the first batch in return for the preliminary shipment of 2 million barrels of condensate.

Latin America Coordinator: José Antonio Sierra