With U.S. sanctions spooking key oil buyers and depriving its government of cash, Venezuela last year inked a deal with a little-known local company to swap crude for food, Reuters has learned.
By Reuters – By Luc Cohen and Marianna Parraga
Aug 24, 2021
That agreement saw state oil company PDVSA, beginning in December 2020, deliver more than 6 million barrels of crude worth nearly $260 million to a company named Supraquimic C.A., which was to supply food for a government program. But the arrangement collapsed when PDVSA accused two executives linked to Supraquimic with embezzling the proceeds, according to criminal charges filed by Venezuelan prosecutors in late March.
This account of the deal and its demise is based on dozens of pages of internal PDVSA documents viewed by Reuters, court filings by prosecutors, and interviews with three people familiar with the situation. It offers a rare glimpse inside one of the maneuvers that Venezuela’s socialist government devised to continue exporting crude – the lifeblood of its beleaguered economy – despite U.S. sanctions.
Neither PDVSA nor Venezuela’s oil or information ministries or chief prosecutor’s office responded to requests for comment. President Nicolas Maduro has called U.S. sanctions illegal and blames Washington and his domestic political opponents for the country’s woes.
Just as important, the Supraquimic deal provided PDVSA with a new customer. Since the United States blacklisted PDVSA in early 2019, many major clients have stopped buying. In their place, a series of mysterious, recently-formed companies with no previous oil experience have materialized to buy PDVSA’s oil, including previously-unknown Mexican and Russian firms.
Purchases by these new players have allowed Venezuela’s crude exports to climb sharply this year, internal PDVSA shipping documents and Refinitiv Eikon vessel tracking data show.
“It is amazing how Venezuela has mutated to overcome difficulties coming from sanctions, which is making Venezuela’s oil trade increasingly opaque,” said Francisco Monaldi, a fellow in Latin American Energy Policy at Rice University’s Baker Institute.
Neither the U.S. State Department nor the Treasury Department, which enforces U.S. sanctions, responded to requests for comment.
The Supraquimic deal also demonstrates potential perils for companies doing business with Venezuela’s government, which has sparred repeatedly with the private sector even as the Socialist Party has courted their investment to boost the economy.
In 2015, for example, with Venezuela rocked by shortages of consumer goods, authorities detained executives of a pharmacy chain and workers at a leading food company on accusations of hoarding supply to destabilize the economy, which they denied. Venezuela’s industrialists have blamed Maduro’s socialist economic policies for the nation’s woes.
Venezuela’s Information Ministry did not reply to a request for a response to Hernandez’s assertions.
Such tensions were on display again on March 30, when Venezuelan authorities issued arrest warrants for Supraquimic President Oscar Garcia as well as Jose Llamozas, who owns firms that sold food to Supraquimic. Both were charged with embezzlement, collusion between a public official and a contractor, and illicit association, according to the prosecutor’s request to a judge for the warrant.
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Read More: Reuters – Exclusive: Venezuela swapped PDVSA oil for food, then punished the dealmakers
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