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Iran, Venezuela winning economic war with US

A very large crude carrier (VLCC) has started discharging about 2 million barrels of Iranian condensate at a port in Venezuela in the latest energy swap which helps the two countries bypass illegal US sanctions.

The Iranian-flagged Starla, owned and managed by the National Iranian Tanker Company (NITC), arrived in Venezuelan waters on Friday and began unloading its cargo at Jose port on Monday, Reuters reported.

Iran’s condensate shipments under a swap deal signed in the second half of last year have helped Venezuelan state-run oil company PDVSA sustain its oil output which had been severely paralyzed under the US sanctions.

According to PDVSA internal documents, the delivery of condensate had been expected in December, but a lack of oil storage and bottlenecks at Jose created delays. 

PDVSA’s swap contract with the National Iranian Oil Company (NIOC) provides it with a steady supply of condensate, a high-value light crude, as a diluent. 

The bituminous crude from the Orinoco Belt, Venezuela’s largest producing region, requires mixing before it can be transported and exported. 

Venezuela imported 2 million barrels of Iranian condensate in 2020 and 4.6 million barrels in 2021, snubbing US oil sanctions on the country. This marks the fifth shipment of condensate state-owned PDVSA has received from Iran since September 2020.

The two countries have also exchanged Iranian gasoline for Venezuelan jet fuel under an agreement signed in 2020 which marked thousands of Venezuelans queuing up in miles-long lines to try to fill their cars with motor fuel.

Iran’s supply of condensate helps Venezuela stabilize exports of the Orinoco’s crude blends and allows its own lighter oil to be refined in the country to produce badly needed motor fuel.

The country needs revenues from oil exports which it has recently resumed to Asia to improve an economy suffering because of the US sanctions.

Venezuela aims to pump over 1.5 million barrels a day in 2022 to keep its economy afloat, with Iranian condensate being crucial to the plan.

The Islamic Republic has stepped in to help its South American ally with engineers, refined products and spare parts for its oil industry.

Last year, Venezuela began receiving a shipment of catalysts from Iran to help it produce fuel. It came after Iran sent more than a dozen flights to Venezuela to help restart Cardon refinery and alleviate acute gasoline shortages.

In a sign of recovery for its industry, PDVSA doubled its oil exports in December from a year earlier.

 According to oil industry sources cited by US daily the Miami Herald, the Venezuelan oil production reached an estimated average of 900,000 bpd in December and could reach 850,000 bpd in January.

Venezuelan oil experts confirmed the significant growth in the country’s oil production, underlining that the Iranian naphtha is essential for Caracas to be able to sell crude from the Orinoco Oil Belt.

“Indeed, they have increased production and there are several elements that indicate this,” said Juan Fernandez, former executive director of planning for PDVSA. “A lot of it is because they have been receiving the Iranian thinner and that goes directly to production in the Orinoco heavy-oil belt.”

Fernandez said the Venezuelan industry estimates that each barrel of thinner allows Venezuela to produce three of Orinoco Belt oil.

“Oil production estimates for the belt currently add up to 450,000 to 500,000 barrels a day and that is due mainly to Iran’s help.”

Other sources said the sale of 600,000 bpd of oil could be generating about $1.1 billion a month for Venezuela.

During his annual address to the nation, Maduro said last week that the South American country’s economy grew by more than 4% last year, following eight years of recession and rising prices.

“After five years of economic war of boycotts and blockades, Venezuela is back on track for economic growth,” Maduro said in his address before the National Assembly, also forecasting the country’s economic growth in the third quarter of last year to be at 7.6%.

The US government has said it was “concerned” about increased cooperation between Iran and Venezuela in their oil sector.

Iran has also ramped up its oil production in recent months. Last month, China reported the first imports of Iranian crude oil in a year despite ongoing sanctions by the United States government.

On Friday, a group of US Senate Republicans wrote to President Joe Biden, urging him to enforce sanctions on Iranian oil tankers. According to the letter, a growing fleet of oil tankers is evading US sanctions and entities are purchasing Iranian oil from these tankers.

“In recent weeks, the Chinese government has openly acknowledged importing millions of barrels of Iranian oil for its strategic petroleum reserves,” the letter said.

“As a result of this surge in oil sales, Iranian currency reserves soared from just $4 billion at the end of 2020 to $31 billion at the end of 2021. These Chinese purchases give Iran a vital lifeline and flout US sanctions with impunity,” it added.

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