Venezuela Turns to Iran for Fuel Supplies and Workers
(Bloomberg) -- Strangled by U.S. efforts to isolate it from financial markets, Venezuela is getting help from another country crushed by American sanctions: Iran.
As armed soldiers in Caracas guard the city’s last drops of fuel and state-owned Petroleos de Venezuela SA struggles to maintain its operations, Tehran has started delivering blending components used for producing gasoline, according to people familiar with the matter. The Islamic Republic is also supplying workers and equipment for oil refining, and the countries have discussed bringing actual gasoline cargoes into Venezuela, the people said.
The support comes at a critical time. While the rest of the world grapples with a massive supply glut that has hammered energy prices, Venezuela is rapidly running out of fuel. U.S. sanctions on Russian traders last month abruptly halted key supplies to the nation, which is already contending with hyperinflation, food shortages and the coronavirus.
The crisis has brought Venezuela even closer to longtime ally Iran, whose economy has also taken a hit after U.S. restrictions cut off much of its foreign trade. Venezuelan President Nicolas Maduro and his Iranian counterpart Hassan Rouhani last week reaffirmed their plans to cooperate on energy, agricultural and financial projects, as well as on the Covid-19 pandemic, Venezuela’s foreign ministry said.
Since then, sanctioned Tehran-based carrier Mahan Air has been flying aircraft to Venezuela’s northern coast to deliver gasoline blendstock, as well as transport technicians and spare parts to help repair one of the world’s largest refineries, PDVSA’s Amuay plant, the people said. Maduro’s regime is also considering buying cargoes of finished gasoline from the Islamic Republic via intermediaries, said the people.
The fuel supplies are crucial to Venezuela, as its limited gasoline inventories get rationed to the military as well as to medical and food suppliers. That leaves most Venezuelans -- accustomed to filling up practically for free -- paying sky-high prices on the black market to get a little gas in their tanks.
“What is outrageous and inconceivable is that a country with the largest oil reserves in the world has to receive ‘humanitarian aid’ from Iran,” said Carlos Vecchio, the U.S. envoy for Venezuelan opposition leader Juan Guaido, in an interview. He said that Maduro allies are using the gasoline trade to enrich themselves and that those involved in shipments put themselves at risk of sanctions.
The U.S. Treasury Department declined to comment. The Iranian Oil Ministry didn’t respond to a request for comment on the matter. PDVSA and Venezuela’s Information Ministry didn’t respond to emails seeking comment.
Mahan Air, Iran’s first private airline, launched a 16-hour direct flight to Caracas last year. The latest trips appear to be some of its first to a smaller Venezuelan airport. One plane arrived at the local airport in Falcon state on Wednesday and another touched down Thursday, flight logs tracked by Sweden-based flightradar24.com show. More Mahan jets are expected to arrive in the coming weeks, the people said.
The airline has been sanctioned several times by the U.S. Treasury Department, which accuses the carrier of shipping military equipment to Yemen on behalf of Iran’s Islamic Revolutionary Guard Corps.
Venezuela has faced chronic shortages of gasoline since 2017, when the U.S. escalated financial sanctions on PDVSA, but the situation got worse after additional measures targeting subsidiaries of Russia’s state oil giant Rosneft Oil Co PJSC. Rosneft Trading SA and TNK Trading International SA had been supplying gasoline and gasoline components to PDVSA in exchange for cargoes of crude oil. The two companies halted deals with Venezuela last month.
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