Washington inadvertently created the “axis of the sanctioned”
Russia’s interests in Venezuela oil sanctions debated
India looks to Venezuela as supplier after US sanctions
The United States must rethink its use of oil and other sanctions after economic pressure pushed China, Iran, Russia and Venezuela to forge strong trade partnerships rather than isolating countries as wanted Washington, a panel of international experts from the Wilson Center said on June 29. .
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James Bosworth, author of the Latin America Risk Report, said the United States inadvertently created a “sanctioned axis.”
“We have brought the sanctioned countries together and given them a reason to create an alliance and form financial links (…) which allow them to escape these sanctions,” he said. “Any individual country sanctioned could be punished, but together they have the capacity to trade back.”
The Biden administration is potentially on the verge of lifting US sanctions on Iran’s oil, petrochemical and maritime sectors if it reaches an agreement with Tehran to join the Common Comprehensive Plan of Action. Doubts over the parties’ ability to reach a deal have started to emerge as talks enter a fourth month.
S&P Global Platts Analytics expects the United States to lift sanctions on Iran’s petroleum, petrochemical, maritime and other sectors by September, allowing the country to increase its crude and condensate exports to 1 , 5 million bpd by December, compared to 600,000 bpd in May.
U.S. sanctions against Venezuela could also be relaxed under the Biden administration, at least the diesel-for-crude trade that allows Indian, Spanish and Italian refiners to supply the diesel needed for power generation and agriculture in return. a payment in Venezuelan crude.
An easing of some sanctions would only reduce Venezuelan oil production to around 700,000 bpd by the end of 2022, while any major recovery would depend on the lifting of US sanctions against state-owned PDVSA, according to Platts Analytics.
Bosworth, one of the co-authors of the Wilson Center’s book “Venezuela’s Authoritarian Allies: The Ties That Bind” published ahead of the conference, said Iran, China and Russia had drawn Venezuela into the alliance for their own reasons.
Iran probably sees its relations with Venezuela as a lever in the nuclear talks. But Bosworth predicts that the United States will only be able to achieve one of its two main goals with these sanctions: to prevent Iran from developing nuclear weapons or to overthrow the Maduro regime in Venezuela.
“Iran is benefiting from this, as is Venezuela,” Bosworth said. “If they didn’t benefit financially, they would probably work a lot less together.”
The panel had different views on how Russia views its relationship with Venezuela and the ongoing oil sanctions.
Vladimir Rouvinsky, director of the Center for Interdisciplinary Studies at Icesi University in Colombia, said Moscow may be willing to help negotiate a political transition in Caracas.
“I think Russia is very interested in finding a solution to this impasse,” he said. “We might see new developments in the second part of this year – I wouldn’t be surprised.”
Rouvinsky said Venezuela is “like a suitcase without a handle” for Russia.
“Russia has invested too much in Venezuela,” he said. “They cannot just leave Venezuela, but they are very much aware that the cost of maintaining the Maduro government will be increasingly higher for Russia.”
Brian Fonseca, director of the Jack D. Gordon Institute of Public Policy at Florida International University, believes Russia will benefit from continued sanctions against Venezuela because Moscow’s heavy crude exports are more valuable.
Russian crude exports “benefit greatly from the fact that Venezuelan oil is tied up in the ground,” Fonseca said.
U.S. imports of Russian oil hit a 10-year high of 740,000 b / d in March, including 197,000 b / d of crude oil and 543,000 b / d of refined products, according to the latest data from US Energy Information Administration. US imports of Russian oil last increased in August 2010 to 786,000 bpd.
U.S. refiners have increasingly used Russian oil to replace Venezuelan supplies they imported before the U.S. sanctioned PDVSA in January 2019.
India’s economic ties
India has been an economic lifeline for Maduro’s regime, but would view any new Venezuelan government on the same economic terms, said Hari Seshasayee, business advisor at ProColombia.
Seshasayee estimates that India bought $ 26 billion worth of oil from Venezuela over the past five years, being the largest source of hard currency for Maduro’s regime, while sales to China largely repay the cost. debt rather than generating cash.
If the United States relaxes sanctions against Venezuela, “India will resume operations,” Seshasayee said.
India has complied with U.S. sanctions against Iran and Venezuela, although Reliance Industries continues to press the Biden administration to allow the resumption of trade in diesel for crude.
Exports of U.S. crude to India increased during sanctions against Venezuela and would likely fall back if the Biden administration eases sanctions, Seshasayee said.
“I have a feeling that the Biden administration can at least remove this diesel trade, if not all of the sanctions,” he added.