U.S. sanctions Russian producer over links to PDVSA

By Ben Bartenstein, Jack Farchy and Josh Wingrove on 2/18/2020

NEW YORK (Bloomberg) - The U.S. sanctioned a unit of Russia’s largest oil producer Rosneft PJSC for maintaining ties with Venezuela’s Nicolas Maduro and state-run oil company PDVSA.

The Treasury Department’s Office of Foreign Assets Control is acting against Rosneft Trading SA, the company’s Swiss-incorporated brokerage firm, as well as its Chairman Didier Casimiro. The U.S. restrictions come with a three-month wind-down period that expires May 20.

The action against Rosneft represents the latest escalation in the Trump administration’s campaign to oust Maduro and rally international support behind Venezuelan opposition leader Juan Guaido. The U.S. placed an array of sanctions on Venezuela last year, freezing all state assets, targeting senior officials and prohibiting transactions with state entities.

Rosneft didn’t immediately respond to requests for comment.

Oil futures pared a decline, with Brent crude down 20 cents on the day to $57.48 a barrel at 10:48 a.m. New York time, after falling as much as $1.37 earlier.

Rosneft is handling over half the oil coming from Venezuela and helping the country evade sanctions, according to U.S. officials who briefed reporters on condition of anonymity. Rosneft recently facilitated a shipment of 2 million barrels of Venezuelan oil to West Africa, one of the officials said.

Rosneft has been evading sanctions by using ship-to-ship transfers to obtain Venezuelan oil, a U.S. official said. In other cases, they’ve changed names on ships to avoid detection, or lied about the source of the oil.

The sanctions affect assets in the U.S. But those engaging in transactions with Rosneft Trading and Casimiro worldwide run the risk of being sanctioned, an official said.

President Donald Trump personally signed off on the sanctions and Secretary of State Michael Pompeo discussed the matter on Saturday with Russian Foreign Minister Sergei Lavrov, an official said.

In the wake of U.S. sanctions on Venezuela, Russia has become the second-largest source of American oil imports. The nation’s crude and oil product exports to the U.S. climbed to 20.9 million barrels last October, the highest since November 2011, according to U.S. government data.

Rosneft is currently subject to some U.S. market-sector sanctions, although those measures aren’t as far-reaching as the sanctions against businesses associated with the Maduro regime and don’t prevent Rosneft from entering into transactions for Venezuelan oil.

Rosneft has been Venezuela’s main shipper of crude, which goes predominantly to refineries in India and China. The Moscow-based company, controlled by Russian President Vladimir Putin’s government, has loaned $6.5 billion to Petroleos de Venezuela SA, the Latin American country’s state-owned oil company, in exchange for crude.

Venezuelan oil sales fell to a 34-year-low in 2019 after sanctions cut off trade with the U.S., until then the country’s biggest customer.

Notably, the U.S. Treasury Department has exempted Chevron Corp., allowing the company to conduct business with PDVSA. Chevron has ramped up output at a key Venezuelan oil project to levels not seen in almost a year. Its current waiver from sanctions expires in April.

Rosneft Trading has been involved in a variety of international relationships for the Russian producer. It’s been the counterparty for an oil-supply deal with Kurdistan, a liquefied natural gas contract with Egypt and gasoline shipments to Asia, according to the company’s website.

The impact on Rosneft’s core business of selling Russian oil on the global market is unclear. Recent company documents offering crude and refined oil products for sale don’t mention the Switzerland-based trading arm. However, Rosneft Trading SA was the counterparty for a contract to supply crude to Germany through the Druzhba pipeline from 2017 to 2018, according to a company disclosure.

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