Eni, Repsol Receive U.S. Permission to Deliver Venezuelan Oil to Europe

Italian and Spanish oil companies Eni and Repsol could start shipping Venezuelan oil as early as next month to replace banned Russian crude after they get the green light from the U.S. State Department. The companies will resume the oil for debt swaps, which was banned by Washington two years ago as part of sanctions on Caracas.

Eni and Repsol’s shipment volume from Venezuela will not be large and will probably have little impact on surging oil prices, but Washington’s permission to resume Europe bound shipments could provide a boost for Maduro.

The Biden administration aims to hit two birds with one stone as Venezuelan crude can help cut Europe’s dependence on Russian oil and re-direct some of Venezuela’s shipments from China. Washington also hopes to restart talks between Maduro and Venezuela’s opposition.

Eni and Repsol, both of which have joint ventures with Venezuela’s state run oil company PDVSA, can accept the cargoes as payment for unpaid debts and dividends.

A key condition is that oil has to go to Europe and cannot be resold anywhere else.

The U.S. does not think PDVSA will benefit from oil for debts transaction as it does from oil for cash sales to China.

While the permissions came last month, details and resale restrictions haven’t been previously unveiled.

Washington has not given the same permissions to Chevron, India’s Oil and Natural Gas Corp. (ONGC) and France’s Maurel & Prom, which have also lobbied the State and Treasury Departments to take oil for debts from Venezuela.

All five oil companies had halted transactions from Venezuela in 2020 after Trump’s sanctions against Venezuela that cut the country’s oil exports but failed to oust Maduro.

In March, the U.S. has held the first high level talks in Caracas with the Venezuelan government in years. While the government pledged to resume election talks with the opposition, Maduro has yet to agree on a date to return to the negotiating table.

Biden has been criticized by both the Republicans and some of his fellow Democrats, who oppose any softening towards Maduro, for his one-sided approach.

Washington maintains further sanctions relief on Venezuela will be conditioned on progress toward democratic change as Maduro negotiates with the opposition.

The White House has authorized Chevron last month to continue talks with the Venezuelan government and PDVSA about future operations in the South American nation.

About the same time, the State Department sent letter to Eni and Repsol saying it would not object if they resumed oil for debt deals and shipped the oil to Europe.

Chevron’s request to the U.S. Treasury to expand its operations in Venezuela came as the State Department issued the no-objection letters to Eni and Repsol. Whether Chevron’s request was still under consideration remains unclear.

The U.S. oil major did receive a six-month continuation of a license that preserves its assets and U.S. approval to talk with Venezuelan government officials about future operations.

China has become the largest customer for Venezuelan oil, with as much as 70% of monthly shipments destined for its refiners.

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