Special Report-Venezuela’s Petrochemicals Exports Have Expanded to the U.S. Despite Sanctions

Despite the United States’ efforts to limit trade, Venezuelan petrochemicals produced by joint ventures of state owned petrochemical company Petroquimica de Venezuela (Pequiven) and its foreign partners have been arriving in the U.S. At least two cargoes were dropped at Houston area ports since October, as Venezuela’s petrochemical and oil byproduct exports have been expanding.

The shipments to the U.S. ports shows Venezuela’s efforts to boost export revenues despite U.S. sanctions on its oil industry, which pushed down the South American country’s exports to their lowest in 77 years.

The sanctions were imposed to put pressure on President Nicolas Maduro, whose election victory in 2018 is seen by the U.S. as a sham. Maduro claims he was elected fairly.

Mitsubishi Corp. has continued to export methanol from its Venezuelan joint venture Metor in 2021, after a suspension for a couple of years. Metor’s shareholders include Pequiven.

The U.S. move also reflects frustration with members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies who have rebuffed repeated requests from Washington to speed up production increases.

Biden and top aides have discussed the possibility of a coordinated release of stockpiled oil with close allies including Japan, South Korea and India, as well as with China, over the past several weeks, sources told Reuters earlier.

China’s state reserve bureau said it was working on a release of crude oil reserves although it declined to comment on the U.S. request.

A Japanese industry ministry official said the United States had requested Tokyo’s cooperation in dealing with higher oil prices, but he could not confirm whether the request included coordinated releases of stockpiles. By law, Japan cannot use reserve releases to lower prices, the official said.

A South Korean official confirmed the United States had asked Seoul to release some oil reserves.

“We are thoroughly reviewing the U.S. request, however, we do not release oil reserve because of rising oil prices. We could release oil reserve in case of supply imbalance, but not to respond to rising oil prices,” the official said.

The United States and its allies have coordinated strategic petroleum reserve releases before, for example in 2011 during a war in OPEC member Libya.

But the current proposal represents an unprecedented challenge to OPEC, the cartel that has influenced oil prices for more than five decades, because it involves China, the world’s biggest importer of crude.

The U.S. SPR was set up in the 1970s after the Arab Oil Embargo to ensure the United States has adequate supply to weather an emergency.

Venezuela’s oil industry was subjected to U.S. sanctions in 2019 by an executive order. The sanctions particularly target Venezeula’s state oil company PDVSA and its subsidiaries. A subsequent order broadened the sanctions to cover companies owned or controlled by the government, but Pequiven or Venezuela’s other petrochemical operations were not specifically named.

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