Russia Squeezing Embattled Venezuela for Tax-Free Gas Expansion - Bloomberg
▻https://www.bloomberg.com/news/articles/2019-06-20/russia-squeezing-embattled-venezuela-for-tax-free-gas-expansion
Photographer: Wil Riera/Bloomberg
• Venezuela offers Rosneft path to amplify natural gas dominance
• Expropriation clause gives Moscow-based company a hedge
Russia’s state-controlled oil giant, Rosneft PJSC, is extracting concessions from crisis-ridden Venezuela to enter the offshore natural gas market on the cheap, a potential headache for the U.S. and Europe.
An accord signed by both Russia and Venezuela earlier this month will give Rosneft tax breaks to produce and export gas from the Patao and Mejillones fields off Venezuela’s east coast. The document, which also includes a “fair market price” in the event of an expropriation, makes changes to a bilateral agreement reached in 2009, according to a filing by the Russian government.
The deal underscores how Russia is both propping up and gaining from the Nicolas Maduro regime at a time when the U.S. is sanctioning Maduro and China has cut its support. Venezuelan gas could eventually offer Russia new entry points into both Asia and Europe.
“China is backing away in terms of its financial exposure,” Andrew Stanley, an associate fellow at the Center for Strategic and International Studies, said in a telephone interview. “Whereas the Russians, over the past few years, they’ve gone in the opposite direction, they’ve kind of doubled down and seen this as an opportunistic plan.”
Since 2014, Rosneft has loaned about $6.5 billion to Venezuela in exchange for oil, according to data compiled by Bloomberg. Petroleos de Venezuela SA, or PDVSA, has been repaying the loans by delivering barrels to Rosneft, and had an outstanding debt of about $1.8 billion in the first quarter, according to a company presentation.
As a result of the changes signed by Russian President Vladimir Putin, Rosneft and its suppliers will be exempt from value added and import taxes to develop the two gas fields, which are near to where Exxon Mobil Corp. is rushing to extract oil in neighboring Guyana. The agreement was filed online by the Russian legal information website, which publishes orders by the president and applied international treaties.
