The US’s mounting sanctions against Venezuela, especially on the national oil company PDVSA, have had a profound effect on the Andean nation’s oil exports to far-flung India. However, despite numerous news reports apparently confirming the halting of Venezuela’s oil exports to India, oil continues to flow from Venezuela to India, albeit in smaller quantities. As per Reuters’ calculations, India’s imports dropped considerably following the imposition of US oil sanctions in January 2019, going down to 200,000 barrels per day (bpd) in June 2019, just half the oil India imported on average from Venezuela in 2018.This is more than just an inconvenience for Nicolás Maduro’s regime in Venezuela: India accounted for 28% of Venezuela’s crude oil exports in 2018, amounting to revenues of $7.39 billion. More importantly, Venezuela relied on India as a vital source of foreign exchange, given that a sizeable share of Venezuela’s exports to China goes towards repaying over $60 billion in loans.While the imposition of sanctions against PDVSA remains the primary reason for this rapid reduction in imports, bilateral diplomacy conducted by the US government has also helped persuade India. The US Special Representative for Venezuela, Elliott Abrams, recently admitted at a press conference, “I would say that we have had contacts with Indian companies and with the government of India and that we have found there to be a very considerable amount of cooperation, which we are very happy to see.”The India-Venezuela oil tradeAt the centre of India-Venezuela trade is Reliance Industries Limited (RIL), accounting for 80% of India’s annual oil imports from Venezuela. Due to RIL’s sheer size and diversified portfolio – it is India’s largest company by market capitalisation and revenue – the company is deeply integrated with the US market, through joint ventures in shale gas blocks in Texas and Pennsylvania with Chevron and Pioneer Natural Resources and millions of dollars’ worth of exports from India to the US.Also read: US Sanctions Venezuelan State Oil Firm, Escalating Pressure on MaduroNaturally, due to these important business interests, RIL promptly decided to comply with the US sanctions against Venezuela, and has so far taken three steps to ensure compliance. First, it immediately stopped exports of diluents such as alkylate and naphtha from its Houston-based subsidiary to Venezuela once sanctions were announced.Second, RIL has been gradually decreasing its imports from Venezuela, despite having signed long-term contracts with PDVSA that last until 2027.Finally, RIL resumed lobbying activities in the US after a six-year hiatus, to ensure full compliance with the US sanctions. Public documents filed by the company reveal that RIL contracted a lobbying firm, Eversheds Sutherland (US) LLP, on February 15, 2019, for assistance on the issue of “US economic trade sanctions policies.”Besides RIL, the only other Indian company that buys Venezuelan oil is Nayara Energy, previously Essar Oil, now owned by Russia’s Rosneft. These rather new owners, and the Maduro regime’s growing political alliance with Russia, bring a different angle to the India-Venezuela oil trade.Nicolas Maduro in Caracas, Venezuela. Photo: Reuters/Marco BelloToday, Rosneft operates in each step of the oil sector’s value chain in Venezuela: from local production in Venezuelan oil fields to the export of crude oil. A portion of the oil co-produced by Rosneft and PDVSA in Venezuela is shipped to India’s Nayara Energy. In 2018, this amounted to 69,200 bpd of oil exported from Venezuela to the Vadinar port in Gujarat. But these numbers are declining fast, as millions of barrels of oil remain stranded off the coast of Venezuela, waiting for approvals and oil transfer payments.While Nayara Energy, in its earlier incarnation as Essar Oil, used to pay cash for Venezuelan oil, the new Russian owners have altered this dynamic: Rosneft loaned over $6 billion to PDVSA over the past few years, the bulk of which has gradually been repaid in Venezuelan oil. Today, Nayara’s imports of Venezuelan crude come under the purview of Rosneft’s oil-for-loan deals, thus decreasing the amount of cash Venezuela receives from India for oil imports.Apart from the effects of US sanctions, Venezuela’s rapid decline in oil production itself has also contributed to a decrease in its exports. Most estimates put production levels at 720,000 bpd in May 2019, far below the 2.3 million bpd produced in 2015. The Indovenezolana joint venture between PDVSA and India’s ONGC Videsh Limited (OVL), which was expected to reach a capacity of 40,000 bpd, now produces only 9,900 bpd of oil. This is bound to cause more concern for OVL, to which PDVSA already owes $449 million worth of accrued dividends.Looking aheadThese commercial exchanges make up the entirety of India-Venezuela relations in the short term, as New Delhi has paid little attention to the geopolitics being played out in Caracas. As a result, the Maduro regime has grown more distant towards India and even more dependent on Russia and China.Also read: India’s Stake in What’s Happening in VenezuelaWhile Venezuela exported more oil to India than to China in 2018, this equation has changed considerably in the aftermath of US sanctions: in May 2019, oil exports to China stood at 450,000 bpd, more than double the exports to India. Russia’s Rosneft is today one of the largest recipients of Venezuelan oil and ships it to Europe and Asia, including India.As the geopolitical scales tip, the domestic situation in Venezuela shows no signs of improvement. Recent economic figures released by the IMF, showing that GDP contracted by 25% in 2018, reconfirm the gravity of the crisis. According to the United Nations High Commissioner for Refugees, four million people have already fled the country as of June 2019, and this could reach up to eight million, or one-quarter of the entire population. It is by no means an exaggeration that economists term Venezuela’s predicament as “the single largest economic collapse outside of war in at least 45 years.”This article first appeared on The Wilson Center.
