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Venezuela Falls Behind on Oil-for-Loan Deals

Venezuela Falls Behind on Oil-for-Loan DealsVenezuela Falls Behind on Oil-for-Loan Deals

Venezuela’s state-run oil company, PDVSA, has fallen months behind on shipments of crude and fuel under oil-for-loan deals with China and Russia, according to internal company documents reviewed by Reuters.

The delayed shipments to such crucial political allies and trading partners—which together have extended Venezuela at least $55 billion in credit—provide new insight into PDVSA’s operational failures and their crippling impact on the country’s unraveling socialist economy.

Because oil accounts for almost all of Venezuela’s export revenue, PDVSA’s crisis extends to a citizenry suffering through triple-digit inflation and food shortages reminiscent of the waning days of the Soviet Union.

The total worth of the late cargoes to state-run Chinese and Russian firms is about $750 million, according to a Reuters analysis of the PDVSA documents. At the end of January, PDVSA was late on nearly 10 million barrels of refined products that the company owes the firms—with shipments delayed by as much as 10 months, according to the documents. It also failed to make timely deliveries of another 3.2 million barrels of crude shipments to China’s state-run China National Petroleum Corporation.

Shipments to China and Russia are critical for PDVSA’s financial health because firms from the two countries purchase about a third of the PDVSA’s total oil and fuel exports. The administration of Venezuela President Nicolas Maduro has for years relied on credit from the two nations, particularly China, to finance infrastructure and social investment in Venezuela.

During the decade-long oil boom that ended in 2014, Venezuela borrowed nearly $50 billion from China that it agreed to pay back in crude and fuel deliveries to state-run Chinese firms.

Venezuela was the seventh largest crude supplier to China in 2016 and the largest in Latin America. 

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