Russian Oil Firm Pulls Out of Venezuela Amid Squeeze on Maduro

Russia's Rosneft has transferred its assets in Venezuela to a company fully owned by Vladimir Putin's government, a move apparently intended to shield Russia's largest oil producer from U.S. sanctions while Moscow continues showing support for Venezuelan President Nicolas Maduro in the wake of a U.S. narcotics indictment.

The sale, announced Saturday, follows the recent sanctioning of two Rosneft subsidiaries in an effort to cut a critical lifeline Russia extended to Maduro after the U.S. government made it illegal for Americans to buy crude from Venezuela.

Rosneft, led by Russian Putin's longtime associate Igor Sechin, said that its move means that “all assets and trading operations of Rosneft in Venezuela and/or connected with Venezuela will be disposed of, terminated or liquidated.” It did not name the new company that would take over the assets, which include multiple joint ventures, oil-field services companies and trading activities.

The move comes at a critical time for Maduro's government. The spread of the coronavirus pandemic threatens to overwhelm Venezuela's already collapsed health system all the while depriving its crippled economy of oil revenue on which it almost exclusively depends for hard currency.

Amid the pandemic, which has claimed two victims and another 113 infected in Venezuela, the U.S. is stepping up pressure to remove Maduro. On Thursday, it made public indictments against the socialist leader and several top aides for allegedly leading a narcoterrorist conspiracy that converted the Venezuelan state into a platform for violent drug cartels, money launderers and Colombian guerrillas who sent 250 metric tons of cocaine a year to the U.S.

Francisco Monaldi, a Venezuelan oil expert at Rice University in Houston, said the move would protect Rosneft and its two largest minority shareholders, BP and the government-run Qatar Investment Authority, from U.S. retaliation.

“They didn’t want to lose those assets right now,” Monaldi said. “It seems like a logical step.”

But Russ Dallen, head of Caracas Capital Markets brokerage, cautioned that it's too early to know for sure whether the move is intended to bolster Maduro.

“We don't know whether the new state entity is a cemetery corporation, where companies go to die, or whether the Russians are simply doing it to take Rosneft — which is their crown jewel and provides a large portion of Russia's income — out of the way of sanctions and Putin will use the new company to continue to help Maduro,” he said.

In February, the U.S. Treasury Department imposed sanctions on a Rosneft subsidiary based in Geneva that sells crude to European customers. U.S. authorities vowed to keep applying pressure, and hit a second Rosneft subsidiary with sanctions earlier this month.

Rosneft spokesman Mikhail Leontyev said the company's decision was aimed at “protecting the interests of our shareholders" and that he expects the U.S. will now waive sanctions against its subsidiaries.

"We really have the right to expect American regulators to fulfill their public promises,” he added in remarks carried by Russia's Tass news agency.

Konstantin Kosachev, the Kremlin-connected head of the foreign affairs committee in the upper house of Russian parliament, reiterated that Russia's view is that “unilateral U.S. sanctions against Venezuela are unlawful and inhumane.”

"Moscow and Caracas will remain partners amid the U.S. sanctions against Venezuela," he told the Interfax news agency.

The U.S. was first among nearly 60 nations to recognize opposition leader Juan Guaidó a year ago as Venezuela's rightful leader. The international coalition considers Maduro illegitimate after 2018 elections widely deemed fraudulent because the most popular opposition candidates were banned from running against him. Russia's support has helped Maduro to face down U.S.-backed efforts to unseat him.