After the new US sanctions came into effect last month, Venezuela is looking toward India for its oil exports. The state-owned oil company PDVSA is planning to replace deliveries to the United States and Europe that were disrupted by payment restrictions to the Asian countries especially India and China.
The country is focusing on cash-paying buyers, mostly based in India, which is the second largest customer after the United States. The Trump administration has slapped sanctions on the oil industry which apparently has helped Venezuelan President Nicolas Maduro remain power.
As per Refinitiv Eikon data, PDVSA has managed to load and export 1.15 million barrels per day (bpd) of crude and refined products in the first two weeks after the sanctions came into effect.
Notably, months before sanctions Venezuela was exporting 1.4 million bpd. Earlier this week two supertankers, Baghdad and Folegandros I, left the docks from Venezuela's Jose terminal carrying cargoes to Indian ports. But the exports to India is not going to be easy for PDVSA as the US may use is political and financial influence the deals.
In a special report on Venezuela, Barclays bank has highlighted that "Considering all the difficulties that Venezuela faces in delivering oil to other markets and the legal, reputational and financial risks confronting traders or counterparties that do business with it under the current conditions."
The bank further wrote that "it seems unlikely that all production can, in short order, go to other markets."
New agency Reuters reported that US bank also underlined that due to the sanctions introduced by the US there was "limited ability for non-US refiners to take on Venezuela's very heavy crude" beyond India and China.
The Venezuelan government is leaving no stone unturned to convince Indian refiners to double their oil purchase. In fact, its oil minister, came Indian to broker a deal with refiners like including Reliance Industries Ltd and Nayara Energy Ltd. On Monday Quevedo said that "We are selling more than 300,000" bpd to Indian buyers, we want to double that amount."
Interestingly, Reliance is among PDVSA's biggest cash-paying customer, on the other hand, Nayara receives Venezuelan oil from Russian oil-giant Rosneft which is its largest stakeholder.
Although Indian refineries have the capacity to import extra oil, the issue remains the proposed freeze on Venezuela using the US or European bank systems after April 28, the deadline set by the US Treasury.