Venezuela Looks To Mend Alliance With Iran

According to reports, Venezuela and Iran are attempting to mend their oil alliance, which started to crack last year when Venezuela lagged short on oil swaps that had increased the export of crude and helped alleviate gasoline shortages in the country.

The Iran alliance will play a pivotal role in rescuing Venezuela’s flagging energy sector from the impending resumption of U.S. sanctions on Venezuela in April. The US temporarily lifted sanctions on the country last year.

According to shipping data analyzed by Venezuela’s oil giant PDVSA, the country’s payment problems with Iran became much more severe after the United States issued permits in late 2022. The state-run company redirected shipments meant for Iran to clients who could pay in cash.

Venezuela plans to pay off its outstanding debt by sending more gasoline and heavy crude oil to Iran faster. Before Iranian President Ebrahim Raisi’s upcoming visit, Venezuela is finalizing hundreds of unfinished projects, such as those involving the agricultural and automobile industries.

In February, Venezuela’s oil minister, Pedro Tellechea, admitted that the relationship was in shambles. He stated that PDVSA will maintain its own petrochemical facilities and refineries this year, as stipulated in the 20-year agreement with Iran.

The domestic effort comes after Iranian specialists finished an upgrade at Venezuela’s smallest refinery, which was supposed to be repeated at Paraguana, the country’s biggest refining plant, last year. That would have replaced outdated American processing equipment with brand-new machinery from Iran and China.

From 2022 to 2023, Iran’s supply of oil and condensate to Venezuela decreased by 44%, while Venezuela’s supply of gasoline and petroleum decreased by 56%, reaching 39,400 bpd (barrels per day).

As Venezuela battled to restore lost oil production, fix infrastructural and quality problems, and meet supply obligations with its clients, the overall volume of exchanges decreased by 50% last year. With the monthly delivery of one huge shipment of heavy oil, PDVSA has been steadily paying off its debt since the middle of last year. However, because Iran has not restarted its supply, the state-owned oil business has had to seek other suppliers, including Russia.