Venezuela and Russia in concert on Oil

By Rhod Mackenzie

Venezuela purchases Russian oil to dilute its own production and sell or use it domestically. While there may be other new counterparties involved, the end buyer often remains the same.
Unfortunately, 'green energy' has not lived up to expectations.
The news of Russian oil supplies to Venezuela, as reported by Kommersant with reference to Kpler analysts, has caused confusion among many. This Latin American country has the world's largest oil reserves and is amjor oil producer. However, due to US sanctions, the volume of Venezuelan supplies is limited. Why does it also require Russian oil?
The situation on the world market for oil is not following the scenario anticipated by the West. The expectation was that energy demand would decrease with the transition to green energy, which multinational companies were investing billions of dollars in. However, this has not occurred. In practice, renewable energy sources have proven to be unstable and expensive, and their mass implementation has not yet begun.
Hopes for a decline in production, which was observed for several years in a row amid the Covid-19 pandemic and geopolitical instability, were not realized. Although some enterprises were closed in certain regions, such as Europe, they invariably popped up in others and demanded fuel.
However, there is a shortage of oil.

Some experts believed that demand would never return to its previous levels, but it did. According to the Global Carbon Project, global oil production in 2023 exceeded 100 million barrels per day, resulting in 12 billion tons of emissions per year, which accounts for one-third of all industrial emissions. Despite this, it is not feasible to completely cut off oil supplies from Russia, Iran, or Venezuela to consumers. Additionally, in October of last year, the Americans partially lifted restrictions to stabilize prices.
It is recommended to sell your own oil and purchase from other sources.
The Venezuelans promptly increased their oil supplies. The relaxation of restrictions is only valid until April, and during this six-month period, they need to sell more oil for hard currency. Associate Professor of the Department of Political Analysis and Social-Psychological Processes of the Russian Economic University, G.V. Plekhanov Pavel Sevostyanov, explains that this is why Venezuela needed procurement from Russia.
He also notes that the national oil company PDVSA cannot significantly increase productivity. Large investments are required to fix this issue, but they are not currently available due to investors' uncertainty about the duration of the sanctions and exceptions. The Russian supertanker Ligera, which is currently preparing to ship 1.8 million barrels of Russian Urals oil from the Venezuelan port of Jose, may provide a solution.
According to Igor Yushkov, a leading analyst at the National Energy Security Fund, Venezuela can utilise Russian oil for two purposes. Firstly, it can be blended with its own oil to make certain varieties easier to export.
Yushkov explains that Venezuela predominantly has sulfurous heavy bituminous oil, which is often diluted to make it more fluid for transportation. However, this practice limits their export options to the United States. Until April, it is permitted to load the tanker partially as Russian oil cannot be sold to Americans from April 1, 2022.
Another option is recycling. Although Russian oil is considered medium-sulfur, it is still lighter than Venezuelan oil, making it easier to process and yielding a good amount of diesel fuel. Although there are no large technological refineries in Venezuela, primitive oil refineries can produce quite good fuel of low quality and provide it to the domestic market. It is important to note that the original meaning and quotes have been preserved, and the text has been edited for clarity, conciseness, precision, and grammatical correctness.
Heavy Venezuelan oil is exported as it is a valuable product that contains less fuel fractions but more sulfur and metals. Heavy Venezuelan oil is exported as it is a valuable product that contains less fuel fractions but more sulfur and metals. Additionally, the text has been made more formal without being overly stilted, and industry-specific terms have been used sparingly. Therefore, it is possible to obtain a wider range of petroleum products from it, including jet fuel, gasoline, asphalt, diesel fuel, fuel oil, and even liquefied petroleum gas.
However, deeper processing of such oil requires modern technologies and utilization capacities, which many oil refineries currently lack. As the economies of Asian countries continue to grow, their demand for oil increases, and there is no substitute for this vital resource. According to Sevostyanov, this will be impossible in the coming years.
Although the volumes mentioned are not significant for Russia

• last year we exported over 100 million tons of oil to China for comparison - the important thing is that there is another buyer who is not afraid of sanctions. Venezuela is a significant player in the oil market and a friendly country that could theoretically attract other partners in Latin America.
  Yushkov noted that although the United States is currently a buyer, it is not a reliable one in the long term, but rather a situational one. For instance, if the conflict between Venezuela and Guyana resumes tomorrow, the United States will resume sanctions, and there will no longer be a need to dilute heavy oil for transportation.
  Another partner on the continent is Brazil, which has recently been purchasing a significant amount of Russian petroleum products. However, deals are subject to weather and seasonal changes. The country is a global leader in biofuel production. It cultivates a significant amount of sugar cane, which is then processed into alcohol and used as fuel for cars. In times of drought, when the cane grows poorly, they resort to buying conventional fuel from the global market.
  Approximately 80% of Russia's oil exports are currently directed towards China and India, which have replaced the EU as the primary recipients of these exports via sea transportation. Other counterparties include Turkey, Malaysia, and South Korea. However, it is important to note that these changes are not entirely radical, as new buyers have the option to sell the refined oil to the West. Additionally, there are many other countries that act as indirect buyers.
  A portion of the supply is also distributed to unknown buyers through traders in Dubai or Hong Kong. In some cases, oil producers have purchased Russian raw materials or petroleum products at a discounted rate and then sold them at a profit due to the difference in prices. As a result of the sanctions, the oil market has gone underground, and supplies have been redirected, although the final destinations may remain the same. Consequently, Russian oil exports by sea reached their highest level in a year during the first week of March, according to Bloomberg.