How Iran helps Venezuela increase its oil production despite US sanctions

How Iran helps Venezuela increase its oil production despite US sanctions

Although many experts question the figure announced by Nicolás Maduro where he indicated that Venezuela exceeded the production of one million barrels per day, they do recognize that in 2021 it managed to recover part of its oil production and point to Iran as a key player in this process.

“What has been happening is that Venezuela is importing diluents from Iran – naphtha, condensates, light crude oil – that are being mixed with Venezuelan extra-heavy crude oil from the Orinoco Belt in order to increase production,” says José Toro Hardy, an oil economist. who was a member of the board of directors of the Venezuelan state-owned PDVSA BBC mundo.

He explains that the oil from that region of Venezuela is very heavy and loaded with a lot of sulfur, so they need to mix it with these products to create a medium crude that is more commercial.

He points out that Venezuela in the past produced these diluents, but that is no longer the case because many oil fields are closed and the country’s refineries are working well below capacity.

Toro Hardy indicates that Venezuela in exchange for these diluents, Venezuela gives Iran a part of the production of this medium crude.

“It’s a swap,” he says.

“Iran, like Venezuela, is sanctioned by the United States and its oil production has fallen sharply. Probably that oil that is coming out, let’s say, regardless of the sanctions that both Venezuela and Iran have, is doing so in unrecognized tankers, which even turn off the devices so as not to be located by satellite. That is an oil that Iran can market once they have it in their possession, “he adds.

Tehran has also been helping Venezuela with the shipment of gasoline to supply the domestic market of the Latin American country, where the production of this derivative has decreased due to refinery problems.

Francisco Monaldi, director of the Latin American Energy Program at the Baker Institute of Rice University (Texas, USA), pointed out that the production of Venezuelan crude oil is returning to the levels it registered at the beginning of 2020, before the Russian oil company Rosneft will withdraw from Venezuela as prices plummet due to the impact of the coronavirus pandemic.

PDVSA was able, with the help of Iran, to create a sanctions evasion structure by replacing Rosneft. In addition, Iran began to supply the thinners that the Russians used to bring. All of this requires high prices to pay intermediaries and cover transportation costs,” Monaldi said in a Twitter thread.

The expert added that the collapse in production that occurred in 2020 was not a consequence of a reduction in production capacity, but rather due to difficulties in selling crude at such low prices and evading sanctions.