“Oil is a commodity and at the right price people will buy it. It’s like stolen property; there’s always going to be someone willing to make a buck,” said Russ Dallen, managing director of Caracas Capital, a Venezuela-based boutique investment bank, who closely tracks the oil industry.
Cut off from U.S. oil payments, Maduro has already begun to look for alternative markets, including India, the world’s second most populated country with 1.4 billion people and fast-growing fuel market which has a huge appetite for fuel as its population moves from bicycles to motorbikes and cars. “The Indians love Venezuelan oil,” said Dallen. “It’s very heavy, like tar, they can also turn it into asphalt and use it to make roads.”
The current head of PDVSA, General Manuel Quevedo is a career military officer with no oil industry experience. “Quevedo has done the work of our sanctions by himself because of his incompetence,” said Dallen. “They have killed the golden goose themselves,” he added.
“El petróleo es una mercancía y al precio adecuado la gente lo va a comprar. Es como las cosas robadas; siempre hay alguien dispuesto a hacer dinero”, dijo Russ Dallen, director gerente de Caracas Capital, un banco de inversión con sede en Venezuela que monitorea estrechamente la industria petrolera.
Al no poder recibir los pagos del petróleo que se le vende a Estados Unidos, Maduro ya comenzó a buscar mercados alternativos, como India, el segundo país más poblado del mundo con 1,400 millones de personas y un mercado de combustible en rápido crecimiento que tiene una gran sed de combustible conforme su población pasa de las bicicletas a las motos y los automóviles.
“Los indios aman el petróleo venezolano”, dijo Dallen. “Es muy pesado, como el alquitrán, pueden convertirlo en asfalto y usarlo para hacer carreteras”.
El actual director de PDVSA, el general Manuel Quevedo, es un oficial militar de carrera sin experiencia en la industria petrolera. “Quevedo ha hecho el trabajo de nuestras sanciones por sí solo debido a su incompetencia”, dijo Dallen. “Ellos mismos han matado la gallina de los huevos de oro”, agregó.
“They are desperate,” says Russ Dallen, an expert on Venezuelan oil and finances who heads the investment firm Caracas Capital in Miami. “Their cash flow from oil is severely disrupted by the loss of the U.S. market. This week, for example, there are no ships offloading any oil from Venezuela for the first time ever.”
Dallen points out that the U.S. and other countries are trying to block Venezuela from cashing in its gold. Britain is withholding more than $1 billion in Venezuelan gold stashed there.
But Dallen says Maduro will still be able to find countries like Russia, as well as global investment firms, to take the gold off his hands.
“It’s gold,” says Dallen. “There are always people willing to buy gold. That’s why pawn shops do so well.”
That is, Dallen adds, until the gold runs out. Then Maduro stands a bigger chance of being overthrown by opposition leader Juan Guaidó – whom the U.S. and some 50 other countries now recognize as Venezuela’s legitimate president.
Although China and Russia are still receiving Venezuelan oil, those sales generate no income, said Russ Dallen of investment bank Caracas Capital Markets, because they were prepaid with loans that Maduro long ago spent.
Current shipments to China, Dallen said, total 300,000 to 400,000 barrels a day, with 200,000 to 300,000 more going to Russia as its portion of a joint venture. An additional 400,000 barrels a day theoretically goes to India — where Russia owns one of two refineries that handle heavy Venezuelan crude — although Venezuela lacks the ultra-large tanker ships to make up for the long-distance transport costs.
Chevron, which also operates a joint venture with PDVSA, still imports Venezuelan crude under a provision in the sanctions that gave it a six-month grace period.
Russ Dallen, um dos sócios do banco de investimentos Caracas Capital Markets, disse ao canal americano CNBC que os chineses temiam que a oposição venezuelana não reconhecesse as dívidas contraídas pelo país durante os anos de Hugo Chávez – ou então que encontrariam “brechas legais” para não honrar com os pagamentos.
“Os chineses não sabem o que fazer. Os homens de Maduro não estão pagando… e a situação continua se deteriorando”, disse Dallen.
Uno de los socios del banco de inversión Caracas Capital Markets, Russ Dallen, le decía la semana pasada a la cadena estadounidense CNBC que a los chinos les preocupaba que la oposición venezolana no les reconozca las deudas contraídas durante los años del chavismo o que encuentre “vacíos legales” para no pagarlas.
“Los chinos no saben qué hacer. Los hombres de Maduro no les están pagando… y la situación continúa deteriorándose”, afirmó Dallen.
“Eles estão preocupados que a oposição chegue e não necessariamente queira honrar os contratos ou procure brechas”, disse Russ Dallen, especialista em títulos venezuelanos da Caracas Capital Markets, em nota recente a investidores.
Ironicamente, caso Moscou permita que a Venezuela dê um calote, a Rússia poderá fazer valer sua penhora sobre o bem mais valioso da Venezuela: a petrolífera americana Citgo. Em 2016, Maduro obteve um novo empréstimo ao dar à petrolífera russa Rosneft uma participação de 49,9% na Citgo como garantia. Além disso, os 50,1% restantes – detidos pela petrolífera estatal venezuelana PDVSA – também estão atrelados a uma emissão de títulos de propriedade russa.
“Não seria estranho os russos tentarem exercer o penhor, simplesmente porque seria muito perturbador e caótico para os Estados Unidos”, disse Dallen.
“Maduro can no longer call the shots,” Russ Dallen, managing partner of in the New York office of Caracas Capital Markets, an investment bank. “Now, you can support the Venezuelan resistance by buying your gas at Citgo.”
Credit fears still linger, though. Rosneft, Russia’s state-owned oil company, has a 49.9 percent stake in Citgo as collateral for a $1.5 billion loan to PDVSA. Russians could try to seize Citgo shares if they stop receiving payments, Dallen said, particularly with a new incentive to wreak havoc on the American and Venezuelan opposition plan.
PDVSA bondholders and Crystallex, a Canadian gold and mining company owed an arbitration award from Venezuela, also pose a threat to the company’s survival. If PDVSA fails to make payments on 2020 bonds, they, too. could move to seize Citgo assets.
At the moment, Maduro has favoured repaying Russia and China, which is unsurprising given that the two countries are helping to keep the lights on in his administration. According to Russ Dallen of Caracas Capital Markets, Russia’s state-owned oil producer Rosneft received an additional $800m from Venezuela in the fourth quarter, bringing total debt repayments to the company by the country to $2.3bn in 2018. Excluding interest, Venezuela still owes Rosneft another $2.3bn, per Dallen:
Russia and China will have a seat at the table for whatever restructuring talks eventually take place, says Dallen, and the current priority bestowed to them may continue long after Maduro steps down. Dallen reckons that Guaidó could dangle preferential treatment when it comes to repayment to encourage the two countries to pull their support from Maduro.
“They’re worried the opposition will come in and not necessarily want to honor their contracts — or find loopholes,” said Russ Dallen, managing partner of investment bank Caracas Capital Markets.
But Dallen acknowledged that Beijing’s loyalty may not last. “The Chinese don’t know what to do. They’re not getting paid by Maduro’s guys … and the situation keeps deteriorating.”
A desire to avoid antagonizing the United States during an already complex, high-stakes trade war may encourage China to consider a change of allegiance from Maduro to Guaido, according to Dallen.
“It would not be unusual for the Russians … to try and exercise the lien they have on the Citgo collateral, just because it would be very disruptive and chaotic to the U.S.,” said Dallen of Caracas Capital.
Where Venezuela goes from here?
If Guaido wrests control of the government, there won’t be widespread default, but nobody is going to get paid immediately.
The International Monetary Fund will likely take the lead in what would be one of the largest and most complicated sovereign debt restructurings ever. Venezuela will essentially have to be rebuilt completely.
The good news for Venezuela is that it sits on 300 billion barrels of oil, as well as underground reserves of gold, iron ore and other resources.
“What they have is a liquidity crisis, but not a solvency crisis. Everyone should be pretty sure they are going to get paid back,” said Dallen.
With Taysir Abu Saada, Diana West, Trevor Loudon and Russ Dallen
RUSS DALLEN, President & Editor in Chief at The Latin American Herald Tribune, Head of the international investment bank, Caracas Capital Markets, Served as President of Venezuela’s “The Daily Journal”:
How Maduro and Socialism destroyed Venezuela
The significance of major nations supporting opposition leader Guaido