The following is our translation of an article from rueconomics.ru with commentary by Vince Dhimos.
The discussion below arose in the context of the Saint Petersburg International Economic Forum, which is a huge assembly of investors from a large number of countries. The 2018 SPIEF had over 7000 attendees from 143 countries. With the American stock market in an obvious fragile bubble and with a loss of $5 trillion thanks to Trump’s trade wars, it is natural that some folks would like to escape to a more tranquil and stable investing environment in the country that, as I have shown here, has the healthiest and most stable economy in the world. But don’t be surprised that SPIEF gets short shrift in the West. For instance, if you look it up on Google, you find on the first page of results, ten mentions, only 2 of which are to articles published in the Western world. We often hear Russia accused of being isolated, but no country anywhere does a better job of isolating itself than the USA.
To be sure, this year's SPIEF is being boycotted by some US investors in protest of the arrest of a US investor on fraud charges. Which may be trumped up. Or not. But then, have we forgotten about poor Maria Butina, who has been jailed for joining and promoting the NRA? Oh, wait. Maria is Russian. So that would be inflitrating, not joining. When ordinary people join the NRA, they are joining. But when Russians do that, they are infiltrating. We can come up with a whole host of sinister sounding words for Russians, can't we? After all, Russians are born of bad seed. All of them. Yeah. They must all be jailed for being from a country that is not a country, but a gas station. After all, John McCain was a war hero. Failure to hate Russians sufficiently is disrespectful of his memory.
It is natural to wonder how the Venezuelan people are doing these days, with all the sanctions intended to hurt them by starvation and denial of medical care. Of course, Western msm rarely talk about the pain inflicted by their governments on the people they falsely portray as enemies. Due to the constant propaganda, we need to be reminded that these are people just like us and that the pain inflicted by the US is real pain and not an abstraction as it relates to their everyday lives. The Washington Establishment would like to have us think they deserve the pain for electing officials who are not dyed-in-the-wool American style predatory capitalists, or for not allowing the US vulture and its puppet Juan Guaidó to swoop in and grab their resources. But their political systems are like ours in that the little guy has no control whatsoever over the list of candidates available to them and they, like Americans, are generally confronted with a lot of bad choices come election time. Thus they don’t deserve punishment for choosing the lesser of an array of evils.
That’s one of the many reasons why sanctions are immoral, as I reminded you here. Another is that the US Establishment simply has no moral authority to demand that other nations comply with its wishes.
The author of our translated article is no doubt writing for the political base back home, which is naturally concerned that their tax money may be wasted on charity, an accusation that surfaces at times with relation to Russia’s relationship with Venezuela. So the author’s interlocutor reminds us that there is money to be made by Russia from Venezuelan oil because it is discounted due to sanctions and to the associated risks to the investor.
Ideally the Russians will be able to help Venezuela earn income from its oil while also making a profit for its efforts. That’s the way it always was, back when free trade was legal. Oh, that’s right. It’s still legal, just not allowed.
Finally, here we have just another example of the impotence of US sanctions. As the saying goes: the dog barks and the caravan moves on.
Russia will play the role of mediator in Venezuela’s oil exports
June 06, 2019
Cooperation between Russia and Venezuela in the oil sector, from an economic standpoint, is associated with a certain risk, says Vyacheslav Kulagin, director of the Center for the Study of World Energy Markets at the Institute for Energy Research, Russian Academy of Sciences.
Venezuelan Oil Minister Manuel Quevedo at the St. Petersburg International Economic Forum (SPIEF) said that Caracas is going to replace the American oil market with the Russian one, and noted that this is the main line of Venezuelan policy.
At the same time, Russia is one of the largest oil exporters in the world and does not need supplies of Venezuelan energy resources, if only because of the territorial remoteness of this country. Such deliveries, of course, are technically possible, but they will cost dearly.
“As for Russia, we have certain economic interests in Venezuela. So, only on this basis is our country interested in stability in this Latin American state. If we take the issue of direct deliveries, then Russia is naturally not the country that needs to import energy resources, not to mention deliveries from Venezuela,” Kulagin sums up.
Russia has enough of its raw materials, but the oil market leaves us with options for cooperation. After all, if one of the suppliers of oil is experiencing difficulties with sales, then, as the expert observes, he begins to sell his goods at a discount, and this really arouses interest.
“In this situation, those companies that play on the difference between discounts and market prices can make money on such a deal. This gives some potential for oil deals with Venezuela, but this is not a matter of theory, but of practice,” states Kulagin.
Moreover, this is not about Russia, as a state, but about individual Russian companies - whether they want to participate in Venezuelan projects, or whether they have no interest in such undertakings. And so, oil traders may well earn on such oil operations.
“On the other hand, all of these preferences, which Venezuela can give to the Russian entities, are an opportunity to make money but carry specific risks. It is necessary to soberly weigh the situation and understand who is ready to go and for what. And here we must not forget that a number of Russian companies have long-term agreements with Venezuela,” concludes Kulagin.
Accordingly, the return of Venezuelan debts, and they are quite large - for example, to Rosneft itself, can take place in the form of supplies of Venezuelan oil, which will immediately be resold on the world market, and not go to our country.
“By the way, such deliveries do not fall under the sanctions impact from the United States and its allies, so there is a prospect here, even though this does not mean physical deliveries of oil from Venezuela to the Russian market,” Kulagin summarizes.
Russian entities may receive oil payments from Venezuela, which will then be resold by them on the world market, but this is a deeper issue, and it cannot be said that such operations are simple - there are a number of nuances.
Venezuela may change the direction of its exports
Notably, Quevedo also stated that Venezuela wants to diversify the direction of its oil exports and place bets on such states as Russia, India and China. This is not surprising, since these countries will not comply with US sanctions against Venezuela, and India and China are the largest importers of oil in the world, which need more and more raw materials every year.
Only India and China are very far from Venezuela, and the nearest sea route to them passes through the Panama Canal, the "neutrality" of which is vigilantly guarded by the United States. Accordingly, there is a question whether there will be problems with such exports.
“In fact, oil can be delivered by sea anywhere that someone is ready to receive it, and there are no transport restrictions per se. Oil is transported in liquid form and the cost of its transportation in the final price is rather small. So, all the leading global companies freely trade in crude on the global oil market,” states Kulagin.
According to Vyacheslav Alexandrovich, oil transfer occurs between regions without any special problems, although there is a US factor here, but they are unlikely to deal with the detention of such goods from Venezuela, because the interests of third countries are also involved.
“The main issue is the quality of the oil, because refineries in different regions of the world are tuned to certain brands and grades, and if the parameters of the crude deviates, then it requires the application of technical operations,” concludes Kulagin.
For example, by mixing Venezuelan raw materials with fuel from the United States, American importers managed to achieve a product that is optimally suited for their national refineries. This is logical, because the Venezuelan oil is very dense.
“Accordingly, in the current situation, Venezuelans will have to trade according to special schemes. These schemes may not imply a situation where American sanctions could be imposed on companies that participate in them,” Kulagin said.
However, in any case, despite all the enthusiasm of the Venezuelans, selling oil is now much more difficult for them.
Author: Dmitry Sikorsky