Venezuela And China Amend Oil-For-Loans Agreement

CARACAS (Reuters) – Venezuela and China have amended an oil-for-credit agreement to allow the OPEC nation to pay faster for oil deliveries without significantly changing the terms of the bilateral agreement. The amendment to the agreement published in the Venezuelan Official Journal also removes a three-year payment period for one of the three tranches of credit. The other two tranches remain for three years. Instead of imposing explicit secondary sanctions on Venezuelan crude oil flows, the United States has imposed restrictions on dollar transactions with PDVSA by maintaining oil credit agreements between Venezuela and China and about $7 billion in prepaid crude oil agreements between PDVSA and Rosneft outside the scope of U.S. sanctions. China has agreed to relax some of the conditions for Venezuela for oil-for-credit agreements of more than $50 billion, amid a drop in oil prices that would force Caracas to boost exports to keep pace with its payments. Further changes to the oil-to-credit agreement removed the minimum requirement for oil exports and also removed a three-year repayment period, China`s Ministry of Commerce (Mofcom) said in a brief statement on its website. Venezuela is sending 230,000 barrels of oil (b/d) per day to China to repay parts A and B of the loan and an additional 100,000 b/d to pay part C of the agreement, Mofcom said. Venezuela`s state-owned oil group PdV said in its latest annual report that it sent some 550,000 b/d of oil to China last year to repay its loans, up from 480,000 b/d in 2011. PdV sells oil and products to China at market prices to repay its loans, so the recent collapse in crude oil prices would have required a drastic increase in exports to China in order to keep its payments. As Mofcom stated in its press release, Venezuela is unable to increase production in the short term to follow the initial terms of the agreement. The setback will be a further frustration for China in its relations with Venezuela.

“This (agreement) will be in effect until at least December, and they will then re-evaluate it,” one of the sources said. The United States has focused on dollar trade restrictions, not secondary sanctions, which have repaid About $9.6 billion to China, the results show.