Fallout from Venezuela’s admission to losing at least $3bn in oil funds to corruption continues, along with uncertainty over the implications for the Opec nation’s energy sector.
By Argus Media – Carlos Camacho and Carla Bass
Mar 24, 2023
Venezuela’s oil minister Tareck El Aissami resigned this week amid a corruption investigation that had led to the arrest of at least 19 people so far and turnover among other officials, many of them close to the former minister. State-owned PdV president Pedro Tellechea — a military officer who immediately froze contracts upon taking the post in January — is now also oil minister.
Opaque glass houses
The admission to the scale of corruption comes in the wake of the US easing sanctions late last year that have allowed PdV and its partner Chevron to increase crude production and restart exports. El Aissami has been the target of US sanctions and has been indicted in the US for alleged drug trafficking.
“At least the military guy does not live in a glass house,” said one oil industry observer in Maracaibo, Venezuela, who asked not to be named, referring to the sanctions. “Foreign oil companies will feel a lot more at ease sitting down with him.”
Companies will not need to ask the US Office of Foreign Asset Controls for permission to talk to the minister, said managing director of consultancy Gas Energy Latin América, Antero Alvarado. “That’s something.”
At the same time, El Aissami was leading the company during the process of easing sanctions, unlike Tellechea.
“The way this is developing in terms of showing the sheer scale of the corruption creates problems for any advancements in the negotiations in general,” said Latin American political scientist Francisco Monaldi of Rice University in Houston, Texas. “I don’t think concessions to the Americans are the main driver of this. It might be a side effect.”
Having the president of PdV also serve as oil minister — as was the case under now exiled Rafael Ramirez from 2004-2014 — has worked poorly in the past, university professor and author Rafael Quiroz in Caracas noted.
“The designer of Venezuela’s oil policy and its executioner, that’s two separate things,” Quiroz said. “When those two positions have been unified, that has hurt the oil industry greatly.”
The shape of ships
Tellechea is still also part of the same administration that has been assessed as one of the most corrupt in the world under multiple transparency rankings. That the government would suddenly admit to the scale of the corruption now “is puzzling,” Monaldi said.
One lawmaker aligned with the party of Venezuelan president Nicolás Maduro claimed losses could be as high as $23bn — roughly Venezuela’s estimated annual oil income.
“It may be that the scale of corruption at PdV exceeded Chavista norms, upsetting the balance of power,” Nicholas Watson of Teneo advisory firm said in a research note.
There are three main pressure points that sources say could have lead to the chain-reaction of events this year: Venezuela’s weakening economy, since the value of its currency tumbled late last year; presidential elections planned for 2024; and power struggles within the regime that sought to take advantage of the easing of sanctions.
Pointing out the losses could provide the government with a scapegoat for the economic pressures ahead of the 2024 election, Monaldi noted. Tellechea’s appointment underscores the importance of the military to the Maduro administration, and siblings Jorge and Delcy Rodríguez — national assembly president and vice-president, respectively — had vied for power with El Aissami. But motivations are still unclear.
The former oil minister’s fate also remains uncertain. He posted his own resignation on Twitter, “something Maduro usually handles himself,” Monaldi noted, and remains free.
Even PdV’s plan to bring some order to its shipping services — as the lost funds appeared to be mostly related to unpaid crude already shipped by PdV — has been unusual. Its shipping arm, PdV Marina SA, issued a public appeal over several channels this week for transporters to re-register with the government. Companies “lending shipping agency services, with proven capacities in operations” were invited to send their proof of tax registration information, enrollment in Venezuela’s national institute over bodies of water (INEA) and other certifications to a PdV email.
The call seems to be an attempt to smoke out any shipping agencies that might rather decide to keep a low profile in the wake of the corruption accusations.
“They don’t want any more pirates,” another observer who asked not to be named said. “They are fishing.”
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