• By The Financial District

Despite U.S. Sanctions, Iran, Venezuela Cut Oil Export Deal

Venezuela has agreed to a key contract to swap its heavy oil for Iranian condensate that it can use to improve the quality of its tar-like crude, with the first cargoes due this week, five people close to the deal said, Deisy Buitrago, Marianna Parragam, and Matt Spetalnick reported for Reuters.

Photo Insert: El Tablazo is one of the most prominent oil refineries in the Maracaibo lake area of Venezuela.

As the South American country seeks to boost its flagging oil exports in the face of US sanctions, according to the sources, the deal between state-run firms Petroleos de Venezuela (PDVSA) and National Iranian Oil Co. (NIOC) deepens the cooperation between two of Washington's foes.

Trump's tightening of sanctions contributed last year to a 38% fall in Venezuela's oil exports - the backbone of its economy - to their lowest level in 77 years and curtailed sources of fuel imports, worsening gasoline shortages in the nation of some 30 million people.

One of the people said the swap agreement is planned to last for six months in its first phase but could be extended. Reuters could not immediately determine other details of the impact. The oil ministries of Venezuela and Iran, and state-run PDVSA and NIOC did not reply to requests for comment.

The deal could be a breach of US sanctions on both nations, according to a Treasury Department email to Reuters which cited US government orders that establish the punitive measures.

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US sanctions programs not only forbid Americans from doing business with the oil sectors of Iran and Venezuela but also threaten to impose "secondary sanctions" against any non-US person or entity that carries out transactions with either countries' oil companies.

Secondary sanctions can carry a range of penalties against those targeted, including cutting off access to the US financial system, fines, or the freezing of US assets. Any "transaction with NIOC by non-US persons is generally subject to secondary sanctions," the Treasury Department said in response to a question about the deal.

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It also said it "retains authority to impose sanctions on any person that is determined to operate in the oil sector of the Venezuelan economy," but did not specifically address whether the current deal is a sanctions breach.


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