U.S. sanctions Venezuelan oil giant for Iran trade

WASHINGTON/CARACAS Tue May 24, 2011 7:53pm EDT

PDVSA's El Palito refinery is seen in Puerto Cabello, 150 miles (241 km) west of Caracas, September 23, 2009. The banner reads: ''Venezuela now belongs to all''. REUTERS/Edwin Montilva

PDVSA's El Palito refinery is seen in Puerto Cabello, 150 miles (241 km) west of Caracas, September 23, 2009. The banner reads: ''Venezuela now belongs to all''.

Credit: Reuters/Edwin Montilva

WASHINGTON/CARACAS (Reuters) - The United States hit Venezuelan state oil company PDVSA with sanctions on Tuesday in a more aggressive bid to starve Iran of fuel, prompting fury and warnings from Venezuelan President Hugo Chavez's government.

The sanctions are largely symbolic, since they do not limit the company's sale of oil to the United States and other global markets, or the activities of its U.S.-based CITGO subsidiary.

Venezuela's response was inevitably noisy: Chavez's oil minister made a thinly-veiled warning against oil shipments, but numerous past threats have never become reality.

The measures appeared to be the least severe of a range of options available to Washington and bar PDVSA from access to U.S. government contracts and export financing.

They come after months of pressure from conservatives in Congress to take action against Chavez for his support of Iran.

"By imposing these sanctions we're sending a clear message to companies around the world: those who continue to irresponsibly support Iran's energy sector or help facilitate Iran's efforts to evade U.S. sanctions will face significant consequences," said Deputy Secretary of State James Steinberg.

By taking aim at PDVSA and six other oil and shipping companies, the U.S. hopes to squeeze Iran's supplies, he said.

Chavez, who has inherited from his friend Fidel Castro the mantle of Latin America's most strident U.S. critic, will seek to whip up public anger at the sanctions to fuel patriotic spirit as he prepares a re-election bid for next year.

"Sanctions against the Fatherland of Bolivia? Imposed by the Gringo imperialist? Well, welcome Mr. Obama, don't forget we are the children of Bolivar!" Chavez said via his Twitter account.

Bolivar is an independence hero for much of South America.

The State Department said PDVSA delivered at least two cargoes of reformate, a gasoline blending component, to Iran between December 2010 and March 2011 worth about $50 million.

In a news conference broadcast on all Venezuelan TV stations, Oil Minister Rafael Ramirez said PDVSA guaranteed oil shipments to its U.S. subsidiaries, but was studying the impact of the sanctions on other U.S. clients.

A source at PDVSA sought to shrug off the importance of the measures, while during a parliamentary debate lawmakers in Caracas shouted their outrage at "imperial" meddling.

TROUBLED WATERS

Ties with Venezuela have been troubled since Chavez took office in 1999. The relationship has soured despite intertwined interests and the two countries' diplomatic missions are without ambassadors at the moment.

Venezuela's oil-reliant economy ships roughly 45 percent of its crude to the United States, making up about 10 percent of U.S. imports. U.S. oil majors ExxonMobil and ConocoPhillips fled the country in 2007 after Chavez nationalized their flagship projects as part of his push for a socialist state.

Venezuelan global bonds fell steeply on the news, then recovered some of the losses as traders interpreted the measures as symbolic.

The move signals concern about Iran's ability to get around sanctions aimed at stifling a suspected nuclear weapons program.

The United Nations nuclear watchdog said in a confidential report obtained by Reuters it has more information on possible military aspects to Iran's nuclear program and that the nation's uranium stockpiles had grown despite sanctions.

A senior U.S. official, speaking on background, conceded that in most cases the new U.S. sanctions would have "minimal" immediate impact on the targeted firms, which have little or no U.S. exposure. But he said they would be a powerful deterrent.

They are also a significant warning to Chavez, a frequent critic of Washington's foreign policies in the Western Hemisphere and globally. The Venezuelan leader has frequently threatened to cut off oil supplies to the United States.

The other companies covered by the new U.S. sanctions are PCCI, the Royal Oyster Group and Speedy Ship of the United Arab Emirates, Tanker Pacific of Singapore, Ofer Brothers Group of Israel and Associated Shipbroking of Monaco.

Separately, the State Department announced sanctions on 16 companies and individuals -- including three in China and a Venezuelan arms company -- for banned nuclear and weapons proliferation activities, chiefly with Iran.

'UNWILLINGNESS TO BREAK ITS TIES'

Senator Richard Lugar, the top Republican on the Senate Foreign Relations Committee, said the sanctions on PDVSA were a result of Venezuela's "unwillingness to break its ties with terrorist organizations and countries that support them."

The U.S. move could put Chavez in a bind despite the temptation to impose retaliatory measures, according to Simon Wardell, director of oil markets at IHS Global Insight.

"Ultimately I don't think Chavez will be able to do much about the sanctions. He might talk a lot and make a lot of noise but will continue to sell crude to the United States."

Steinberg said the main objective of the sanctions was to encourage Tehran to engage in real negotiations with the major powers over its nuclear program, which western nations and Israel fear is aimed at building weapons. Iran denies this.

Venezuela, once the largest foreign supplier of crude oil to the United States, has seen its U.S.-bound shipments shrink in recent years as its production falls. The South American country, home to the largest known oil reserves outside the Middle East, now ships more of its oil to other destinations including China.

(Additional reporting by Susan Cornwell, Arshad Mohammed, Matt Robinson, Joshua Schneyer and David Sheppard and Frank Jack Daniel and Eyanir Chinea in Caracas; Editing by Warren Strobel and Paul Simao)

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Comments (9)
Logical123 wrote:
Deputy Secretary of State James Steinberg seems to be either delusional or a complete liar. The claims that “sanctions were aimed at squeezing Iran’s gasoline supplies” and “the main objective was to encourage Tehran to engage in real negotiations with the major powers over its nuclear program” are utterly preposterous. Yet, it should be noted that the sanctions “would not affect the company’s sale of oil to the United States.” Why doesn’t the US simply stop buying oil from Venezuela.

Incidentally, Iran is already exporting refined gasoline products and does not need to import any from Venezuela or anywhere else. Apparently, the US State Department is the last to find out what is going on in the world.

May 24, 2011 11:35am EDT  --  Report as abuse
fred5407 wrote:
The state department has visions of grandeur. I wonder if James Stienberg had to do something to justify his position. It would be nice to cut the State Department budget by at least 50% and not run up the debt any further.

May 24, 2011 2:17pm EDT  --  Report as abuse
ATIGH wrote:
US officials seems to be living in the past. Iran is now self sufficient in gasoline production. Iran is becoming self sufficient in many areas. It seems the sanctions have benfitted the Iranian economy. The Tehran Stock Exchange hit an all time high in the current month of May.

May 24, 2011 6:31pm EDT  --  Report as abuse
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