As numerous European clients of Venezuela’s state-owned PDVSA petroleum company freeze crude purchases in the face of mounting international sanctions, analysts in Moscow say all of Venezuela’s Russian customers with the exception of Rosneft had begun suspending or liquidating contracts in mid-to-late 2018.

Caracas-based “Diario2001Online” news outlet reported last week that PDVSA had announced that one of its largest Russia contractors, Moscow-headquartered Lukoil, had suddenly frozen its contracts in Venezuela for fear of being subjected to U.S. financial system restrictions resulting from the rapidly unfolding political turmoil.

Moscow-based energy economist Mikhail Subbotin told VOA that in June a PDVSA official had notified eight of its international clients, including Lukoil, that it would be unable to meet its production commitments.

Lukoil forewarned

PDVSA had forewarned Lukoil in particular, Subbotin said, that its diluted crude oil deliveries would fall short by more than 100,000 barrels, suggesting Lukoil officials may have been mulling a termination of their Venezuela contracts as early as summer 2018.

Independent Russian defense analyst Pavel Felgenhauer reiterated that point, explaining that, with the exception of Russia’s state-run Rosneft, an exodus of private Russian firms was underway before 2019.

“It wasn’t only Lukoil, but other [Russian] companies as well,” he told VOA, adding that Lukoil in particular had suspended or sold its contracts to Rosneft following last June’s especially dim PDVSA production forecast.

“As far as I know, all the companies left,” Felgenhauer said. “It happened quite some time ago, and I have to look for it online to figure out a precise date but, as I remember, it happened earlier. It is solely Rosneft that remains there. There are no more fools.”

Last week’s reports of a sudden Lukoil suspension of contracts relied almost exclusively on a Jan. 29 Tweet by Wall Street Journal correspondent Anatoly Kurmanaev, who said an industry supply official had confirmed Lukoil’s decision, which “threatens to leave [PDVSA] without gasoline and diluent (diluting agent) to process its crude.”

Kurmanaev, who has since joined The New York Times, also tweeted: 

Lukoil officials have not responded to multiple inquiries about the timing of contract suspensions.

Oil exports crucial

PDVSA brings in almost all of Venezuela’s income and is run by the military. A December investigation by Reuters called the company poorly run and unusually vulnerable to collapse if faced with U.S. sanctions.

Venezuela depends almost entirely on oil exports for hard currency, so the new U.S. sanctions against Venezuela’s state-run oil company mean that the country will be able to purchase even fewer imports, including food.

Last month, the leader of Venezuela’s National Assembly, Juan Guaido, declared himself interim president in a direct challenge to the power of socialist leader Nicolas Maduro, who had been sworn in to a second term in office only two weeks before.

U.S. President Donald Trump officially recognized Guaido as the legitimate interim president of Venezuela just minutes after Guaido said he was taking over as acting president.

Russia, China prop up Venezuela

Trump’s comments infuriated Russia, which views Maduro as Venezuela’s legitimate leader, and called the street anti-Maduro protests in Venezuela the result of a Western plot.

Russia and China are Venezuela’s biggest creditors, providing loans to help Maduro’s government prop up the country’s imploding economy.

Kremlin officials, Subbotin said, would likely be dismayed by a Lukoil pullout from the region, as such a move would only exacerbate circumstances on the ground in Caracas and undermine their efforts to resolve an entrenched political crisis unfolding in a key client state.

But Andrey Kortunov, director general of the Russian International Affairs Council, said many of Russia’s private investors have been shaky on Venezuela for some time.

“To start with, it’s quite far away, so it’s quite complicated for small- and medium-sized businesses to conduct affairs there,” he told VOA, adding that some Russian investors had anticipated that Venezuela’s sustained economic downturn could culminate in political repercussions.

“Private businesses just afraid to get involved there,” he said. “Many [Russians] just don’t believe in the stability of this regime.”