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Rosneft Claims Venezuela Pays Its Debts

Rosneft, a Russian state-controlled oil company, says that Venezuela is repaying its debt on schedule. Rosneft is a major investor in the Venezuelan energy sector and the state-owned oil company, PDVSA, and the Russian government has been integral in propping up the crumbling Venezuelan economy.

According to the Financial Times, Rosneft officials believe that Venezuela will repay its loans.

“We see no problems in getting a refund of previously made prepayments from Venezuela,” said Didier Casimiro, vice-president for refining, petrochemical, commerce and logistics.

Rosneft has loaned $6.5 billion to Venezuela of which $3.26 billion has been repaid – $2.35 billion in principle and $0.89 billion in interest.

Russia and state-controlled businesses like Rosneft are major creditors to the struggling South American nation. Last November Russia and Venezuela came to an agreement to restructure $3.15 billion of Venezuela’s debt. During that same month, Venezuela missed a debt payment and defaulted on its obligations to bond holders.

Since then the economic conditions in Venezuela have worsened.

An economy in crisis

Oil production has steadily fallen in recent years undermining Caracas’ ability to finance the various social programs initiated by the socialist governments of Hugo Chavez and Nicolas Maduro.

According to the Organization of Petroleum Exporting Countries’ monthly market report, crude production in February was between 1.548 and 1.586 million barrels per day. The average production rate was between 2.154 and 2.373 million barrels per day in 2016.

Production of crude oil has fallen steadily in recent years as the economic and political crisis in Venezuela has deepened. / Data from OPEC Monthly Oil Market Report / Graph by Nathan Davis
Production of crude oil has fallen steadily in recent years as the economic and political crisis in Venezuela has deepened. / Data from OPEC Monthly Oil Market Report / Graph by Nathan Davis

Some see the possibility for increased investment and production in the energy sector if a more stable and creditworthy government comes to power in Caracas. However, those prospects seem dim. Nicolas Maduro prepares to solidify his grip on power with the upcoming presidential elections.

The International Monetary Fund projects that the real gross domestic product of Venezuela will contract by 6 percent in 2018. Hyperinflation is expected to continue unabated with consumer prices rising more than 2,300 percent this year.

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