Venezuela rushes to mend Iran relationship as US sanctions loom

Reuters:  Iran and Venezuela are trying to patch together an oil alliance that began to fray last year, according to six people familiar with the matter, after the South American country fell behind on oil swaps that had boosted crude exports and helped stem domestic fuel shortages.

The expected April return of U.S. sanctions on Venezuela's oil industry will make the Iran alliance critical to keeping its lagging energy sector afloat. Washington last year temporarily relaxed sanctions on Venezuela's promise to allow a competitive presidential election, something that has not happened.

The situation is growing dire. A review of shipping data and documents from Venezuela's oil company PDVSA show that Venezuela fell behind in payments to Iran, a shortfall that worsened when the U.S. began to issue licenses in late 2022. Those authorizations prompted the state firm to reassign cargoes originally planned for Iran to cash-paying customers.

To salvage the partnership, Venezuela is rushing to fulfill terms of a three-year-old alliance that has involved hundreds of millions of dollars in oil swaps and contracts. The nation is trying to settle pending debt by accelerating deliveries of heavy crude and fuel cargoes to Iran.

Venezuela also is striving to renegotiate dozens of unfinished projects from agriculture to car manufacturing before Iranian President Ebrahim Raisi visits Caracas in the coming months, the people said.

Two prior Iranian delegations that traveled to Venezuela since mid-2023 left without significant agreements announced, on the promise that Venezuela would catch up on payments.

"Despite encountering challenges, particularly in terms of payments by Venezuela, both nations remain resolute in their commitment to fortify their relationship and enhance their energy partnership in the face of American pressure,” said a senior Iranian official.

Venezuela's oil minister Pedro Tellechea in February acknowledged the tattered relationship, saying PDVSA would conduct its own maintenance for refineries and petrochemical plants this year, something that was a key part of the 20-year deal with Iran.

"We are completing the maintenance programs with our workers," he said at a briefing at a fuel distribution plant in central Carabobo state.

The home-grown work follows the completion of a 110-million-euro overhaul by Iranian technicians at Venezuela's smallest refinery that was to be replicated last year at the country's largest refining complex, Paraguana. That would have brought in much needed new processing equipment from Iran and China to replace aged, U.S.-made gear.

Venezuela's and Iran's Foreign Affairs ministries and PDVSA did not reply to requests for details on the status of the relationship between the countries.