Venezuela’s state-run oil company was slapped with sanctions for violating the Iran embargo

Venezuela’s state-run oil company, PDVSA, was slapped with sanctions for violating the Iran embargo.
BY JIM WYSS
[email protected]

BOGOTA -- Venezuela’s state-run oil company was slapped with sanctions on Tuesday for allegedly supporting Iran’s nuclear ambitions, in a move that appeared designed to protect U.S. consumers while throwing a wrench into the company’s global finances.

The U.S. Department of State’s measure comes as Venezuela increasingly embraces Iran – even as the international community has moved to isolate the Persian nation.

The U.S. government said Petroleos de Venezuela S.A., or PDVSA, ran afoul of the Iran Sanctions Act of 1996 when it shipped some $50 million worth of a fuel additive to Iran between December and March.

The penalty: PDVSA is prohibited from competing for U.S. government contracts, obtaining U.S. export licenses, and from getting financing from the Export-Import Bank of the United States, which provides credit to exporters.

But the sanctions do not apply to PDVSA’s subsidiaries and do not bar Venezuela from exporting crude to the United States. The oil giant sells fuel under the CITGO brand, and Venezuela is the United States’ fifth-largest oil exporter.

Those caveats should help stave off higher gas prices.

Even so, Tuesday’s sanctions could seriously stymie operations in one of Venezuela’s key industries, said Juan Fernández, who worked at PDVSA for 18 years and was the company’s general manager for financial planning and global business.

The sanctions mean PDVSA can no longer offer fuel to the U.S. Strategic Petroleum Reserve – a role it has played in the past. And its exclusion from the Export-Import Bank will boost financing costs, he said.

Just as important, investors may think twice before engaging in projects with PDVSA, Fernández said.

“Money is cowardly, and sanctions like these — which threaten money — will have their consequences,” he said.

PDVSA bonds plunged after the announcement, and yields hit their highest levels in three months, according to Bloomberg News Service.

Venezuelan Foreign Minister Nicolás Maduro said the country exports 1.2 million barrels a day to the United States, and that now it would have to study its options.

“There are several proposals that are being evaluated by President [Hugo] Chávez to respond to the United States’ imperialist pretentions,” he said.

Freddy Bernal, a close associate of Chávez and a member of the ruling PSUV party, said no one should dictate what Venezuela does with its oil wealth.

“Trying to involve Venezuela in a nuclear program is ridiculous,” he told the state-run Bolivarian News Agency. “The United States — once again — wants to be the world’s policeman as it steps on the sovereignty and autonomy of the people.”

Six other companies were also accused by the State Department of working with Iran’s petroleum sector. Although the companies were not directly accused of aiding Iran’s nuclear program, the goal of the sanctions was to prevent the nuclear program from developing, the State Department said.

“Iran uses revenues from its energy sector to fund its nuclear program, as well as to mask procurement of dual-use items,” U.S. Deputy Secretary of State James Steinberg said. “Today’s actions add further pressure on Iran to comply with its international obligations.”

Rep. Connie Mack, R-Fort Myers, the chairman of the House Western Hemisphere Subcommittee, said PDVSA is just one example of how Venezuelan President Hugo Chávez supports Iran.

“While the State Department’s actions today are welcome, the slow and inadequate response has been frustrating,” he said in a statement. “The U.S. needs to move quickly to cut off Chávez’s source of revenue, and bring an end to both his influence in Latin America and his dangerous relationship with the terrorist-supporting Iranian regime before it’s too late.”

On Monday, the United States sanctioned 16 companies and individuals for transferring or acquiring controlled technologies on behalf of North Korea, Syria or Iran. Among those sanctioned was CAVIM, the Venezuelan Military Industries Company. The government did not provide details but said CAVIM would face a two-year ban on U.S. government contracts and other U.S. assistance.

Since taking office in 1999, Chávez has embraced some of the United States’ staunchest foes as he has pursued “21st century socialism.”

In October, during his ninth visit to Teheran, Chávez vowed to boost economic ties with the nation and defend it against international sanctions. Iran has said it is seeking peaceful nuclear energy, but the United States, Israel and others accuse President Mahmoud Ahmadinejad with harboring military ambitions.

According to diplomatic cables publicized by WikiLeaks, U.S. authorities were concerned that Iran may be scouring Venezuela and Bolivia for uranium, but those claims were never verified.

Earlier this month, Germany’s Die Welt newspaper, and El Nuevo Herald, citing anonymous intelligence sources, said Iran may be helping Venezuela build bunkers and a missile base on the Paraguaná Peninsula, an oil-industry hub.

Venezuelan Foreign Minister Maduro has denied those claims.

This isn’t the first time Venezuelan companies have violated the Iran sanctions act.

According to the Congressional Research Service, CAVIM was hit with sanctions in 2008 for allegedly violating a ban on technology that could assist Iran in the development of weapons systems. That same year, the U.S. Treasury Department imposed sanctions on an Iranian-owned bank based in Caracas, the Banco Internacional de Desarollo (International Development Bank).

U.S. Rep. Ileana Ros-Lehtinen, R-Miami, chairman of the House Foreign Affairs Committee, suggested Tuesday’s move was just the beginning.

“Many of these laws have been in effect since 1996, yet only now is the U.S. beginning to get serious about using them to pressure Tehran to end its destructive activities,” she said in a statement. “I welcome these steps in the right direction, but finishing the job is what really matters.”

Read more: http://www.miamiherald.com/2011/05/24/v-fullstory/2233024/venezuela-pdvsa-hit-with-sanctions.html#ixzz1NTQ0PLin