Corruption in Venezuela's oil company
A new anti-corruption campaign has unveiled billions are missing in state-run PDVSA
Caracas, 25 March 2023.
Staff close to Venezuelan oil minister Tareck El Aissami have been arrested under corruption charges. El Aissami himself resigned, while making it clear that he remains loyal to his party. This is not the first time that corruption scandals hit PDVSA, it has been a recurring theme for Venezuela’s oil company. According to the government, there are already around 60 former executives and senior staff in prison. On a televised appearance, President Nicolas Maduro said this is part of a large anti-corruption campaign taking on all levels of government.
The corruption scandal has come alongside a shocking revelation: after US sanctions hit the country, many of the buyers just are not paying their dues. An array of intermediaries has been forced into PDVSA, some of whom have also been sanctioned or can just delay payment without consequences. These include Russia’s Rosneft and Iranian firms. Documents obtained by Reuters estimated that the oil company is owed $21bn, of which $3.6bn may never be recovered.
At the start of the year, a cabinet reshuffle included replacing PDVSA’s top executive with Pedro Tellechea. He had made it his top priority to stop supplying buyers that do not pay. As Chevron was allowed to resume shipping oil to the US, the Biden administration argued that it would only take oil for debt. However, last week the first payment in Bolivars arrived in Venezuelan accounts – this currency has been stable once more since last year.
The oil industry has been key for Venezuela for the last century. Since nationalisation in the 1970s, it has been the main source of state revenues. In 2017, as US financial sanctions were imposed, fossil fuels accounted for 97% of export revenues. In 2019, sanctions targeted specifically this sector and PDVSA, wreaking havoc on an already ailing economy. Oil’s share of exports has fallen, but it still takes up the majority.
Venezuela has benefitted extensively from trade flows with Turkey and the UAE. Not surprisingly, the two countries are also being singled out by the US Treasury for aiding sanctions evasion on Russia. Last year, President Maduro carried out a tour visiting friendly governments in Algeria, Turkey, Kuwait, the UAE and Qatar.
Tareck El Aissami, of Lebanese and Syrian parents, has been instrumental in building trade ties with Middle Eastern countries, especially since US sanctions put Venezuela out of conventional trade and financial systems. Given that much of the trade is intended to circumvent sanctions, it is very hard to tell anything, from what is exported to how much revenue is being brought back.
Read more on Venezuela’s economics in our report.