WASHINGTON (Reuters) – The United States on Tuesday tightened financial restrictions on Venezuela, blacklisting a subsidiary of Russian state oil major Rosneft that President Donald Trump’s administration has said provides a lifeline to President Nicolas Maduro’s government.
The sanctions imposed by the U.S. Treasury Department increase pressure on Russia, which the United States sees as the main backer of Maduro’s government. The Trump administration has accused the subsidiary, Rosneft Trading SA, of propping up the Venezuelan oil sector and actively evading American sanctions.
The United States also issued a general license allowing companies 90 days to wind down their transactions with the company.
The action freezes any U.S.-held assets of the Geneva-based trading unit of the Russian oil giant and its chairman of the board of directors and president, Didier Casimiro.
“I think this is a very significant step and I think you will see companies all over the world in the oil sector now move away from dealing with Rosneft Trading,” Elliott Abrams, the U.S. special representative for Venezuela, told reporters.
Abrams said Rosneft Trading now handles about 70 percent of Venezuelan oil.
The United States last year recognized Venezuelan opposition leader Juan Guaido as the OPEC nation’s legitimate interim president and began ratcheting up sanctions and diplomatic pressure on Maduro’s government.
A year later, Maduro remains in power, backed by the military as well as Russia, China and Cuba. His staying power has been a source of frustration for Trump, U.S. officials have said privately.
Rosneft declined to comment. It said in September that any attempts to curb its income in Venezuela would be illegal and that the United States was using the threat of sanctions as a form of unfair competition. Russia and China have called U.S. sanctions against Venezuela unilateral and illegal.
The shares of Rosneft fell 2.7 percent, underperforming oil prices and the broader Russian index. The news about the sanctions came soon before the close of the Russian market.
The decision to impose sanctions on Rosneft Trading was cleared by Trump, a senior administration official said, and Secretary of State Mike Pompeo on Saturday discussed the blacklisting with his Russian counterpart Sergei Lavrov on the sidelines of the Munich security conference in Germany.
“Obviously we have deep differences over what is happening in Venezuela and what is the way out for Venezuela,” Abrams said, when asked about Pompeo’s discussion with Lavrov.
It was unclear whether Tuesday’s move will reduce export revenue flowing to Maduro’s government, which continues to enjoy Moscow’s backing in a stand-off reminiscent of the Cold War.
Moscow has acted as a lender of last resort for Venezuela, with the government and Rosneft providing at least $17 billion in loans and credit lines since 2006, and has also provided diplomatic support.
Abrams said that the United States will have conversations with China and India, the leading buyers of Venezuelan oil, and with Spanish officials over Spanish company Repsol’s activities regarding Venezuela.
The United States has also reiterated its call to companies worldwide to cease business with the Maduro government and added that Tuesday’s step was part of a wider campaign.
Rosneft is the world’s largest listed oil company by output. Through units including Rosneft Trading and TNK Trading it took over a third of Venezuela’s oil exports last year, according to PDVSA’s documents and Refinitiv Eikon vessel tracking data, for reselling to final customers, mainly in Asia. That way it became the largest intermediary of Venezuelan oil amid U.S. sanctions.
U.S. officials have been mindful of the need for caution in targeting a company as large and far-reaching as Rosneft because of the risk of causing unintended damage to American and allies’ interests.
The U.S. Treasury Department eased sanctions on Russian aluminum giant Rusal and one unit of Chinese shipping company COSCO after they sparked mayhem in markets and supply chains.
The United States has implemented a broad sanctions program against Maduro’s government and has urged the armed forces to turn against him. Maduro has held on to power despite the country’s economic crisis in large part because of support from the military. He accuses the United States of preparing an invasion.
Venezuela’s military on Saturday held exercises that deployed civilian militia and armored vehicles in the capital Caracas and around the country, an effort by Maduro to show strength before the U.S. move to escalate sanctions.
The U.S. action was announced just weeks after Guaido visited Washington and Trump hailed him as a “very brave man who carries with him the hopes, dreams and aspirations of all Venezuelans.”
Maduro has overseen an economic collapse in his once-prosperous nation and has been accused of corruption and human rights violations. The socialist president calls Guaido a U.S. puppet seeking to oust him in a coup.
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