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3 months ago
Russia resumes oil shipments to Cuba, helps fill Venezuelan breach
May 3, 2017 / 6:37 PM / 3 months ago

Russia resumes oil shipments to Cuba, helps fill Venezuelan breach

3 Min Read

HAVANA, May 3 (Reuters) - Russia has begun shipping large quantities of oil to Cuba for the first time this century, sources said, as supplies to the island from crisis-wracked Venezuela have dwindled.

A Russian oil tanker with 249,000 barrels of refined products is due to arrive in Cuba on May 10, according to Reuters shipping sources and others, bringing back memories of when the Soviet Union supplied all of the Communist-run Caribbean island’s energy needs.

More tankers apparently will follow.

Rosneft, Russia’s state oil company, announced on Wednesday it had signed an agreement with Cuba’s state-run Cubametals to supply 250,000 tonnes of oil and diesel fuel, without providing further details.

The news is sure to raise eyebrows in Washington as its tense relations with Moscow continue, despite President Donald Trump’s campaign pledge to improve them.

The Russian company has already become a concern for the United States. Venezuelan state oil company PDVSA last year used 49.9 percent of its shares in its U.S. subsidiary, Citgo, as collateral for loan financing by Rosneft.

According to Jorge Pinon, an oil expert at the University of Texas at Austin, the Cuba deal is equivalent to around 1,865,000 barrels and valued at $105 million at current prices.

In comparison, Russia reported it shipped oil products to Cuba from 2010 through 2015 valued at $11.3 million.

Cuba consumes 22,000 barrel per day of diesel and 140,000 barrels per day of oil products.

"It is very clear that Cuba is diversifying its long-term supply contracts in the event that its October 2000 subsidized oil agreement with Venezuela is terminated," Pinon said.

Cash-strapped Cuba struggled with long blackouts and fuel shortages after the fall the Soviet Union, but the rise of the late Venezuela leftist President Hugo Chavez quickly solved the crisis at the turn of the century.

Since then Cuba has relied on Venezuela, an OPEC member, for about 70 percent of its fuel needs, including oil for refining and re-exports.

But socialist Venezuela’s subsidized shipments have fallen by as much as 40 percent since 2014. Potential new suppliers usually want cash because of Cuba's poor credit rating.

Electricity and fuel rationing to state companies began a year ago, and more recently there have been gasoline shortages.

A change of government in Venezuela, which has been experiencing daily protests, would directly threaten the agreement. (Additional reporting by Marianna Parraga; Editing by Leslie Adler)

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