Venezuela and Iran signed a crude oil export deal as the two countries faced US sanctions, Reuters reported, citing people close to the matter. Under the deal, Venezuela will ship its heavy oil in exchange for Iran’s condensate. The swap deal will be executed by state-owned National Iranian Oil Company (NIOC) and Petroleos de Venezuela (PDVSA), the sources said.
The first Venezuelan oil cargo under the swap agreement is expected to sail toward Iran this week. According to the sources, the deal is aimed to last for six months in its first phase, but the two countries have an option to extend it. The South American country will likely use the condensate to increase the quality of its bituminous oil grade. Venezuela produces tar-like crude at its Orinoco Belt, which needs to be diluted before it can be transported and exported.
Venezuela’s oil exports have been flagging around 650,000 bpd this year. However, it is facing a shortage of diluent, which threatens its exports. The US Treasury Department said the two countries would violate US sanctions with the swap deal. It could lead to penalties ranging from fines, being blocked to the US financial system, and the freezing of US assets.
