The Strategist

Riyadh is not going to increase oil production due to sanctions against PDVSA


01/30/2019 - 10:31



Saudi Arabia has no plans to increase oil production in the light of the introduction of US sanctions against the Venezuelan state-owned company PDVSA, The Wall Street Journal reported.



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According to sources in the kingdom, Riyadh is not currently going to increase production volumes, as it was in the case with Washington declaring restrictions on Iran’s oil industry. "Last time, when the US imposed sanctions on a major oil producer, Saudi Arabia supported the coordinated efforts of the American side to expand exports and maintain the balance of supply in the global oil market," the material states. At the same time, according to sources, this time Riyadh "will not want to rush to the rescue."

“They don’t want to repeat the last year’s scenario and, in fact, plan to reduce exports and production next month,” the source says. According to the publication, Saudi Arabia "believes that the US itself could solve the problem of responding to any shortage of Venezuelan oil," by selling this raw material from US strategic reserves.

The material states that so far there is no information that Washington turned to Riyadh with requests for this. "However, over the past decade, Washington, as a rule, asked Saudi Arabia to increase production to compensate for the deficit caused by geopolitical factors - from the war in Libya to oil sanctions against Iran," the newspaper said.

Sources did not rule out that, if requested by the United States, the authorities of the kingdom may reconsider their position. At the same time, as the publication states, at the moment Riyadh is set to reduce oil production.

Earlier, Washington imposed sanctions against the Venezuelan state PdVSA, banning transfer to its accounts of funds from the United States, where most of the oil exported by the company is sold.

PdVSA property in the United States, where the company owns 3 large refineries, has been blocked, and US citizens are prohibited from conducting transactions with the company.

"Inclusion of PdVSA in the sanctions list will prevent further use of the company's assets in the interests of Maduro and preserve them for the people of Venezuela," said US Treasury Secretary Steven Mnuchin.

According to him, the purpose of the sanctions is to achieve a change in the behavior of the Venezuelan authorities. "The United States made it clear that we will consider the possibility of lifting sanctions against those who take concrete and verifiable steps in support of democracy and the fight against corruption in Venezuela in general and in PdVSA in particular," Secretary said.

US sanctions will affect only US refineries, but won’t concern supply of Venezuelan oil to other buyers, including India and China in particular. Thus, US restrictive measures will lead to redirection of Venezuelan oil to other markets, but will not reduce the overall supply of raw materials on the market.

source: wsj.com