Oil-for-loan debts cost Venezuela’s PDVSA hardwon India market share

CARACAS/HOUSTON/NEW DELHI: Venezuela’s state-run oil company, PDVSA, has spent at least a decade trying to build business ties and boost shipments to refineries in India, where crowds once welcomed the late socialist leader Hugo Chavez with cries of ‘Viva!’ Now, the ailing firm is being forced to slash sales to its crucial trade partner.

Venezuela has given up the fight for coveted market share in India because of a combination of declining crude production and heavy obligations under oilfor-loan deals with China and Russia, according to internal PDVSA data and two people familiar with the company’s strategy and operations.

Caracas needs the oil to pay debts to China and Russia, key political allies that have together lent Venezuela at least US$50 billion in exchange for promised crude and fuel deliveries.

PDVSA and the Venezuelan Oil Ministry did not respond to requests for comment.

In 2013, when Venezuela exports and oil prices were high, PDVSA raked in nearly US$14 billion from India, the world’s fastest growing large economy.

By last year, after an oil price crash, that figure had plummeted to US$2.7 billion, according to a Reuters analysis of the PDVSA data.

That means less cash income for the isolated South American economy, deepening a recession that has left many citizens skipping meals amid food shortages and soaring inflation.

Oil accounts for almost all of Venezuela’s export revenue, and many of Venezuela’s customers pay for oil in kind – with food or medical supplies, for example.

India is among the few trading partners that buy large volumes of PDVSA oil with cash.

So lower sales to India’s refineries are further eroding the company’s cash flow – and its ability to pay mounting debts to suppliers and service providers, which have caused delivery delays and cancellations around the globe. — Reuters