By Charlie Devereux -Bloomberg
Venezuela said it may not be able to guarantee all future oil shipments to the U.S. after PresidentÂ Barack Obama imposed sanctions onÂ South Americaâ€™s biggest oil producer for doing business withÂ Iran.
The U.S. yesterday imposed economic sanctions on state oil company Petroleos de Venezuela SAâ€™s and six other foreign companies for working with Iranâ€™s energy industry in ways that might bolster the countryâ€™s â€œillicitâ€ nuclear program. PDVSA, as the company is known, delivered at least two cargos of a gasoline additive worth $50 million to Iran between December and March, the U.S. State Department said in aÂ statement.
Venezuelan Oil MinisterÂ Rafael Ramirez told reporters yesterday that his government would provide an â€œadequateâ€ response to the sanctions after analyzing their impact on PDVSAâ€™s production and exports. PresidentÂ Hugo Chavez, an anti- American ally of Iranian PresidentMahmoud Ahmadinejad, said his country wonâ€™t back down in the face of U.S. â€œaggression.â€
â€œThe true impact of this new gringo aggression will be to strengthen the nationalist and patriotic morale of Venezuela,â€ Chavez said in a message posted on his Twitter account. The yield on 8.5 percent dollar-denominated PDVSA bonds due 2017 jumped 51 basis points, or 0.51 percentage point, to 15.74 percent yesterday, according to prices compiled by Bloomberg. The price fell 1.66 cents on the dollar to 71.33 cents.
The sanctions prohibit PDVSA from competing for U.S. government procurement contracts, receiving financing from the U.S. Export-Import Bank and from obtaining U.S. export licenses. They donâ€™t prohibit the export of crude oil to the U.S. The sanctions wonâ€™t affect the operations of CITGO Petroleum Corporation, the U.S. unit of PDVSA, saidÂ Paul Biszko, an emerging-market strategist at Royal Bank of Canada in Toronto.
For now, Venezuela wonâ€™t cut its oil dispatches to the U.S. of 1.2 million barrels per day, though it may in the future stop sending oil to some U.S. companies, Ramirez said.
â€œThey are trying to sanction Venezuela for our profound co-operation with a founding member of OPEC,â€ Ramirez told reporters in Caracas. â€œItâ€™s a right from which we will not back down.â€
The relative leniency of the sanctions and the fact that PDVSA was targeted alongside other companies signals the U.S. doesnâ€™t want to pick a fight with Chavez, said Eric Farnsworth, vice president of the Council of the Americas inÂ Washington.
â€œItâ€™s a very clear signal that deeper connections between Venezuela and Iranian regime will have consequences in Washington,â€ Farnsworth said. â€œItâ€™s symbolic, but itâ€™s not going to impact PDVSAâ€™s bottom line.â€
Chavez has led other nations in Latin America including Brazil and Bolivia that have expanded ties with Iran in recent years.
In 2006, he announced the establishment of regular air service between Caracas and Tehran. In 2009, during a visit by Ahmadinejad in which he praised the Iranian leader as a fellow â€œgladiator of anti-imperialist battles,â€ he said the U.S. should eliminate its arsenal of atomic weapons before taking Iran to task for its nuclear program.
Iranâ€™s nuclear program has drawn four sets of United Nations sanctions because of concern by the U.S. and other countries that it is being used to develop weapons. Iran says itâ€™s enriching uranium to fuel nuclear reactors.
The U.S. has applied sanctions on Venezuela before. In 2006, PresidentÂ George W. Bushended all commercial arms sales to the country because Chavez wasnâ€™t co-operating sufficiently in the fight against terrorism.
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