Adds Venezuelan foreign minister´s remarks.
New US sanctions on ships and freight companies that transport Venezuelan oil to Cuba will exacerbate the island's chronic fuel shortages and power outages, two Caribbean diplomats in Havana tell Argus.
The sanctions mainly target the Liberian-flagged Despina Andrianna Panamax tanker that routinely shuttles Venezuelan crude to Cuba, as well as the vessel´s obscure Liberian owner Ballito Bay Shipping and Greek operator ProPer In Management. The US Treasury also levied sanctions on 33 other vessels, mostly tugs, owned by Venezuelan national oil company PdV.
One of the Caribbean diplomats described the new US sanctions as "a damaging blow to Cuba's energy sector and the national economy."
"There is no immediate prospect of significant supplies to make up for the already reduced volumes supplied from and sourced by the Venezuelan company," the diplomat said. Rolling blackouts and the fuel shortage "will get worse" if the sanctions take effect.
The Despina Andrianna is currently en route from Cuba to PdV's main Venezuelan oil terminal of Jose, according to vessel tracking data.
But the Venezuelan oil flow to Cuba may not be cut off altogether. Another tanker that is not on the new sanctions list, the S-Trotter, is currently in Jose and is scheduled to arrive in Matanzas, Cuba, on 12 April, the tracking data indicates.
Fresh off a Middle East tour that included Syria, Venezuela´s foreign minister Jorge Arreza told reporters in Caracas today that Venezuela will continue to supply oil to Cuba using "unconventional" means. "We cannot reveal our strategy, but we will always fulfill our Venezuelan commitments and of course our commitment to the people of Cuba," he said.
To the extent that they do impact Venezuelan oil supply to the island, the sanctions could have the effect of reducing throughput at the island's 65,000 b/d Cienfuegos refinery. The Soviet-era plant had been a joint venture between PdV and its Cuban counterpart Cupet until Cuba quietly took over PdV´s 49pc stake in August 2017.
The refinery processed around 37,000 b/d in 2018, up from 24,000 b/d in 2017, according to official Cuban documents and statements. Processing is expected to climb by another 28-31pc in 2019, Cupet has said.
Washington accuses Havana of helping to prop up the Venezuelan government of Nicolas Maduro, whom most western countries no longer recognize as the country's legitimate president. Under a bilateral agreement signed in 2000, Venezuela provides oil to Cuba in exchange for the deployment of Cuban advisers and specialists in healthcare, security, sports and other fields.
The island had been receiving around 100,000 b/d from Venezuela until around 2015, when the shipments started declining in line with PdV's falling production, and Venezuela's oil-backed loan commitments to Russia and China. The Venezuelan supply was supported by domestic production to meet demand of 160,000 b/d.
Imports of Venezuelan crude and products averaged 42,000 b/d in 2018, Cuban government officials said in January. The supply to Cuba is a fraction of Venezuela's oil exports which mainly go to India and China.
To make up the loss, Cuba has been seeking alternative supplies from Algeria, Russia, Iran, Angola and Trinidad and Tobago, according to several government statements since 2017. The island needs "about 25,000 b/d more" to close its energy deficit, a Cuban official told Argus early this year.
The sanctions are "an act of extraterritoriality, interference and imperial arrogance," Cuban president Miguel Diaz-Canel said after the sanctions were imposed on 5 April. The oil shipments are "a lawful activity under commercial contracts."
For its part, Cupet said it "cannot comment on this matter as it has not yet seen the impact of the new measures." Cupet also declined to comment on how much oil it is currently receiving from sources other than Venezuela.
"Recent discussions about supplies from Russia and Algeria have not yet delivered the required quantities," one of the Caribbean nation diplomats said.
Cuba's foreign trade minister Rodrigo Malmierca visited Algiers in February with a request to implement a January 2018 supply agreement, Cuban officials said at the time.
Under the agreement, Algeria would send unspecified volumes of crude and a range of products to Cuba between 2019 and 2021, following ad hoc shipments in recent years.
PdV has also supplied Cuba with Russian Urals grade transhipped at its leased Bullen Bay terminal in Curacao, according to Caribbean shipping sources.
The new sanctions will be a further constraint on the island's economy that is already dogged by declines in agriculture, including traditional sugar production, tourism and nickel and cobalt mining.
The economy grew by 1pc in 2018, missing a 2pc government target, according to official figures.
Washington has had an economic embargo on Cuba since the 1960s.
