Following the departure of former Venezuelan Oil Minister Tareck el Aissami in March, the Nicolás Maduro regime increased its dependence on Iran to keep the oil industry afloat.
In June, president of state-owned Petroleos de Venezuela (PDVSA) and Oil Minister Pedro Tellechea, signed a memorandum of understanding with his Iranian counterpart Javad Owji, to “boost petrochemical cooperation between the two nations,” PDVSA indicated.
“[The Iranians] contribute some catalysts to improve refining processes. In Amuay [Falcón state] only three of the more than 20 plants  are working; one of them is the catalytic [plant],” Iván Freites, secretary of Professionals and Technicians of the United Federation of Oil Workers of Venezuela, told Diálogo on August 9. “They also made some repairs at El Palito, where the crude they bring for refining goes […]. They are bringing two million barrels per month to Venezuela and they charge the equivalent of six million barrels, but already processed.”
Venezuela is the country with the largest proven oil reserves in the world, with 304 billion barrels, according to German data gathering platform Statista. However, in 2014, the Venezuelan oil industry collapsed, due to corruption and politicization in the management of its payroll.
While the representatives of both countries were signing this agreement, long queues of vehicles remained in the streets around PDVSA gas stations, due to fuel shortages, Voice of America reported. Motorists who live near Colombia cross the border to fill up at gas stations in that country.
Since February, Iranians have been gradually increasing their presence in the main Venezuelan industry. That month, the Maduro regime awarded the National Oil Refining and Distribution Company of Iran (Niordc) a contract for nearly $120 million to start the repair of the El Palito refinery, in Carabobo, 150 kilometers west of Caracas.
Freites indicated that the Iranian teams are working discreetly in Venezuela. They have two main centers of action: in the La Campiña development in Caracas, where the oil industry international trade decision-making center is located, and in the El Palito refinery.
Venezuelan production of fuels such as gasoline and diesel for public transportation increased from 40,000 to 70,000 barrels per day, yet this barely covers the demand of the domestic market, Freites said. The problem, he added, is that Venezuela sends 20 percent of that production to Cuba, due to a cooperation agreement signed at the beginning of this century.
“The Iranians are currently the ones who are most involved in the oil industry. This is not only a business issue to make Venezuela dependent on the Iranians. It is also a way for Iran to make Western countries, and especially the United States, uncomfortable,” Freites said.
The oil industries of Iran and Venezuela are under sanctions by the U.S. State Department because they are used by their respective regimes as instruments for oppression and political persecution. In the Venezuelan case, moreover, PDVSA is accused of belonging to a system that supports terrorist organizations such as dissidents of the Revolutionary Armed Forces of Colombia and the National Liberation Army.
In 2018, Maduro accentuated his rapprochement with the Islamic republic to evade sanctions. A key operator in this matter was Colombian businessman Alex Naín Saab, arrested in Cape Verde when he made a stopover during a flight from Venezuela to Iran in June 2020. The Venezuelan regime claims that Saab was an “official envoy” of Maduro.
According to the former president of PDVSA’s board of directors Horacio Medina, Maduro’s insistence on tightening the relationship with the Iranians “sounds more like political issues,” and not an attempt to improve the industry.
“This has been seen since the time of [Hugo] Chávez, when they began to hand out sectors of the Orinoco oil belt to Chinese and Russian companies,” Medina told Diálogo on August 9. “It was a way of protecting themselves. For the Iranians, this is a business and at the same time a beachhead to annoy the United States. They could contribute some things, but the oil industry suffers from structural problems that cannot be solved with band-aids because they require large investments.”
To increase national production to one million barrels per day would require an investment of more than $4 billion, which has not been negotiated with Iran, Medina added. In addition, persisting on engaging with Asian nations such as Iran causes losses for the country.
“It’s paradoxical, but no market values Venezuelan oil more than the United States. This can be known from business intelligence. Venezuelan crude is placed in Asian markets at 35 to 40 percent discounts. On the other hand, in the U.S. they buy it at the real price,” Medina said.