ENERGY ADVISOR a WEEKLY PUBLICATION of the DIALOGUE March 6, 2020

LATIN AMERICA ADVISOR ENERGY ADVISOR A WEEKLY PUBLICATION OF THE DIALOGUE www.thedialogue.org March 6, 2020

BOARD OF ADVISORS FEATURED Q&A TOP NEWS Nigel Blackaby Global Head, OIL & GAS International Arbitration Group, Freshfields Bruckhaus Deringer What Does Maduro’s Ecopetrol Limits Mary Rose Brusewitz Travel Due to Member, Clark Hill Strasburger ‘Energy Emergency’ Coronavirus Jeffrey Davidow Colombia’s state-run oil com- Senior Counselor, pany has placed restrictions on The Cohen Group Mean for Venezuela? business travel to all Asian and Jonathan C. Hamilton European countries in response to Partner, the coronavirus outbreak. White & Case Page 2 Ana Heeren Managing Director, FTI Consulting OIL & GAS Raul Herrera Partner, Venezuela Names Corporate & Securities Practice, New VPs for Four Arnold & Porter James R. Jones PDVSA Units Chairman, Venezuelan President Nicolás Monarch Global Strategies Maduro’s government appointed Jorge Kamine Venezuelan President Nicolás Maduro last month created a commission with the aim of new vice presidents for the state Counsel, revamping the country’s oil industry, which he said was in a state of emergency. // File Photo: oil company’s finance, exploration, Skadden Arps Venezuelan Government. refining, and supply and trading Craig A. Kelly units. Venezuelan President Nicolás Maduro on Feb. 19 declared Director, Page 2 Americas Int’l Gov’t Relations, an “energy emergency” and announced the creation of a Exxon Mobil commission to rehabilitate state oil company PDVSA in a bid Tyler Kruzich OIL & GAS Director, Int’l Gov’t Affairs for Q to bolster the country’s crumbling industry. The announce- Pemex Virtually the Western Hemisphere, ment came one day after the United States blacklisted Rosneft Trading, Chevron a subsidiary of Russian state oil firm Rosneft which has become a major Doubles Losses, Jorge León Energy Economist, intermediary for Venezuelan crude since the Trump administration Misses Targets BP slapped sanctions on PDVSA. What is the “energy emergency,” and what Mexican state oil company Pemex Jeremy Martin nearly doubled its losses last year should Maduro’s commission focus on to successfully boost Venezuela’s Vice President, Energy & Sustainability, and failed to meet production tar- Institute of the Americas crude output? To what extent will the new Rosneft sanctions deter the gets despite a slight improvement Larry Pascal company, and more broadly Russia, from doing business with the Madu- in its debt situation. Mexican Chairman, President Andrés Manuel López Americas Practice Group, ro government? How much will the latest sanctions hurt Venezuela’s oil Obrador has repeatedly promised Haynes & Boone production and exports, and will the move ultimately result in signifi- to boost the firm’s output. Charles Shapiro cantly more pressure on Maduro to step down? Page 2 President, World Affairs Council of Atlanta R. Kirk Sherr Francisco J. Monaldi, fellow in Latin America energy policy President, Clearview Strategy Group at Rice University’s Baker Institute for Public Policy and Mark Thurber lecturer in energy economics at the Center for Energy Partner, Studies: “The U.S. sanctions on PDVSA that started in 2019 Hunton Andrews Kurth A Jose L. Valera significantly reduced the company’s cash flow. Before the sanctions, Partner, PDVSA exported about 550,000 barrels per day (bpd) to the United States Mayer Brown LLP and produced about 1.3 million bpd. U.S. refineries also supplied around Lisa Viscidi Program Director, 125,000 bpd of products to Venezuela. By the second half of 2019, Inter-American Dialogue PDVSA did not trade oil or products with the United States and produced about 800,000 bpd. Production also fell due to other factors, such as electricity blackouts, but exports have been constrained by lack of buyers. López Obrador // File Photo: Mexi- can Government. Continued on page 3

OIL AND GAS NEWS NEWS BRIEFS Venezuela Names Mexican State Oil New VPs in Four Key Colombia Issues Decree With Fracking Rules for Firm Nearly Doubles Areas of PDVSA Pilot Projects: Ministry

Losses, Misses Target The government of Venezuelan President Colombia’s Mines and Energy Ministry on Nicolás Maduro has appointed new vice Tuesday issued a decree outlining the rules for Mexican state oil company Pemex virtually presidents for four units of state oil company pilot projects employing fracking in the country, doubled its losses last year and failed to meet PDVSA, as well as a new president for the unit Reuters reported. Among the published rules, production targets despite a slight improve- that handles joint ventures with private compa- projects will be able to use the fracking tech- ment in its debt situation, the Financial Times nies, PDVSA said Saturday, Reuters reported. nologies for exploration but not yet to enter reported Feb. 27, Pemex posted a loss of 169.8 The moves come after Maduro declared an the production stage. Additionally, the projects billion pesos ($8.7 billion) in the fourth quarter, “energy emergency” and the creation of a new will require an environmental license and are compared to a 157.3-billion-peso loss in the commission, led by Economy Vice President subject to civilian oversight, Reuters reported. same three-month period a year earlier and a Tareck El Aissami, in a bid to revamp the coun- loss of 88 billion pesos in the previous quarter. try’s shattered oil industry. The government For last year overall, the company reported a named Oswaldo Pérez, who currently serves in AES Gener to Invest in 1.6 346.1-billion-peso loss, 91 percent higher than the finance ministry, as PDVSA’s vice president the 180.4-billion-peso loss registered in 2018. of finance, Erwin Hernández was vice president Gigawatts of Renewables Debt at the end of last year stood at $105.2 for exploration and Gabriel Oliveros as vice in Chile, Colombia billion, down 0.6 percent from the end of 2018, president of refining. Hernández has previous Chilean power company AES Gener has Reuters reported. Pemex’s crude production experience managing Venezuela’s main oil port, announced plans to invest $1.8 billion to add was also down in the fourth quarter, to 1.693 the José terminal, as well as Petrocedeno, a approximately 1.6 gigawatts of new wind million barrels per day (bpd), compared with crude joint venture between PDVSA, France’s and solar capacity in Chile and Colombia, 1.723 million bpd in the same quarter the pre- Total and Norway’s Equinor, Reuters reported. Renewables Now reported Monday. AES Gener vious year. Including production from private Oliveros was previously PDVSA’s executive said the projects will be partially financed sector partners, total output was 1.712 million director for new refinery projects. Antonio through a capital increase of $500 million. The bpd, higher than the 1.738 million bpd in the Pérez Suárez was appointed to be the vice announced investment will cover 1.1 gigawatts same quarter in 2018 but below the company’s president for supply and trading on an interim of wind capacity and 500 megawatts of solar target of 1.8 million bpd by the end of last year. basis, according to Venezuela’s official gazette, capacity, to be added by 2024. In a conference call, Pemex executives high- and Germán Márquez, who is currently the vice lighted a slight rise in crude production during minister for hydrocarbons at the oil ministry, the first months of this year. Credit ratings was named president of Venezuelan Petro- agencies are widely expected to downgrade leum Corp., which handles PDVSA’s stakes Guyana Opens Tender for Pemex’s rating to junk status in the first half in exploration and production joint ventures One-Year Contract to of this year amid concerns over the company’s with private oil firms. The company also has a Market its Share of Crude ability to implement a sustained increase in new human resources manager, Víctor Ramón Guyana has opened a tender for a one-year production, the Financial Times reported. Mex- Zamora. ican President Andrés Manuel López Obrador contract to market its portion of light sweet took office in December 2018 vowing to boost crude from the ExxonMobil-operated deepwater Pemex’s oil output by about half by the end of Ecopetrol Restricts Stabroek block, Argus Media reported Feb. 27. his six-year term, Reuters reported. Last year, The tender is set to close on March 12, the he shrugged off ratings’ downgrade, slamming Trips to Asia, Europe government said, adding that the successful agencies such as Fitch Ratings as “hypocriti- Due to Coronavirus bidder would manage at least five cargoes of cal,” Mexico Daily News reported. When asked Liza crude between this year and next year. The about Fitch’s ratings cuts in January of last South American country in December awarded Colombian state-run oil company Ecopetrol year, López Obrador responded, “Investors with three cargoes to Shell in a restricted tender, on Monday placed restrictions on business ethics know very well that Pemex is a solid covering all shipments to load in the first half travel to all Asian and European countries in company because now it’s being managed with of this year. Guyana’s government was up for response to the coronavirus outbreak, CEO honesty.” re-election on Monday’s national vote. Official Felipe Bayón told Reuters. In an interview in final results have not yet been reported.

New York, Bayón told the wire service that the FEATURED Q&A / Continued from page 1 firm is closely watching the virus’ effects on the demand of crude oil, adding that China Rosneft has been trading more than half of apply to Rosneft or its other subsidiaries has so far not limited its crude purchases. Oil Venezuela’s oil exports, and PDVSA has had and affiliates. In fact, right after learning of prices have taken a hit as the spread of coro- to discount the barrels it sells by as much as these sanctions, Rosneft, in line with Rus- navirus threatens to hurt global crude demand, 40 percent and import around 150,000 bpd sia’s traditional position on U.S. sanctions, plummeting more than 20 percent to multi-year of products in disadvantageous swaps. As publicly criticized them as illegal and said lows, according to the report. Approximately a result, PDVSA’s net cash flow fell by close it would continue with its Venezuela-related 46 percent of Ecopetrol’s crude exports were to $10 billion. Sanctions on Rosneft Trading operations. However, the fact that the United to Asia last year, Bayón told Reuters, with the are a blow that should increase the risk of States is imposing secondary sanctions on majority destined for China. In the fourth, buying from PDVSA and the discounts it has 54 percent of Ecopetrol’s total exports were to give. But if, as it appears, Russia wants to Secondary sanctions shipments to Asia. continue trading Venezuelan oil for geopolit- ... force Venezuela to ical reasons (it also made handsome profits and was paid close to $2 billion in debt increasingly rely on Petrobras Sets New for doing so), it would do so through other dealings with Russia.” Record for Fuel Oil subsidiaries, such as TNK Trading, at the risk — Massimiliano Ballotta and Javier Coronado of also getting it sanctioned. The threat of Exports in February sanctions might dissuade other buyers, such non-U.S. firms operating in the oil sector of as Reliance, Repsol and ENI, from trading the Venezuelan economy, such as Rosneft Brazilian state oil company Petrobras said with PDVSA. Thus, production and exports Trading, makes the picture appear grim Wednesday that it set a new record for fuel oil should continue to fall in 2020, although for Maduro. While the 2019 U.S. economic exports in February, reaching 238,000 barrels at a much lower rate than in 2019. Gen. sanctions on PDVSA caused a drastic drop per day and exceeding one million tons for the Quevedo’s leadership of the company has in Venezuela’s oil production and created se- month. The new world standard for marine been disastrous, and there is no doubt that a vere barriers for Venezuela to trade with U.S. fuels, known as IMO 2020, which sharply change is required. But appointing Tareck El refineries, Maduro managed to keep Ven- reduced the sulfur rate limit, “generated an Aissami as head of the restructuring board ezuela’s oil industry afloat by dealing with unique opportunity” for the company, Petrobras seems like a move by Maduro to reduce the companies not subject to U.S. jurisdiction. said in a statement. Both oil and fuel oils that power of Diosdado Cabello. If, as repeatedly Secondary sanctions pose a threat to that the firm produces tend to have low sulfur rates. stated, the government wants to increase strategy and force Venezuela to increasingly Although the coronavirus outbreak restricted the role of international partners in joint ven- rely on dealings with Russia. Not surprising- demand in Asia, traditionally the top destina- tures, picking a person on the United States’ ly, PDVSA is preparing a fuel rationing plan tion for Petrobras exports, the company said it most-wanted list for trafficking narcotics for domestic consumers. To further address shipped more oil and fuel oils to the Caribbean, does not seem to be the right move.” the crisis in Venezuela’s oil industry, Maduro United States and Europe to compensate for is considering to transfer ownership of a the drop. “It is important to highlight that it Massimiliano Ballotta, Mos- number of PDVSA’s subsidiaries to interna- is not yet possible to safely estimate all the cow-based partner, and Javier tional corporations. Although that change impacts the company may suffer concerning Coronado, associate attorney, in ownership would be a step in the right its operations and results, considering the A both at Diaz, Reus & Targ: direction to boost Venezuela’s crude output, unfolding events of the COVID-19 outbreak in “U.S. sanctions on relatively small Rosneft it will only work if international corporations the world economy,” Petrobras added. Trading, which was created in 2011 to also take control over PDVSA’s operations assist Rosneft on foreign projects, will not and work alongside the U.S. government. deter Russia from doing business with the Otherwise, these international corporations Venezuela Military Maduro regime. The designation does not could also face economic sanctions.” Forced Tanker to Continued on page 6 Discharge Oil: Citgo port at the country’s Jose Terminal, unveiling barrels of crude oil that both Citgo and PDVSA details of an oil cargo carrying $57 million claim. The refiner said the ship departed Ven- worth of crude that had been lost for more than ezuela’s Jose Terminal on Feb. 27 and entered Citgo, the U.S. based refiner of Venezuelan a year, Reuters reported. The Gerd Knutsen oil international waters early the next day, adding state oil company PDVSA, said last Friday that tanker last week finished discharging 960,000 that the tanker was “forcibly escorted by a the Venezuelan military had forced a tanker to

COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 3 LATIN AMERICA ENERGY ADVISOR March 6, 2020 military vessel” into port so the oil cargo could be transferred to PDVSA. The captain was ADVISOR Q&A reportedly ordered to make the transfer under threat of criminal penalties, including jail, Re- uters reported. Neither the Venezuelan Armed Why Is Peru’s Economy Slowing Down? Forces nor the Information Ministry responded to the wire service’s requests for comment. Cit- Peru’s economy grew 2.19 go vowed to continue efforts to collect losses percent last year, its weakest tions, as the new legislation that the govern- from Venezuela and “any entities that may have performance in a decade, the ment enacted for undertaking new public assisted,” Reuters reported. Opposition leader Q country’s statistics agency works and public and private partnerships Juan Guaidó’s backers control Citgo. Dozens of said Feb. 14. A day earlier, the country’s (PPP) has proven to be extremely cumber- countries including the United States recognize central bank kept interest rates unchanged some. On the positive side, private expendi- Guaidó as Venezuela’s legitimate interim pres- at a nine-year low in an effort to encour- tures grew above overall real GDP in 2019. ident. Citgo has sought a U.S. court order to age growth. Why has economic growth According to the central bank’s estimates, block the tanker from returning the oil loadings slowed in Peru? Will the country’s economy private consumption grew at 3 percent and to PDVSA. According to Refinitiv Eikon data, continue to struggle this year, or will it see as of late last week, the Gerd Knuntsen was a sharp rebound? Which industries face the sailing toward the Caribbean island of Aruba. strongest headwinds this year, and which The economy is con- will thrive? verging to a 2 percent to 3 percent long-term POLITICAL NEWS growth trend.” Alfredo Thorne, principal — Alfredo Thorne director at Thorne Associates Opposition Leads in and former Peruvian economy Guyana Election by A minister: “Last year’s 2.2 per- investment at 4 percent. This has sustained cent real GDP growth rate after a 4-percent overall real GDP growth in positive territory. Just 50,000 Votes expansion in 2018 may indicate that Peru Key to the outlook is how well the private has joined Latin America’s low-growth trend. sector performs in a more politically volatile With nine of Guyana’s 10 electoral districts Close inspection of the GDP report indicates environment. President Vizcarra shut down having officially declared their results of the that commodity sectors subtracted about Congress on Sept. 30, a new Congress was country’s national election, the opposition one percentage point from overall growth. elected in late January, and presidential and PPP/C party is leading President David Grang- This was a collateral effect of the U.S.-China congressional elections are scheduled for er’s APNU+AFC party by more than 51,000 trade war, as both countries are Peru’s main early 2021. In this environment, our outlook votes, Stabroek News reported. The two parties trading partners. Fishing output fell sharply, anticipates real GDP expanding 2.8 percent were both claiming victory on Wednesday amid by 26 percent in 2019, but its weight in in 2020 (and 2.5 percent if the COVID-19 out- rising tensions as party supporters gathered overall GDP is small, 0.7 percent. However, break extends beyond the first quarter), with outside the remaining vote-counting center the expenditure side indicates that more government expenditures taking the lead after a dispute arose over a spreadsheet’s data permanent factors are at work and that the and the private sector feeling less robust.” not matching corresponding documents. The economy is converging to a 2 percent to 3 matter was resolved before any violence broke percent long-term growth trend. For one, the out. The Atlanta-based Carter Center, which under-execution of public works may have EDITOR’S NOTE: More commentary on this among other international groups is monitoring subtracted between 0.5 and one percentage topic appears in Monday’s issue of the Latin the elections for fairness, has called on every- point from GDP. Some may be related to the America Advisor. one, including political parties, to refrain from government’s fight against graft. Yet, most declaring election results while the country may have resulted from self-imposed restric- waits for the Guyana Elections Commission (GECOM) to officially report them. “We appeal Paet, has called out the APNU+AFC coalition a clear slowdown in business activity, leaving to political parties to refrain from declaring any and opposition PPP/C for using state resourc- residents nervous and frustrated. Collecting results if they want to do justice to democracy es to campaign for Monday’s general and re- ballots from remote locations in territory in Guyana,” Aminata Touré, the co-chair of the gional elections. Again on Wednesday, parents dominated by forests, mountains and rivers Carter Center, stressed. The head of the Euro- kept their children out of school, and there was can be slow, and full results are not expected pean Union’s election team in Guyana, Urmas

NEWS BRIEFS until Friday, Agence France-Presse reported. the worst affected countries, with seven and The election is being watched more closely five cases, respectively. Meanwhile, in Brazil, Mexican President to than might ordinarily be the case because the the region’s most populous country, only two eventual winner will be in control of a coming confirmed cases remain identified, but the Leave Fate of Brewery oil boom that is expected to transform Guyana. number of suspected cases of infection with to Public Consultation [Editor’s note: See related Q&A in the Feb. 21 COVID-19 has increased from 433 to 488, ac- Mexican President Andrés Manuel López Obra- issue of the weekly Energy Advisor.] cording to the health ministry. By comparison, dor said Tuesday that his government will ask the United States has had more than 125 con- the public whether to allow U.S. company Con- firmed cases and at least nine deaths. [Editor’s stellation Brands to open a massive brewery in ECONOMIC NEWS note: See also the Advisor’s video interview the border city of Mexicali in northern Mexico, with Fitch’s Shelly Shetty on the region’s sover- Reuters reported. The brewery, set to be worth Latin America’s eign ratings outlook.] more than $1 billion, has sparked some contro- versy, with local groups protesting its potential Outlook Dims Amid Private Bondholders opening on claims that it would cause water shortages. López Obrador said his adminis- Coronavirus Fears Meet With Argentine tration would organize a public “consultation,” despite U.S. officials’ opposition to the idea. Investors in Latin America are bracing for Officials on Debt stronger-than-expected consequences from the global outbreak of the new coronavirus. Some of Argentina’s largest private sector Despite having only two confirmed cases in creditors flew to Buenos Aires this week for Chile’s SQM Posts Lower its borders, Brazil’s real currency posted a talks with Alberto Fernández’s government over Profit on Lithium Decline record-closing low on Tuesday of 4.51 reais debt negotiations, Bloomberg News reported Chilean mining giant SQM, the world’s num- per U.S. dollar, Reuters reported. Meanwhile, Wednesday, citing people familiar with the mat- ber-two lithium producer, on Monday reported in Mexico, the government of Andrés Manuel ter. Representatives from BlackRock, Pacific net income of $66.9 million for the fourth López Obrador has been in close contact Investment Management Co. and Ashmore quarter of last year, a 38-percent fall compared with the country’s central bank to coordinate Group met with Economy Minister Martín Guz- to $108.6 million in the same three-month a response to building economic pressures, mán, a respected U.S.-trained economist who period a year earlier. For last year overall, the Finance Minister Arturo Herrera said on Tues- has little direct experience in debt negotiation. company posted net income of $278.1 million. day, The New York Times reported. The peso Guzmán is also set to meet with investors from Gross profits fell 30 percent to $137.8 million, slumped 5.5 percent in the second half of last Greylock Capital, according to the report. The while quarterly lithium revenues also plum- month, along with other emerging markets hit meetings come as Fernández’s new administra- meted 57.4 percent, amid lower prices for the by a flight to safe-haven assets, but it rebound- tion attempts to persuade bondholders that it metal. ed more than 1 percent Tuesday in the wake will negotiate in good faith and the government of emergency rate cuts in the United States. has a plan for putting the South American That rebound may not last long, as uncertain- country’s troubled economy on a stable path ty over the U.S. election is likely to keep up after decades of turbulence. However, the new Brazil Spending on the pressure on the peso, Reuters reported. program being discussed by Argentina and its Military Up 11 Percent Goldman Sachs on Tuesday lowered its 2020 biggest single lender, the International Mone- in Bolsonaro’s First Year growth forecast in Brazil to 1.5 percent, from tary Fund, could set up private bondholders for 2.2 percent, and in Mexico to 0.6 percent, heavy losses without requiring the spending During his first year in office, Brazilian Presi- from 1 percent. It also downgraded its growth cuts needed to make the country solvent, dent Jair Bolsonaro spent $1.46 billion more forecasts in Colombia to 3 percent, from 3.4 investors told Reuters in a report this week. than expected on the military, Folha de S.Paulo percent, and in Peru to 2.8 percent, from 3.3 “Our view is that the capacity for Argentina to reported Monday. The figure is 10.9 percent percent. In related news, Argentina and Chile service its debt is a lot higher than what the higher than the previous year and is probably said on Tuesday they had confirmed their first government claims and they should be aiming one of the largest historical increases in nom- cases of the new coronavirus, or COVID-19, the for a higher fiscal surplus,” Steffen Reichold, inal terms, according to the report. Bolsonaro Associated Press reported. In both cases, the portfolio manager at Stone Harbor Investment has named scores of military leaders to posts patients had recently returned from travels, one Partners, which holds some Argentine debt, in his government, with 9 of 22 ministers in his from Italy and the other from southeast Asia. told Reuters. Guzmán insists that growth, not cabinet now coming from the armed forces, The two new cases bring the total number in fiscal surpluses, should be first on Argentina’s The Wall Street Journal reported. Latin America to 17, with Ecuador and Mexico economic agenda.

FEATURED Q&A / Continued from page 3 LATIN AMERICA ENERGY ADVISOR is published weekly by the Inter-American Dialogue Copyright © 2020 Arturo H. Banegas Masiá, of Rosneft group are quickly stepping up to partner at the Latin America and replace Rosneft Trading and keep selling Erik Brand the Caribbean practice group Venezuelan crude. El Aissami is internation- Publisher [email protected] of Akerman: “Rosneft has been ally known for having presided over a debt A Gene Kuleta a key foreign patron of Nicolás Maduro restructuring commission in Venezuela in Editor to overcome the effects of U.S. sanctions 2017, when the first set of sanctions were [email protected] on Venezuela’s PDVSA, allowing the sale imposed. He was already designated at Anastasia Chacón González of Venezuelan crude to tankers and other that time and that prevented all banks and Reporter & Associate Editor international buyers. However, sanctions bondholders subject to U.S. jurisdiction to [email protected] and an FAQ that OFAC released specifically negotiate the expected restructuring. The excluded Rosneft, one of the largest oil results of that commission, more than two

years after it was created, are PDVSA’s Michael Shifter, President default on some of its bonds in 2017 and on Other sanction-free Rebecca Bill Chavez, Nonresident Senior Fellow the rest of its bonds in 2019. It is in default Sergio Bitar, Nonresident Senior Fellow companies of Rosneft on $6 billion in interest and principal. We Joan Caivano, Director, Special Projects group are quickly cannot expect a different outcome from the Michael Camilleri, Director, Rule of Law Program stepping up to replace new ‘energy emergency’ commission.” Kevin Casas-Zamora, Nonresident Senior Fellow Rosneft Trading...” Héctor Castro Vizcarra, Nonresident Senior Fellow — Arturo H. Banegas Masiá Richard N. Sawaya, vice pres- Julia Dias Leite, Nonresident Senior Fellow ident of the National Foreign Ariel Fiszbein, Director, Education Program Trade Council: “When one Peter Hakim, President Emeritus companies in the world, and any other com- A reviews the sanctions-based Nora Lustig, Nonresident Senior Fellow pany of which Rosneft Trading owns less maximum pressure campaigns directed at Margaret Myers, Director, Asia and than 50 percent, either directly or indirectly. Iran and North Korea, the major economic Latin America Program However, this does not prevent the U.S. sanctions directed at Russia, and the results Manuel Orozco, Director, Migration, Remittances & Development government from extending its sanctions to of the sanctions on Venezuela to date, one Xiaoyu Pu, Nonresident Senior Fellow other companies of the Rosneft group and can only conclude that the sanctions direct- Jeffrey Puryear, Senior Fellow even its parent, which may be disastrous to ed at the Maduro regime will probably not Mateo Samper, Nonresident Senior Fellow Russia. As an almost immediate reaction, result in his removal. As Robert Pape wrote Tamar Solnik, Director, Finance & Administration Maduro declared by decree an ‘energy in ‘Why Economic Sanctions Do Not Work’: Lisa Viscidi, Director, Energy Program emergency,’ after Venezuela’s oil production ‘Modern states can adjust to minimize their Denisse Yanovich, Director of Development and fell to its lowest level in 75 years, producing vulnerability to economic sanctions, because External Relations much less than one million bpd, according to administrative capabilities allow states to Latin America Energy Advisor is published Trading Economics report. A new commis- mitigate the economic damage of sanctions weekly, with the exception of some major sion was created to restructure PDVSA, with through substitution and other techniques. U.S. holidays, by the Inter-American Dialogue 1155 15th Street NW, Suite 800 the name of a late energy minister known for Coercers never anticipate all the adjust- Washington, DC 20005 Phone: 202-822-9002 his fierce opposition to the opening of the oil ments and reworking that targets can devise, www.thedialogue.org sector in the 1990s, which led to Venezuela’s including endless varieties of conservation, ISSN 2163-7962 highest oil output. This commission will be substitution, and more efficient methods of headed by Tareck El Aissami, a sanctioned allocation.’ ” Subscription Inquiries are welcomed at [email protected] Venezuelan vice president, and will include The opinions expressed by the members of the Board of three other individuals, two of whom are also The Advisor welcomes comments on its Q&A Advisors and by guest commentators do not necessarily sanctioned by OFAC, too. According to re- section. Readers can write editor Gene Kuleta represent those of the publisher. The analysis is the sole cent reports, other sanction-free companies at [email protected]. view of each commentator and does not necessarily represent the views of their respective employers or firms. The information in this report has been obtained from reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have any questions relating to the contents of this publication, contact the editorial offices of the Inter-American Dialogue. Contents of this report may not be reproduced, stored in a retrieval system, or transmitted without prior written permission from the publisher.