MOSCOW (MRC) -- Russia has begun shipping large quantities of oil to Cuba for the first time this century, sources said, as supplies to the island from crisis-wracked Venezuela have dwindled, said Reuters.
A Russian oil tanker with 249,000 bbl of refined products is due to arrive in Cuba on May 10, according to Reuters shipping sources and others, bringing back memories of when the Soviet Union supplied all of the Communist-run Caribbean island’s energy needs. More tankers apparently will follow.
Rosneft, Russia’s state oil company, announced on Wednesday it had signed an agreement with Cuba’s state-run Cubametals to supply 250,000 t of oil and diesel fuel, without providing further details.
The news is sure to raise eyebrows in Washington as its tense relations with Moscow continue, despite President Donald Trump’s campaign pledge to improve them. The Russian company has already become a concern for the United States. Venezuelan state oil company PDVSA last year used 49.9% of its shares in its US subsidiary, Citgo, as collateral for loan financing by Rosneft.
According to Jorge Pinon, an oil expert at the University of Texas at Austin, the Cuba deal is equivalent to around 1.865 MMbbl and valued at USD105 MM at current prices.
In comparison, Russia reported it shipped oil products to Cuba from 2010 through 2015 valued at USD11.3 MM. Cuba consumes 22,000 bpd of diesel and 140,000 bpd of oil products.
"It is very clear that Cuba is diversifying its long-term supply contracts in the event that its October 2000 subsidized oil agreement with Venezuela is terminated," Pinon said.
Cash-strapped Cuba struggled with long blackouts and fuel shortages after the fall the Soviet Union, but the rise of the late Venezuela leftist President Hugo Chavez quickly solved the crisis at the turn of the century.
Since then Cuba has relied on Venezuela, an OPEC member, for about 70% of its fuel needs, including oil for refining and re-exports.
But socialist Venezuela’s subsidized shipments have fallen by as much as 40% since 2014. Potential new suppliers usually want cash because of Cuba's poor credit rating.
Electricity and fuel rationing to state companies began a year ago, and more recently there have been gasoline shortages.
A change of government in Venezuela, which has been experiencing daily protests, would directly threaten the agreement.