As OPEC tentatively agreed to an oil output cut, waiting for a commitment from non-OPEC Russia before determining exact volumes for a production reduction, Venezuelan President Nicolas Maduro flew to Moscow this week to meet with Russian President Vladimir Putin, where the two signed deals securing investment from Russia in the South American country’s oil and gold sectors. Venezuela’s oil output has collapsed with a fifth year of economic contraction and hyperinflation.
“We have signed contracts to guarantee investments of more than $5 billion with our Russian partners in joint ventures to raise oil production,” Maduro said in a video posted on his Twitter account, “We are also guaranteeing an investment of $1 billion for mining, mostly in gold.”
The United States (U.S.) has sought to restrict Venezuela’s gold trade through sanctions. Russia has become a key lender of last resort for cash-strapped Venezuela in recent years, as President Maduro’s government struggles to pay its debts. President Maduro has sought to boost the country’s gold output as an alternative source of hard currency as revenue from oil, which makes up over 90 percent of exports, dries up.
The U.S. is not part of any output-limiting initiative due to its anti-trust legislation and fragmented oil industry. Hopefully OPEC will be keeping oil flows as is, not restricted. The world does not want to see, or need, higher oil prices!” U.S. President Donald Trump wrote in a tweet on Wednesday. OPEC delegates have said the group and its allies could cut production by 1 million bpd if Russia contributed 150,000 bpd of that reduction. If Russia contributed around 250,000 bpd, the overall cut could exceed 1.3 million bpd. However, Russia will find it harder to cut oil output in winter than other producers due to their cold weather.
Oil prices have crashed as Saudi Arabia, Russia, and the United Arab Emirates raised output since June after Trump called for higher production to offset lower exports from Iran, OPEC’s third-largest producer. Russia, Saudi Arabia, and the U.S. have been vying for the position of top crude producer in recent years. Iranian oil exports plummeted after the United States imposed fresh sanctions on Tehran in November., however, Washington gave sanctions waivers to some buyers of Iranian crude, further raising fears of an oil glut next year.