SULAIMANI (ESTA) — Venezuela has agreed to a key contract to swap its heavy oil for Iranian condensate that it can use to improve the quality of its tar-like crude, Reuters reported on Saturday.
Reuters cited five people close to the deal as saying the swap agreement was planned to last six months in its first phase but could be extended.
The deal between state-run firms Petroleos de Venezuela (PDVSA) and National Iranian Oil Company (NIOC) deepens the cooperation between two of Washington’s foes, the sources told Reuters.
A source familiar with the matter said the swap deal between Venezuela and Iran had been on the radar screens of U.S. government officials as a likely sanctions violation in recent months, the news agency reported.
The officials want to see how far it will go in practical terms, it added.
The agreement could be a breach of U.S. sanctions on both nations, the Treasury Department said in an email to Reuters.
U.S. sanctions programs not only forbid Americans from doing business with the oil sector of Iran and Venezuela, but also threaten to impose “secondary sanctions” against any non-U.S. person or entity that carries out transactions with either countries’ oil companies.
Secondary sanctions can carry a range of penalties against those targeted, including cutting off access to the U.S. financial system, fines or the freezing of U.S. assets.
Any “transactions with NIOC by non-U.S. persons are generally subject to secondary sanctions,” the Treasury Department said, Reuters reported.
It also said it “retains authority to impose sanctions on any person that is determined to operate in the oil sector of the Venezuelan economy,” but did not specifically address whether the current deal is a sanctions breach.
Sanctions on both nations have crimped their oil sales in recent years, spurring NIOC to support Venezuela – including through shipping services and fuel swaps –in allocating exports to Asia.