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, with the first cargoes due this week, five people close to the deal said.
As the South American country seeks to boost its flagging oil exports in the face of U.S. sanctions, according to the sources, the deal between state-run firms Petroleos de Venezuela and National Iranian Oil Company deepens the cooperation between two of Washington's foes.
U.S. sanctions programs not only forbid Americans from doing business with the oil sectors 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. In Washington, a source familiar with the matter said the swap arrangement between Venezuela and Iran has been on the radar screens of U.S. government officials as a likely sanctions violation in recent months and they want to see how far it will go in practical terms.
A U.S. Treasury spokesperson said the department was "concerned" about reports of oil deals between Venezuela and Iran, but had not verified details. Since last year, PDVSA has imported two cargoes of Iranian condensate in one-off swap deals to meet specific needs for diluents, and it has also exchanged Venezuelan jet fuel for Iranian gasoline.
The U.S. State Department declined to comment on the deal. A Treasury spokesperson did not respond to a Reuters question on how concerned the government might be that Iran-Venezuela deals would allow PDVSA to step up exports.
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