COMMODITIES | Fri Mar 31, 2017 | 9:12pm EDT
Cash-strapped Venezuela negotiating Russian help to pay PDVSA bonds: sources
Venezuela is negotiating financial help from Russian oil major Rosneft to complete nearly $3 billion in PDVSA debt coming due to bondholders next month, two market sources and a government source familiar with the talks told Reuters on Friday.
Venezuela's leftist government has grown increasingly close to Russia's Vladimir Putin and Rosneft has become an important financier and oil player in the OPEC nation with the world's biggest crude reserves.
The negotiations are happening even as political chaos reins in Venezuela after its Supreme Court annulled the opposition-led National Assembly's powers to approve oil joint ventures, sparking protests and international condemnation.
Earlier this month, Reuters reported PDVSA had offered a stake in the Petropiar joint venture to Rosneft, as part of what two sources told Reuters was a wider package of financial help Venezuela was seeking from Russia.
In recent days, financially-squeezed state oil company PDVSA [PDVSA.UL] has realized it needs help from its Russian counterpart to be able to meet its hefty April payments, the sources say.
"PDVSA is counting on help from Russia for the bond payments," a Venezuelan government source said on Friday, asking to remain anonymous because he is not authorized to speak to media.
It was not immediately clear whether Rosneft would agree to the deal or what the company might receive in return.
Rosneft, the Venezuelan central bank and PDVSA did not immediately respond to a request for comment.
Venezuela faces payments of nearly $3 billion in April on bonds issued by PDVSA. Most of that is due around mid-month as PDVSA's April 2017 5.25 percent note matures, requiring a combined interest and principal payment of $2.5 billion.
A separate financial source said Venezuela was negotiating a $600 million loan that would allow it to have enough cash to pay bondholders next month, although he did not know with whom the talks were taking place. He added the central bank hoped to use bonds as collateral.
Bonds crashed on Friday as political tensions escalated.
President Nicolas Maduro's government has pledged to keep paying bondholders, bashing default talk as a Wall Street plot to sabotage his Socialist administration..
But a grueling recession that has millions skipping meals and low oil prices have worsened PDVSA's financial position in recent years.
Caracas-based PDVSA has been particularly squeezed in the last weeks due to unexpected spending on emergency oil imports to stem a nationwide gasoline shortage, heightening the need for external help.
"We think that up to 50 percent of financing needs could be covered by bilateral loans," Oxford Economics said in a note to clients, mentioning Russia and China, Venezuela's top financier.
(Additional reporting by Alexandra Ulmer; Writing by Alexandra Ulmer; editing by Diane Craft)