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Worries that Venezuela and its state-owned oil producer heading for default continue to rise, along with political tensions in the aftermath of the country’s highly criticized election last week.

But Venezuela’s state-owned oil producer has gotten some help.

Reuters reports today that Russian state-owned oil producer Rosneft (ROSN.Russia and ROSN.London) has loaned $1.015 billion to PDVSA in April. The payment was made under a crude oil purchase agreement, Rosneft said in a quarterly financial report on Friday.

Russ Dallen, a lawyer, publisher and investor in Venezuela bonds via Caracas Capital, weighs in on the news. He notes that Rosneft is one of the largest oil producers in the world and has little need to receive oil from Venezuela.

…Although the contract that Russia has with Venezuela is described as a "crude oil purchase contract," it was always meant to be paid off by swapping equity into PDVSA joint oil ventures. In fact, Rosneft admitted the "transfer of equity shares" in its first quarter 2016 financials but has since been buried.

But Dallen goes into more detail, noting that last year Venezuela’s opposition party said President Nicolas Maduro doesn’t have the authority to sign off on financial agreements, and warned investors that any agreements Maduro signed will be void without the approval of the National Assembly.

That became the problem for Russia; Hence Russia's further billion dollar loan, the Constituent Assembly and Russia's quick support of it is an attempt to move past that problem. The Venezuelan Supreme Court had sought to achieve the same thing in its late March ruling dissolving the National Assembly. While nationwide outcry forced the Supreme Court to "clarify" the part of the judgment ridding the government of the pesky National Assembly, importantly, the resulting Opinion that still stands kept in the part of the decision that allows the Supreme Court to take over the right to approve any new oil, gold or mineral investments since the National Assembly is in “contempt.”

The regime’s National Constituent Assembly is designed to further replace the need of approval from the obstinate National Assembly and pave the path for investment more solid legal ground. Field evidence and the new Rosneft loan of $1 billion in April show that the Russians are anxious to pick up sophisticated and profitable bargains on the cheap (ExxonMobil was awarded $1.6 billion by ICSID for the expropriated share of Cerro Negro/Petromonagas that Rosneft was picking up for just $500 million).

Assuming that Venezuela can obtain legal surety for new investments, Rosneft has been looking to swap that debt (that Venezuela does not have the oil production to cover and cannot pay) to also pick up the shares expropriated from ConocoPhillips in their three ventures. ConocoPhillips says that it invested $4.5 billion in the advanced technology that it put into its 3 joint ventures before they were expropriated. Rosneft has visited all three and is especially interested in swapping that debt for equity in PetroSucre (pre-expropriating title CoroCoro), PetroAnzoategui (pre-expropriation title Petrozuata), and PetroPiar (pre-expropriation title Ameriven & La Hamaca).

The VanEck Vectors Emerging Markets High Yield Bond ETF (HYEM), which holds bonds in PDVSA, inched lower today, falling 0.2%. The iShares Latin America 40 ETF (ILF) fell 0.6% on Friday..

Also see related posts:

Venezuela: Default On The Horizon?

Venezuela May Collapse, A First Among State Oil Producers

Buy Venezuela Bonds As Regime Change & Sanctions Risk Rises?