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Moscow — Russia's largest crude producer Rosneft said Saturday it is ceasing operations in Venezuela and selling all assets related to activities there.

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"Today [Saturday], Rosneft entered into an agreement with a company 100%-owned by the Russian government on the sale of shares and termination of its participation in all projects in Venezuela, including shares in production projects Petromonagas, Petroperija, Boqueron, Petromiranda and Petrovictoria, in oil service enterprises and trading operations," Rosneft said in a statement.

"Based on the results of the agreement, all the assets and trading operations of Rosneft in Venezuela and/or related to Venezuela will be sold, closed or liquidated," Rosneft said.

As a result of the sale Rosneft will receive a package of 9.6% of its own shares to be put on the balance of one of its 100%-owned subsidiaries, the company said.

Venezuela's state-owned oil company, PDVSA, did not immediately respond to a request for comment.

Rising tensions

The sale follows the imposition of US sanctions on two Rosneft trading subsidiaries over their activities in Venezuela earlier this year.

The collapse of the OPEC+ agreement and the subsequent sharp drop in oil prices have also increased energy tensions between Russia and the US. Russian officials have said they can cope with low prices but expect US shale oil to leave the market. US senators have accused Russia and OPEC kingpin Saudi Arabia of embarking on an economic war against the US.

On February 18, the US imposed sanctions on Rosneft Trading, which supplied crude to German and Indian refineries, and controlled Rosneft's 49.9% stake in Citgo. Companies were given 90 days to wind down trading with the company. Venezuela gave Rosneft the 49.9% stake in Citgo as collateral in return for a $1.5-billion loan in 2016.

The sanctions were introduced over Rosneft Trading's continued operations with PDVSA, concealing shipments and handling more than half of Venezuela's oil exports.

In response Rosneft and Russian government officials called the sanctions illegal, saying Rosneft's activities in Venezuela complied with international law and that the sanctions would not affect Russia's relations with Venezuela.

A month later the US imposed sanctions on another Rosneft affiliate, TNK Trading, for trading in Venezuelan crude, saying that crude allocated to Rosneft Trading was transferred to TNK Trading to evade sanctions. .

According to the US Treasury, Rosneft Trading and TNK Trading handled a "large percentage" of Venezuela's oil exports in 2019 and in January 2020, TNK purchased about 14 million barrels of crude from PDVSA.

Rosneft said its Venezuelan crude trades were repayments of a $6.5-billion loan to PDVSA. As of the third quarter of 2019, $800 million remained on that loan, according to Rosneft. It did not provide an update on these loans in its Q4 and full-year 2019 report.

Russia has long been a strong supporter of Venezuela and its energy sector. In addition to participating in crude production projects, both the government and Rosneft have extended loans to Venezuela and PDVSA. Rosneft had until now resisted sanctions pressure and continued to take crude produced in Venezuela.

In a sign of Venezuela's increasing reliance on Moscow for support, PDVSA also moved its Lisbon office to Moscow last March over concerns about its European assets in the wake of US sanctions.