Under pressure from a veto-proof majority in Congress, Joe Biden loudly announced a cutoff of energy purchases from Russia, amounting to about 7% of U.S. energy imports.

"Russian oil will no longer be accepted at U.S. ports — and the American people will deal another powerful blow against Putin’s war machine," he tweeted.

Russian oil will no longer be accepted at U.S. ports — and the American people will deal another powerful blow against Putin’s war machine. pic.twitter.com/dk7QNXnDA6

— President Biden (@POTUS) March 9, 2022

Russia had been sending about 600,000 barrels of oil a day to the States in a big export surge, following Biden's bans on federal leases for drilling, halt to the Keystone XL pipeline, and other measures intended to bankrupt Big Oil in the name of "going green."  The rise actually started late in the Trump administration's term, but it spiked sharply higher when Biden started clamping down on American production.  As of the state of the Ukraine war, Putin has been taking home about $56 million a day from sales of crude to the states.

Well, this ought to fix them, right?

Not so fast.  Biden went on to say that the loss of supply would raise energy prices for ordinary consumers, and there was nothing he could do because Putin did it. 

But him being an ally of the American people and all, he'd do his darnedest to alleviate the effects of this price hike, which rather goes against the past statements coming from his administration about driving oil prices higher so that green energy could finally become a viable alternative.

His "solution" has not been to restore America's energy independence seen during the Trump years, but to buy from and become dependent on other suppliers.  He tried hard to get the Saudis and Emiratis to pump more oil, but the sheiks refused to take his phone calls.  That leaves him with much gamier suppliers — like Venezuela, which is currently under a huge sanctions regime dating from the days of President Trump, following the Nicolás Maduro regime's bid to oust him from a constitutionally appointed role as acting president and then the rigged and stolen election of 2020 as well as Venezuela's ongoing history of drug-trafficking.

Who owns Venezuela's oil?  The information is pretty hazy, given that these characters don't release much information anymore, and the news shifts often, but the preponderance of evidence suggests that Russia owns a big chunk of it.

In 2020, Rosneft handed all of its Venezuelan assets to a 100% Russian state–owned entity to avoid U.S. sanctions.

The Associated Press reported at the time:

MOSCOW (AP) — Russia's Rosneft has transferred its assets in Venezuela to a company fully owned by Vladimir Putin's government, a move apparently intended to shield Russia's largest oil producer from U.S. sanctions while Moscow continues showing support for Venezuelan President Nicolás Maduro in the wake of a U.S. narcotics indictment.

The sale, announced Saturday, follows the recent sanctioning of two Rosneft subsidiaries in an effort to cut a critical lifeline that Russia extended to Maduro after the U.S. government made it illegal for Americans to buy crude from Venezuela.

Rosneft, led by longtime Putin associate Igor Sechin, said its move means "all assets and trading operations of Rosneft in Venezuela and/or connected with Venezuela will be disposed of, terminated or liquidated." It did not name the new company that would take over the assets, which include multiple joint ventures, oil-field services companies and trading activities.

In 2017, I noted that Russia had been paying all of Venezuela's bills:

Investment banker Russ Dallen at Caracas Capital Markets points out a painfully obvious truth about Venezuela: it's no longer a sovereign state.  It's actually a Russian puppet state.

In a market note via email, he writes:

While the usual Venezuela cast of rogue acolytes — Cuba, Bolivia, Nicaragua — came out in support of the Maduro Regime after the fraudulent Constituent Assembly vote, from a geopolitical and economic point-of-view, there were only going to be two nations whose support really mattered: Russia and China.  And even after the revelation by Venezuela's voting machine software and hardware provider Smartmatic that Venezuela had misstated turnout by at least one million, both Russia and China came out in support of the Maduro regime.

While China has already invested and loaned $60 billion to Venezuela but has not been sending any new funds, early this morning, we got Russia's state controlled oil company financials for the second quarter (2Q2017), and they help us solve one of the puzzles we had been pondering in where Venezuela and PDVSA sourced funds to pay $3.7 billion in April and May.

As you know, Goldman Sachs and Nomura provided Venezuela with around $900 million by buying $2.9 billion of PDVSA 6% of 2022 bonds from Venezuela in May.  After advancing $2 billion to Venezuela in 2016, Rosneft's second quarter 2017 financials reveal that Rosneft advanced another $1.015 under the "PDVSA crude oil purchase contract" in April.

There's also the CITGO situation, where Russian creditors have claims on half of the company's assets, given that the nominal owner, PDVSA, the Venezuelan state oil company, repeatedly put the marketing and refining operation in the States out as collateral if they default on debt — which they did.  In 2017, the CBS story was this:

WASHINGTON — U.S. Treasury Secretary Steven Mnuchin has acknowledged for the first time that federal officials will scrutinize a deal that could lead state-owned Russian energy giant Rosneft to taking a large stake in U.S. oil company Citgo.

Senator Bob Menendez, D-New Jersey, on Thursday asked Mnuchin about the deal, which CBS News first reported on in March, during the Treasury Secretary's testimony before the Senate Banking, Housing and Urban Affairs Committee. In November, Rosneft issued a loan to to Venezuela's PDVSA, which owns Citgo. PDSVA is financially troubled, and if it goes under Rosneft could end up with a 49.9 percent stake in Citgo. 

Menendez noted that additional transactions could give the Russian company majority control over Citgo, which operates three pipelines and three refineries in the U.S.

The Treasury Department is blocking this to keep Russia from taking over the CITGO filling stations among other reasons, but things may not stay this way, particularly if the U.S. drops sanctions to buy Venezuelan crude.

By January 2022, OilPrice.com reported:

The Treasury Department extended a moratorium on transactions on a bond issued by the U.S. arm of Venezuela's PDVSA, Citgo, for another year in the latest move to shield the company from creditors trying to take it over.

According to Bloomberg, this is the longest extension of the ban so far.

AFP recalls that control of the U.S. business of PDVSA was handed over by the Trump administration to the Venezuelan opposition led by Juan Guaido in 2019 after a round of new sanctions against Caracas. It is as part of efforts to keep Citgo in Guaido's hands that the ban on transactions was extended.

The complicated situation that Citgo is in right now is a result of PDVSA using the U.S. business as collateral for a lot of loans. One such loan made Russia Rosneft, for example, eligible for effectively taking over Citgo if the debt was not repaid — something U.S. authorities have vowed never to allow.

As of 2019, Forbes noted that Russia was indeed attempting to take over Venezuela's oil:

A story in Venezuela's El National newspaper is making the rounds in Russian media — reporting that Russian oil giant, Rosneft, is planning on taking over Venezuela's National Oil Company PDVSA (Petróleos de Venezuela). In exchange, Russia is rumored to be offering debt relief to the struggling Latin American Country.

According to Russian business news outlet, VestiFinance, Russian experts have already visited Venezuela to evaluate the state of PDVSA and the possibility of a deal. There are rumors that any Russian takeover of Venezuela's crown jewel would include a drastic reduction of the company's staff — from 70 thousand employees to 35 thousand.

The prospects of a Russian buyout of Venezuela's economic engine illustrates the dire state of the Chavista Regime's economy and the hard-hitting impact of U.S. sanctions. But details beyond this are scarce. While Russian media outlets have reported positive reactions from Moscow, Rosneft and the government of Venezuela both continue to deny all knowledge of the potential takeover.

All of this points to a hard reality that Russia has its hands all over in Venezuela's crude oil — the very crude that the Biden administration is proposing to buy in lieu of restoring U.S. and Canadian energy development, which, by the way, can come online within a quarter, while Venezuela's raddled energy production state will take years to restore.

It's quite likely that with Venezuela not producing much crude based on its desiccated state, the Russians will slip in their own oil to their Venezuelan entities and brand it Venezuelan oil.  If not, they'll still take home the cash — because they own so much of it already.  So much for halting "Putin's war machine," as Old Joe assured us.

Putin is snickering.

Image: Mike Mozart via Flickr, CC BY 2.0.