This Is How Russia Keeps Venezuela Exporting Oil Despite US Sanctions

With a little help from Rosneft under-siege Venezuela still manages to sell 500,000 bpd monthly ran a fascinating article explaining Venezuela still manages to export about 500,000bpd of oil monthly, about half of it picked up by tankers which opt to switch off their transponders, and often unload their cargo just before their Asian destination ports in ship-to-ship transfers. However the most valuable bit of information was the bit explaining the Indians which are the largest market for Venzuela’s heavy and sour crude notionally do not pay in dollars, but instead in fuel:

Both the Russian company and the operator of the Dragon told Bloomberg that they have not violated any sanctions. One way Rosneft is doing this is by selling the oil on and getting paid in fuel. This is how India has been getting some of its Venezuelan oil shipments despite pressure from Washington to cut these imports off completely.

Combined with what we already knew this means we have a full picture of how with the assistance of Russia and using some acrobatics Venezuela keeps exporting oil despite a huge fear of secondary US sanctions on the account of its customers. This is how it works:

1. Russia’s state-owned corporation Rosneft extends a line of credit to Venezuela (PDVSA).

2. Venezuela transfers ownership of its oil as it is produced to Rosneft.

3. Tanker ships, mostly from third countries, and often with transponders switched off, pick up the oil in Venezuela, and take it to markets in Asia, chiefly India.

4. Indian refineries take posession of the notionally Rosneft oil in ship-to-ship transfers, and settle the bill by transfering ownership of their refined fuel to Rosneft.

5. Rosneft sells the Indian fuel on the open market without ever taking physical delivery thus recouping its credit to Venezuela.

In this waym Indian refiners are neither buying oil from US sanctioned Venezuela nor paying for it in US currency so Washington so far can’t touch them. All thanks to willingness of the Russians to take crude for dollars on one end, and then fuel for crude on the other.

The scheme arose from a practical problem of how to repay Venezuela’s massive $6 billion debt to Rosneft but it wold be advantageous for Caracas and Moscow both to continue it even once the initial loan is repaid — which will be soon as it is already down to under $1.1 billion.

Venezuela Is Using Invisible Oil Tankers to Skirt Sanctions

U.S. sanctions on Venezuela have been squeezing the life out of its economy in an attempt to remove the government of Nicolas Maduro from power, but so far those sanctions haven’t been entirely successful. The reason: Venezuela is still exporting oil.

So far in November, according to OilX data, Venezuela has exported an average of 530,000 bpd, up from 523,000 bpd in October.

Bloomberg reports, citing shipping data, that Venezuela had loaded almost 11 million barrels of crude in just the first 11 days of November, which is more than twice as much as it did in the same period last month. Most of the oil seems to have gone to India and China, with half of the vessels transporting it turning their transponders off to avoid detection.

This is the now-standard tactic used by Iran to export its oil amid U.S. sanctions, too. Turning off the geolocation device is what Iranian tankers do when they leave port—or in the open sea—and they only turn them off when they approach their port of destination. This and ship-to-ship transfers have helped Tehran continue taking in oil revenues despite the sanctions.

These same tactics are being used by Venezuela now as well.

Venezuela’s crude oil production in September averaged just 644,000 bpd, according to OPEC’s latest Monthly Oil Market Report. That’s down from 727,000 bpd in August and an average 975,000 bpd over the first half of the year.

In September 2018, Venezuela was pumping more than twice the October level, at 1.354 million bpd.

This goes to show that sanctions are working to curb oil production, but they have not been able to stifle Venezuela’s exports to zero. The country has oil-for-cash agreements with China and Russia, and although it struggles to repay this debt with its limited amount of oil, it is paying down some of it—apparently without violating any sanctions.

One vessel Bloomberg’s data detected recently was the Dragon—a Liberian-flagged Very Large Crude Carrier, whose last GPS signal came off the French coast. The tanker, however, turned out to be offshore Venezuela where it loaded 2 million barrels of local crude for Russia’s Rosneft, one of Caracas’s biggest creditors.

Both the Russian company and the operator of the Dragon told Bloomberg that they have not violated any sanctions. One way Rosneft is doing this is by selling the oil on and getting paid in fuel. This is how India has been getting some of its Venezuelan oil shipments despite pressure from Washington to cut these imports off completely.

So, there are many ways to avoid detection from sanction-prone parties at sea and Venezuela has been using them, like Iran.

The practice of transponder switch-offs has become even more popular recently, after Washington slapped sanctions on several Chinese shippers for violating its sanctions against Iran. Meanwhile, China’s oil imports from ship-to-ship transfers soared threefold in September, with a lot of the oil coming from either Iran or Venezuela, according to analysts.

Venezuela is certainly having no fun in trying to keep its oil industry going amid sanctions and the decay that follows years of underinvestment in field and equipment maintenance. Yet the most fundamental truth of basic economics is helping it trudge along: for as long as there is demand, there will be supply.

There is still demand for Venezuelan oil, and until it’s there, Venezuela will find ways to ship the oil abroad.

The Moscow Times:

Rosneft Becomes Main Trader of Venezuelan Crude Oil, Helping to Offset Pressure From U.S. Sanctions

Russian state oil major Rosneft has become the main trader of Venezuelan crude, shipping oil to buyers in China and India and helping Caracas offset the loss of traditional dealers who are avoiding it for fear of breaching U.S. sanctions.

Trading sources and Refinitiv Eikon data showed Rosneft became the biggest buyer of Venezuelan crude in July and the first half of August.

It took 40% of state oil company PDVSA’s exports in July and 66% so far in August, according to the firm’s export programs and the Refinitiv Eikon data, double the purchases before sanctions.

Three industry sources said Rosneft, which produces around 5% of the world’s oil, is now taking care of shipping and marketing operations for the bulk of Venezuelan oil exports, ensuring that PDVSA can continue to supply buyers.

Rosneft used to resell volumes it bought from PDVSA to trading firms and was less involved in marketing.

Now it has started supplying some PDVSA clients  Chinese and Indian refineries  while trading houses such as Swiss-based Trafigura and Vitol have walked away because they fear they could breach secondary U.S. sanctions, according to six trade sources.

Trafigura and Vitol declined to comment.

Rosneft and PDVSA did no respond to requests for comment.

Oil accounts for more than 95% of Venezuela’s export revenue and Washington has warned trading houses and other buyers about possible sanctions if they prop up Caracas.

The United States and some Western governments have recognized Venezuelan opposition leader Juan Guaido as the country’s rightful head of state and are seeking to oust the current socialist President Nicolas Maduro.

A State Department spokesman said the United States “has put foreign institutions on notice that they will face sanctions for being involved in facilitating illegitimate transactions that benefit … Maduro and his corrupt network.

“We will continue to use the full weight of U.S. economic and diplomatic power to complete the peaceful transition to a once-again free, prosperous and stable Venezuela.”

Moscow is one of Maduro’s closest allies and has provided military support to his government as well as billions of dollars in loans and equipment.

“Rosneft has been dealing with Venezuela’s crude directly, fixing vessels and offering it to end users”, a source with an oil trading firm said.

Rosneft is not in breach of U.S. sanctions because it takes oil as part of debt servicing agreements after lending Caracas money in previous years.

PDVSA lowered its outstanding debt to Rosneft to $1.1 billion by the end of the second quarter this year from $1.8 billion at the end of the first, the Russian company said Wednesday.

The sources said most deals between the two do not involve cash. Those that do are processed in euros rather than in U.S. dollars to cover Venezuela’s debt to Rosneft.

Russia and China have called U.S. sanctions against Venezuela unilateral and illegal.

Last week, Washington imposed new sanctions on Venezuela, threatening to take measures against any firm “materially assisting” Maduro’s government.

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  2. Mary E says

    The US is putting sanctions on Venezuela against international law because Washington is obsessed with taking Venezuela’s oil in a criminal and audacious act of thievery.
    Good to know that Russia and others have been cunning enough to bypass Washington’s sanctions and do what they have to do anyway. These new sanctions are trying to do away with that by using word ‘materially assist’….Where do those people think they got their power to control the world supply of oil?? The US worked its tail off to be top oil producer in the world and they aren’t happy with that?? Maybe it is because most of the oil they are producing is costing more than they can get for it….
    those stupid, ignorant, greedy Americans! They can just go their own way and no one would mind!

  3. Rowdy-Yates says

    So why sanction Venezuela? it is not because her economy is Socialist or that her Socialism is not panning out as well as Caracas planned. If that was the reason then over 60% to 70% of the world’s economies would also qualify for sanctions due to bad performance.

    The only conclusion I can arrive is that Venezuela under both Chavez and Maduro took a strong anti Israeli stand. Chavez went so far as to demand from the UN that Israel stand for crimes against humanity. Both Chavez and Maduro are pro Palestinian and this is the reason Obama slapped sanctions which Trump has increased. It is a political reason to oust Maduro.

    Back in 2007 Chavez not only nationalized the oil industry but booted out the American oil companies. A Pro Palestinian Venezuela with her oil reserves has the capacity to manipulate global oil prices in a similar manner to Saudi Arabia but do so against the American oil industry.

    1. CHUCKMAN says

      I wouldn’t doubt that that represents a part of the motive. Remember, Israel is part and parcel of America’s empire, a highly privileged and influential imperial colony in the Middle East.

      However, the United States has done many ugly interventions over the matter of socialized governments or nationalized industries.

      And it very much does want to reclaim Latin America for the Planter Class which cooperate historically so well with its policies.

      The Lima Group is just part of an effort to drive new groups of “bad guys” from the continent.

      Look at the new pressures on Cuba, Nicaragua, the coup in Bolivia, and the change in government in Brazil, which was certainly precipitated with behind-the-scenes management by CIA and State Department.

      The United States is being hyper-aggressive now across Latin America.

      I do wish the mass of Americans raised some objections, but they don’t really.

      Coups, interventions, and wars over such matters seem just fine with the large majority of Americans, people who have no investment with what the elites are doing but side with them through emotions conditioned by decades of disinformation and propaganda in their press and from their politicians, including both parties.

      Look at the pathetic Elizabeth Warren’s statements on the subject. Some liberal.

      And a recent American poll shows a large majority of Americans supporting such interventions.

      Minding your own business and civility and respect for rule of law just are not fundamental American values.

      They are qualities vaguely associated with sissies and losers and the unpatriotic. Such attitudes reflect lifetimes immersed in the environment generated by corporate press, financially-compromised politicians in both parties, countless “think tanks” and promotional organizations supported by billionaires and corporations, the work of ugly outfits like the FBI, and just the intense hype of the Cold War, something which still echoes rather loudly in America.

      It really is a huge, not-so-subtle hate campaign on a continuous basis. Indeed, now with Trump and his close associates it has burst out with some renewed vehemence. Imagine, just quietly accepting the fact that America, on at least two occasions, turned off all the fridges of Venezuela’s millions of ordinary people with attacks on the power grid? And also turned off the power for all kinds of life-saving machines? And its harsh embargo starves people and deprives them of medicine.

      I’ve thought most of my life that a fundamental lack of empathy was savagely displayed by the American population during the Vietnam War.

      Some tears and demonstrations for the 60 thousand of their own dead (a relatively tiny number over a 10-year war) while ignoring completely a true holocaust of about 3 million killed, a holocaust which included leaving behind a landscape of bomb craters and landmines and just saturated with poisons like Agent Orange.

      Even making a hero of someone like John McCain, a lifelong nasty piece of work who was bombing civilians in a city when he was shot down. But the establishment required some symbol of American sacrifice given all that wilful horror and destruction inflicted on others for no reason, so a fake hero was manufactured.

      Just a complete hell created for what? And you can even add to the toll, the million or so horribly killed by the Khmer Rouge in Cambodia. Those monsters were enabled to take control because of America’s constant interference in the country’s strictly neutral government, resulting in its collapse. And America never lifted a finger against “the Killing Fields.”

      All that done in the name of the American people. And against the vague and meaningless threat of others’ belief in a different economic system. However mistaken that belief might have been, the incineration of millions was hardly helpful. It wasn’t even sane. It represented the mass burning of witches at the stake.

      And the impulse remains alive in America.

      It represents the unavoidable corruption of near-absolute power. Exceptionalism. I’ll do it because I can, and I want to. A drummed-up Patriotism almost as poisonous as the fascism of 1930s’ Europe.

      Indeed, an eminent American journalist and historian, who reported on the rise of Hitler, William L Shirer, said once that perhaps America would be the first country to go fascist voluntarily, so evident at the time were sympathetic voices and acts in American society.

      1. Mary E says

        The Americans who think that the US invading countries that possess the majority of oil in the world is ok because ‘we’ as Americans have to have it are totally ignorant..thinking that all that invading and plundering of another country’s natural resources is just fine because it is for Them, the People.. Really?
        Uh, think again, people, the US military works for the corporations, not You!…so get over it! Truly, isn’t this just the result of the dumbing down of the American educational system? Putting those dummies in the position of having to join the military because it is fast becoming the only place to get a half way decent paying job with some benefits…And those same Americans grew up with war movies and the adoration of the ‘tough guy’ government telling them that their country (ie; them) rules the world and they are helping that cause….sick, sick , disgustingly so! Sort of reminds one of Hitler’s Germany and Mussolini’s Italy in the old days….
        and Elizabeth Warren stating that she is all for a Venezuelan coup has just lost her lots of votes, including mine. She just isn’t thinking – but is using corporate money now, obviously.

      2. Rowdy-Yates says

        If subjugating central and South America to some form of Imperialism is a motive it will completely fail. Demographics are not on America’s side
        Roman Catholicism is the faith of central and S. America whose population is over 700 million and has the fastest pop growth rate.
        they are also the largest migrants to America. Which means in the next few decades America is going to emerge as a Catholic dominated Hispanic nation.
        when you take the pop drop among Protestants then the effect is multiplied
        That means American politicians and leaders will be Hispanic Catholic Americans whose roots lie just a few thousand miles south of the border’America’s focus will shift to the New world because its Hispanic Catholic leaders want that. it will move away from the Eurasian old world
        but here comes the conflict. For 2 thousand years European Jews and the Catholic church conflicted. Hispanic Catholics are also not burdened by the Slave history of America. they do not care about the Holocaust narrative and their allegiance is also with the Pope.
        Again Israel is on borrowed time.

        1. Mary E says

          Boy, I hope you have got that right!!

    2. Mary E says

      There is the key: Pro Palestininan! Therein lies the reasoning of the US… Evil Empire must become irrelevant and soon…..

      1. Rowdy-Yates says

        America is not an Empire or ever has been. it is a provincial nation with backward people who just happen to have money which they are losing.

  4. Charles Homer says

    As shown in this article, it is interesting to note that Russia has recently implemented a method of working around using the U.S. dollar for certain significant oil transactions:

    This is yet another in a long line of unintended consequences of Washington’s poorly executed foreign policies.

    1. Mary E says

      The undereducation of Americans is showing!

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