Venezuela is using “invisible” tankers to secretly export its oil reserves, enabling a renewed uptick in exports that could help President Nicolás Maduro withstand the pressure of international sanctions.
The tankers turn their transponders off before entering Venezuelan waters, Bloomberg revealed in a recent report, allowing them to load crude from the sanctioned state oil company Petroleos de Venezuela SA (PdVSA), without being detected by GPS.
Bloomberg tracked a large tanker named "The Dragon," contracted by Russian state oil company Rosneft. While the ship’s last GPS signal showed it near France in mid-November, it was in fact loading two million barrels of oil in Venezuela’s José port.
Of 10.86 million barrels of oil exported by Venezuela in the first 11 days of November, around half were transported by this method. Most were delivered to China or India, data compiled by Bloomberg showed.
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Venezuela has increasingly resorted to such clandestine methods since US sanctions hit PdVSA in January. In July, vessels were found to be turning off their transponders and changing their names to bypass US controls on Venezuelan oil shipments to Cuba.
The adoption of such methods for exports to Asia follows threats by the US Treasury Department in August to extend sanctions to foreign businesses that “materially assist” the Maduro government. This measure caused PdVSA to lose key international buyers, including the China National Petroleum Corporation, leaving Venezuela with a glut of unsold oil reserves.
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The use of “invisible” tankers goes hand in hand with other covert international transactions through which Venezuela is striving to resurrect its oil industry.
These strategies are already yielding results. Venezuela’s oil exports have bounced back from the new sanctions, from a low point of 770,000 barrels per day in August to 1,037,000 in November, according to Reuters. Although well under a target of two million barrels per day set by the government in August, this uptick has allowed the country to look towards reviving production.
The first tactic is the use of Rosneft as an intermediary for Asian buyers. Although tightened US sanctions dissuaded several Asian companies from dealing directly with PdVSA, Rosneft promptly took up the slack, increasing its take-up of Venezuelan oil from 49 percent in July to over 60 percent in the following months, Reuters reported. The latest Bloomberg investigation suggests that Rosneft’s dark tankers are ensuring that this oil continues to reach Chinese and Indian buyers.
In October, Venezuela's official gazette also announced the government had approved incentives for Rosneft to invest more in the country's offshore gas reserves.
The second is the use of exchanges to obscure purchases of Venezuelan fuel. Reuters reported that two Indian companies, Nayara Energy and Reliance, have paid for Rosneft’s deliveries of Venezuelan fuel with a cut of the oil itself rather than currency, although Reliance has now resumed direct purchases.
The third, currently under discussion, is to pay for supplies to PdVSA in Chinese yuan, bypassing the US financial system, according to multiple Reuters sources in late November. This initiative demonstrates the administration’s eagerness to boost PDVSA’s productivity, at a time when the company has been crippled through mismanagement and hobbled by the impact of US sanctions.
Even a partial revival of Venezuela’s oil industry could have implications for the durability of the Maduro government. Oil sales accounted for 99 percent of Venezuela’s legal export earnings in 2018, according to the Organization of the Petroleum Exporting Countries (OPEC). Loss of this revenue has left the administration increasingly dependent on illegally-mined gold and other illegal economies.
Resuscitating PdVSA would not only increase the regime’s resistance to international pressure, but also strengthen its hand in relation to the irregular armed groups that manage these illegal economies.
However, the boost in Venezuela’s oil exports is unlikely to alleviate the economic crisis gripping Venezuela’s population. Payments for clandestine exports are not going to state coffers, but rather towards repaying debts to Russia and China.