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.
Tue, 11/19/2019 – 13:30
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Author: Tyler Durden