Confiscated cargo and ships legally warned away on the high seas: how US sanctions are affecting Maduro

In a double blow against two of its biggest enemies, the U.S. government this week seized the cargo of four oil tankers targeted for transporting Iranian fuel to Venezuela.

Meanwhile, tankers carrying nearly two months worth of Venezuelan oil production were reportedly stuck at sea as global refiners dare not take the nation's crude for fear of falling foul of U.S. sanctions, according to Reuters, citing industry sources and shipping data.

The Trump istration continues to ratchet up its campaign of maximum pressure on the outcast regime of Nicolas Maduro, by cutting off his oil revenue, but it remains hard to envisage an endgame that would see him removed from power.

And with elections looming in the United States and Venezuela the tension is only likely to increase in the next few weeks, experts predict.

“There’s always a risk of an October surprise,” said Russ Dallen, a Miami-based lawyer who monitors the Venezuelan oil industry, referring to pre-election political moves designed to impress voters.

Venezuela, as well as Cuba, are top priorities for Donald Trump’s re-election campaign in vote-rich South Florida where Republicans are hoping for a big turnout from conservative Cuban-American voters who are deeply concerned about the socialist menace in Latin America.

“They will keep hammering away at these wedge issues,” said Dallen. Since taking office, Trump has also heaped pressure on Cuba’s communist government, undoing a historic political opening by the previous istration of Barack Obama.

War of attrition

But, Trump’s efforts have been frustrated at every turn by Maduro’s allies, principally China and Russia, who have actively helped Venezuela evade tough U.S. sanctions on its oil exports. U.S. policy towards Venezuela, which intensified last year exciting predictions of imminent victory, has since turned into a painfully slow war of attrition, with no end in sight.

Meanwhile, an estimated five million Venezuelans have fled shortages of gasoline, food and a broken healthcare system.

U.S. officials remain undaunted. The U.S. Special Representative to Venezuela Elliott Abrams told a Senate last week that removing Maduro wasn’t as easy as some may have at first thought. “ Criminal dictatorships like Maduro’s are hard to defeat. The Maduro regime’s relentless attacks on dissidents … demonstrate its obsession with retaining power regardless of the cost to the nation and its people,” he said.
"Obviously we hope that [Maduro] will not survive the year and we are working hard to make that happen," he added.

To be sure, the Maduro regime sometimes appears to be on its last legs. Several of its top leaders have contracted the coronavirus, which this week claimed the life of Darío Vivas, the head of government in Caracas for the ruling United Socialist Party (PSUV).

More worrying for Maduro parhaps, Venezuela oil production fell its lowest since 1929 last month, with no new drilling taking place, according to Dallen’s consulting firm, Caracas Capital Markets. Venezuela’s oil production in July was only 339,000 barrels per day, a drop of 86% since Maduro took office in 2013 when the country produced 2.3 million barrels per day.

“If you don’t drill you die"

Venezuela's daily oil output now represents less than 10% of the 3.5 million barrels it produced in 1998 when the country’s unbroken socialist rule began under the late former military strongman, Hugo Chavez.

The lack of new drilling is also an alarming sign for Maduro, experts say. “If you don’t drill you die,” said Dallen. “Venezuela has lakes of oil underground, but it doesn’t have the oceans of oil that Saudi Arabia is blessed with, so it has to keep drilling,” he added.

The Trump istration has sanctioned more than 50 vessels while urging the maritime industry to improve its vigilance for sanctions-busting activity on the high seas.

At least 16 tankers carrying 18.1 million barrels of Venezuelan oil were stuck at sea around the globe in late June - the equivalent of almost two months of the nation’s output - as buyers shun them to avoid falling foul of sanctions, according to Reuters.

But Venezuela’s state-run oil company, continues to find ways to ship cargo to buyers, almost all located now in China. While U.S. sanctions have succeeded in scaring away the world’s largest shippers from Venezuela’s oil industry, new, less scrupulous players appear willing to take on the increased risks, according to a recent new report by two Washington-based security analysis firms, C4ADS and IBI Consultants.

In the first year since the Trump istration imposed crushing economic sanctions on Venezuela’s oil industry, port calls to Venezuela plunged by 46%, according to the report.

Relying on data from tracking systems that are mandatory on tankers, C4ADS identified 214 vessels that visited Venezuela in the year after sanctions were imposed, but had previously not recently been seen in its waters. Almost half of those vessels visited Venezuela for the first time.

Phantom ships "go dark"

Some ship captains and their employers have responded by turning off their transponders and “going dark” for weeks to hide tankers brimming with crude. The ships then frequently unload their hidden cargo on the high seas in risky ship-to-ship transfers, making it harder for authorities to track their ultimate destination.

While U.S. sanctions “succeeded in reducing the aggregate volume of recorded port calls in Venezuela, persistent dark voyage activity, the continued importance of particular routes, and the entry of new players showed the limits of enforcement,” the report said.

One Russian ship, the Sierra, that recently picked up a cargo of 700,000 barrels of Venezuelan oil, turned off its responder in mid-Atlantic before reaching the South American coast. It went dark for several days until reappearing off the coast of Africa headed for Singapore, a popular destination for ship-to-ship transfers.

Meanwhile, domestic shortages of gasoline have led Venezuela to seek help from Iran, which in May sent five tankers of gasoline to the South American country. Last month, federal prosecutors in Washington filed a civil forfeiture complaint that alleging another sale of Iranian oil to Venezuela via a businessman with ties to Iran’s Revolutionary Guard Corps, a U.S.-designated foreign terrorist organization.

The U.S. Justice Department announced on Friday that it "successfully executed the seizure order and confiscated the cargo" from four vessels, totaling approximately 1.1 million barrels of petroleum. "With the assistance of foreign partners, this seized property is now in U.S. custody," it said.

U.S. officials threatened the ship owners, insurers and captains with sanction to force them to hand over their cargo, AP reported, quoting a U.S. official.

It is not clear where the vessels — the Bella, Bering, Pandi and Luna — or their cargoes currently are. The ship captains weeks ago turned off their tracking devices to hide their locations.

The message to ship owners should be clear, said one U.S. official. “Consider Venezuela off limits,” he said.