FILE PHOTO: Supporters of Venezuela's President Nicolas Maduro hold anti-trump banners during a rally against the U.S. sanctions on Venezuela, in Caracas. Photo: Reuters
Read more at https://www.todayonline.com/world/special-report-vast-amounts-venezuelan-oil-are-hidden-en-route-china-bypassing-us-sanctions-1
https://www.reuters.com/article/us-venezuela-oil-deals-specialreport/special-report-how-china-got-shipments-of-venezuelan-oil-despite-us-sanctions-idUSKBN23J1N1
CARACAS/MEXICO CITY (Reuters) - Last year, China replaced the United
States as the No. 1 importer of oil from Venezuela, yet another front in
the heated rivalry between Washington and Beijing.
The United States had imposed sanctions on Venezuela’s state-owned
oil company as part of a bid to topple that country’s socialist
president, Nicolas Maduro. U.S. refineries stopped buying Venezuelan
crude. Caracas’ ally China, long a major customer, suddenly found itself
the top purchaser. Through the first six months of 2019, it imported an
average of 350,000 barrels per day of crude from Venezuela.
But
in August, Washington tightened its sanctions on Venezuela, warning that
any foreign entity that continued to do business with the South
American country’s government could find itself subject to sanctions.
State-owned China National Petroleum Corp, known as CNPC, stopped
loading oil at Venezuelan ports that month. China’s import data showed
purchases started to slow, and by late 2019, abruptly stopped.
China’s
largest oil company, like customers in some other countries, seemed to
be knuckling under to U.S. President Donald Trump’s threats, despite
Chinese President Xi Jinping’s professed support for Maduro.
But
China never stopped buying. Crude from Petroleos de Venezuela SA, or
PDVSA, kept arriving at Chinese ports with the help of a
Switzerland-based unit of Rosneft, Russia’s state-owned oil company, and
a roundabout delivery method that made it appear as if the oil’s origin
was Malaysia, Reuters has found.
Between July 1 and Dec. 31,
tanker ships delivered at least 18 shipments totaling 19.7 million
barrels of rebranded Venezuelan crude to Chinese ports, Reuters
determined. That finding is based on a review of ship-tracking data,
internal PDVSA documents and interviews with four petroleum analysts who
have tracked flows of Venezuelan oil around the globe.
A unit of
CNPC chartered at least one of those tankers, meaning it was
responsible for the oil aboard, the ship-tracking data show. That
vessel, called the Adventure, took on Venezuelan crude on July 18 and
discharged it in China on Sept. 4, the data show. No charter information
was available for the other ships that offloaded crude in China.
CNPC did not respond to requests for comment.
Those
18 shipments represented more than 5% of Venezuela’s total exports in
2019, worth around $1 billion at market prices for the country’s
flagship crude grade, known as Merey, based on OPEC figures. The sales
provided much-needed support to Maduro’s government, though Reuters
could not determine how much was added to state coffers; PDVSA often
sells its crude at steep discounts, and some of its sales go to pay down
debt rather than generate cash.
The mislabeled shipments have
continued into this year, Reuters found. The review used data available
on financial information provider Refinitiv Eikon, photos culled from
satellite imagery and Automatic Identification System (AIS) data
transmitted by oil tankers. New York-based Refinitiv is part-owned by
Reuters’ parent company, Thomson Reuters.
The shipping method -
involving the transfer of oil between tanker ships at sea – has for
months been under scrutiny by the Trump administration. Washington in
February slapped sanctions on Rosneft Trading SA, the Geneva-based
subsidiary of Rosneft (
ROSN.MM),
which it alleges was helping Venezuela to export its oil using
so-called ship-to-ship (STS) transfers to mask the true origin of the
crude. Rosneft denied wrongdoing.
“The Company has always been
conducting and is conducting its business in full compliance with
applicable international legislation,” Rosneft said in a June 5
statement in response to questions for this article.
Russia’s energy ministry did not reply to a request for comment.
China’s
indirect imports of Venezuelan crude fall into something of a gray
zone, according to Peter Harrell, a sanctions expert at the Center for a
New American Security think tank in Washington.
Harrell believes
U.S. sanctions give Washington authority to punish foreign companies
that purchase PDVSA oil through a middleman - particularly if the
company “knows or should have known it was Venezuelan crude.” But that
does not obligate the U.S. government to act.
“At the end of the day, these sanctions are fundamentally policy calls,” Harrell said.
Reuters could not independently verify if China knew the oil that reached its shores via Rosneft Trading came from Venezuela.
The U.S. Treasury Department, which enforces trade sanctions, declined to comment.
Asked about the Reuters findings, Elliott Abrams, the U.S. State
Department’s special representative for Venezuela, said in an interview
that potential U.S. sanctions against Chinese companies purchasing
transshipped crude were “on the table.”
“We will be taking individual actions with respect to STS transfers,” Abrams said.
China’s
General Administration of Customs did not respond to requests for
comment. The Foreign Ministry told Reuters there was nothing improper
about China’s dealings with Venezuela. The ministry said U.S. sanctions
had “severely affected” relations between Venezuela and the rest of the
world, but said Beijing intends to continue trading with the country.
Neither
PDVSA, Venezuela’s Oil Ministry, nor the Information Ministry - which
responds to media inquiries on the government’s behalf - responded to
requests for comment. Venezuelan officials have repeatedly described
U.S. sanctions on their country as illegal and unilateral.
Oil
analysts since last year have said Venezuelan oil was making its way to
China by way of STS transfers. This account is the first to reveal the
extent of those shipments and demonstrate how systematic the tactic has
been. Reuters also reviewed internal PDVSA documents that showed the
Rosneft unit was involved in moving the oil.
So much PDVSA oil
was shipped to China this way that the country’s total 2019 imports of
Venezuelan oil averaged 283,000 barrels a day. That’s 24% higher than
the 228,700 barrels a day reported by Chinese customs, according to
Reuters calculations based on comparisons of the Refinitiv Eikon data to
official Chinese customs data.
That was not enough to offset
entirely the impact that U.S. sanctions had on PDVSA; U.S. refiners were
importing an average of 500,000 barrels per day when the sanctions were
imposed in January 2019. But it helped Venezuela keep its oil industry
alive at a time when the drop in demand from foreign buyers was creating
a glut onshore, nearly forcing PDVSA to halt production in key oil
fields.
The STS maneuvers mirror tactics that Iran, whose oil
industry is also under U.S. sanctions, has used to ship its oil to China
for years. As Reuters documented in reports in 2019
and 2015, Iranian oil often is labeled as coming from neighboring Iraq.
A
representative of the operator of a Chinese terminal where one such
shipment unloaded in 2019 denied that the origin of the oil was Iranian.
Alireza Miryousefi, spokesman for Iran’s mission to the United
Nations in New York, said in a statement “how we sell or export our oil
is no one’s business.” He said U.S. sanctions on Iran’s oil exports are
“illegal.”
The Chinese shipments of Venezuelan crude were unusual for a variety of reasons, oil analysts said.
STS
transfers typically are used for legitimate purposes - such as
offloading oil from deep-water drilling ships or pumping oil from large
tankers onto smaller vessels that can navigate narrow or shallow
waterways. The use of this technique to transport oil from Venezuela to
China was not seen until the middle of last year, the oil analysts said.
Tankers leaving Venezuela loaded with PDVSA crude did not travel
straight to China as they had in the past. Instead, 15 tankers whose
routes were reviewed by Reuters left Venezuela and first headed for the
coast of Malaysia, tracking data show. A few miles offshore, in the
Malacca Strait, each rendezvoused with a second, empty tanker that had
pulled alongside.
The full tanker then pumped its load into the
waiting vessel, and in some cases into multiple smaller vessels.
Eighteen of those receiving ships then headed to China, where the
Venezuelan crude was offloaded and recorded as a product of Malaysia,
Chinese customs records show.
Reuters could not ascertain who
changed the crude’s labeled origin before it reached Chinese customs,
nor whether doing so expressly violated any maritime laws or local laws
in any applicable jurisdictions.
Michelle Bockmann, markets
editor and analyst at Lloyd’s List, a shipping trade publication, said
the relabeling was highly uncommon. With the exception of Iran, Bockmann
said she could not recall any other instance of crude changing
identities in this way.
The imports were a break from China’s
past practice. China routinely has imported oil from countries such as
Brazil and Russia using STS transfers. But Chinese customs accurately
recorded the true countries of origin in those cases, according to
Chinese customs data and Emma Li, a Singapore-based oil analyst with
Refinitiv.
In addition, Malaysia is a mid-sized oil producer that
has not traditionally sold crude to China in the volumes recorded by
Chinese customs last year, the records show. China’s stated 2019 imports
from Malaysia were 400% higher than levels recorded just three years
earlier, and the highest ever recorded by Refinitiv Eikon, whose figures
date to 2006.
The Malaysia External Trade Development Corporation, the government
agency largely in charge of foreign trade, did not respond to requests
for comment, nor did Malaysia’s state-owned oil company Petronas.
This triangulated trade in Venezuelan oil is now in the crosshairs of the Trump administration.
The
company that lifted the oil from Venezuela for the China shipments
identified by Reuters was Rosneft Trading, according to internal PDVSA
documents reviewed by Reuters. Until late March, it was a major player
in Venezuela’s oil industry. The U.S. Treasury on Feb. 18 hit Rosneft
Trading with sanctions for allegedly helping Venezuela sidestep the U.S.
pressure campaign and sell its oil abroad.
Among the tactics
employed by Rosneft Trading were STS transfers, U.S. officials allege.
By using one ship to haul crude out of Venezuela, then a second to
deliver it to China, Rosneft Trading attempted to blur the chain of
ownership and disguise the oil’s provenance, Abrams, the State
Department’s special representative for Venezuela, told Reuters, without
providing further proof of Rosneft’s intentions.
“The whole purpose is to evade, the whole purpose is to mislead,” Abrams said.
On
March 28, Rosneft announced it was ending its Venezuela operations and
selling all its assets in the country to another, unnamed Russian
state-owned firm.
“Rosneft has no ongoing business involvement,
assets or operations in Venezuela; therefore, there is no subject for
providing further comments,” the company said in its June 5 statement to
Reuters.
The Trump administration, meanwhile, gave Rosneft
Trading customers until May 20 to unwind their contracts with the
company or face U.S. sanctions. Asked whether Chinese customers were
involved in hiding the Venezuelan origin of the crude, Abrams said that
Asian clients often did not care “how it gets to them, what it’s
labeled, as long as they’re getting what they bought.”
China’s Foreign Ministry said in a statement it was not aware of the STS transfers in question.
“The
cooperation between China and Venezuela will be carried out normally no
matter how the situation changes,” the statement read. “It’s legitimate
and benefits the people of both countries and will not be affected by
any unilateral sanction measures.”
Reuters could not ascertain
the final customers for the PDVSA crude in China. But Venezuela’s heavy
Merey blend is a favored feedstock for refineries making asphalt in
China, according to industry sources there.
One of the earliest
STS transfers involved the Adventure, a tanker chartered by a CNPC
subsidiary. On July 18, it took on 1.9 million barrels of Venezuelan
crude from another vessel in Malaysian waters, then headed for China,
Refinitiv Eikon data show.
The manager of the Adventure,
Greece-based Eastern Mediterranean Maritime Ltd, said it had never
entered into any agreement with PDVSA or any company sanctioned by the
United States, and that it “respects and complies in full” with U.S.
sanctions. The maritime company said the cargo’s bill of lading and
certificate of origin said the oil had come from Malaysia.
PIT STOP IN MALAYSIA
Malaysia
is a popular location for STS transfers of crude because of its
proximity to Singapore, one of the world’s largest oil trading and
storage hubs. One of the STS transfers reviewed by Reuters occurred near
Malaysia’s port of Kuala Linggi; the rest took place outside the
country’s Tanjung Bruas port.
To demonstrate how these STS
transfers work, Reuters used records available on Refinitiv Eikon to
reconstruct a shipment to China of 2 million barrels that left the Jose
terminal in northeastern Venezuela on Aug. 5, 2019.
The oil was
carried aboard a Liberia-flagged vessel called the Delta Aigaion,
according to Refinitiv Eikon data and an internal PDVSA document seen by
Reuters. The crude was a heavy blend known as Merey 16, which is unique
to Venezuela, and the customer was listed as Rosneft Trading, the PDVSA
document shows.
The Delta Aigaion sailed to waters off Malaysia
near the port of Tanjung Bruas. There, the crew used a STS transfer to
offload the Merey 16 to another tanker, the Malta-flagged Lipari, on
Oct. 28, according to Refinitiv Eikon data. The Lipari then headed for
China, discharging its crude on Dec. 12 at the port of Zhanjiang, the
data show.
Refinitiv Eikon ship-tracking data shows the location of ships and
indicates how full they are. In this case, the data showed that the
draft of each ship changed dramatically while the two were in the same
location off Malaysia’s coast at the same time. The draft is the
vertical distance between the waterline and the bottom of a vessel’s
hull - a sign of how heavy a load it is carrying. The draft measurements
showed that the Delta Aigaion arrived in Malaysia full and left empty,
while the opposite was true for the Lipari - an indication that an oil
transfer between the two took place.
In a photo taken using a European Space Agency radar satellite and
provided to Reuters by San Francisco-based earth imaging company Planet
Labs, the Delta Aigaion and the Lipari can be seen approaching one
another to start the oil transfer on Oct 28. The authenticity of that
photo was verified by oil industry data provider TankerTrackers.com,
which specializes in satellite image analysis for vessel tracking.
Refinitiv
Eikon retrieves location information from satellite images as well as
from land-based sensors that collect data from ships’ transponders.
Ships are required by international maritime law to carry transponders
to transmit information about their position, speed and destination. The
U.S. government has accused tankers and shipping firms transporting oil
from Venezuela and Iran of manipulating this data to evade authorities,
either by flashing false destinations or simply turning off their
transponders.
The Delta Aigaion, while on its way to Venezuela
in July after leaving its previous berthing in India, never indicated it
was heading to the South American country, Refinitiv Eikon data show.
The tanker listed its destination as “For Orders,” a message meaning it
had not yet received instructions on where to go next.
Delta
Tankers Ltd and TMS Tankers Ltd, the shipping companies that manage the
Delta Aigaion and Lipari, respectively, did not respond to requests for
comment. MMC Corp Bhd and T.A.G. Marine Sdn Bhd, which operate the
Tanjung Bruas and Kuala Linggi ports, respectively, did not respond to
requests for comment.
When the Lipari unloaded in the
southwestern Chinese city of Zhanjiang, Chinese customs labeled the
crude as “Singma blend,” a grade of crude that did not exist in the
market before last year. Customs recorded the country of origin as
Malaysia.
Li, the Refinitiv analyst, said the labeling of the
crude as a blend appears to be incorrect. If the crude were a blend of
different grades - a practice common in the oil industry - the STS
operation would have involved multiple vessels bringing crude from
separate origins, Li said. Ship-tracking data show no indication that
this occurred. “It doesn’t look like there’s any blending,” Li said.
For
14 of the 18 tankers reviewed by Reuters, the grade of crude recorded
by Chinese customs was Singma or Mal, another blend that did not exist
before last year, data compiled by Li show. In other cases, the
Venezuelan crude was given the names of more established Malaysian
grades such as Miri or Kimanis, or was not specified, according to the
data compiled by Li. Merey 16, the Venezuelan blend, was not mentioned.
ROSNEFT EXIT
The
arrival of Venezuelan oil in China via STS transfers continued through
at least the first two months of 2020. During January and February,
Chinese customs once again reported no imports of Venezuelan crude.
However, nearly 130,000 barrels per day of PDVSA oil arrived at Chinese
ports in those two months from seven tankers that had done STS
operations, according to the Reuters review.
With U.S. pressure
on Venezuela rising, it is unclear whether the tactics PDVSA and its
partners employed over the past year to export Venezuelan oil will
remain viable.
Even before it announced its complete withdrawal
from Venezuela on March 28, Rosneft had not lifted any crude from the
country’s ports for around a month. Meanwhile, global oil prices have
plunged in recent months due to a collapse in demand resulting from the
spread of the novel coronavirus. Venezuela’s crude output has dropped by
more than 20% this year to below 700,000 barrels per day.
Still, there are signs the discreet trade will continue.
With
few established oil companies willing to buy oil directly from
Venezuela over fears of provoking Trump, two little-known Mexican firms -
Libre Abordo and Schlager Business Group - recently emerged as the
largest intermediaries for PDVSA crude. The companies told Reuters they
had a deal with Maduro’s government to supply goods, including corn and
water trucks, in exchange for the oil, which they then resell.
The
U.S. Federal Bureau of Investigation has been investigating the two
companies, among others, as part of an inquiry into possible violations
of U.S. sanctions on PDVSA, according to three people familiar with the
matter.
The Mexican firms said swaps of goods for Venezuelan oil
were permitted under U.S. sanctions as long as no cash payments reached
Maduro’s government. The companies said they have no knowledge of any
U.S. investigation into their practices.
On Feb. 11, a
Panama-flagged tanker named the Athens Voyager loaded some 700,000
barrels of crude near western Venezuela’s Amuay oil port, according to
Refinitiv Eikon data. Its customer was Libre Abordo, according to an
internal PDVSA document viewed by Reuters.
On Sunday, April 5,
the fully loaded Athens Voyager arrived at its destination: the Linggi
STS hub off the coast of Malaysia. There it pumped its cargo onto a
Liberia-flagged vessel named the Loyalty A on April 17.
The
manager of the Athens Voyager, Greece-based Chemnav Shipmanagement Ltd,
deferred comment to the vessel’s owner, Marshall Islands-based Afranav
Maritime Ltd. The manager of the Loyalty A, Jacinta Marine Corp of
Lagos, Nigeria, did not respond to a request for comment.
On June 2, the U.S. Treasury Department announced sanctions against
Afranav Shipmanagement for its alleged role in trading Venezuelan oil.
It said the Athens Voyager had lifted oil from Venezuelan ports as
recently as mid-February.
Afranav did not respond to requests for comment.
Libre
Abordo, meanwhile, declared bankruptcy on May 31. It said its
arrangement with Venezuela had been suspended by Maduro, and that it was
the target of an international pressure campaign driven by Washington.
In a June 8 email to Reuters, Libre Abordo confirmed that the
oil transported aboard the Athens Voyager was registered in its name. On
June 10, Libre Abordo said further that the documentation of origin
reflected that the crude came from Venezuela. The company said it sent
the oil to Malaysia, where it was offloaded to another ship at the
behest of the final customer, whose name it would not disclose.
According to Refinitiv Eikon data, the receiving vessel, the Loyalty A, is currently en route to Qingdao, China.
Reporting
by Luc Cohen in Caracas and Marianna Parraga in Mexico City; Additional
reporting by Humeyra Pamuk in Washington, Ana Isabel Martinez in Mexico
City, Aizhu Chen in Singapore, Muyu Xu in Beijing, Joseph Sipalan in
Kuala Lumpur, Michelle Nichols in New York, and Jonathan Saul in London;
Editing by Marla Dickerson
Denver Post via Getty Images 
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