US quarantine targets Venezuela’s $8bn oil black market

The United States is moving to close off Venezuela’s shadow oil trade by targeting a sanctioned tanker fleet that carries most of the country’s crude exports, threatening revenue and deepening the country’s economic crisis, reported The Wall Street Journal on December 17th.

The United States (U.S) is enforcing a partial oil quarantine on Venezuela, targeting a network of sanctioned tankers that carry about 70% of the country’s oil exports, officials said, in a move that could slash Venezuelan revenue by $8 billion a year.

For years, Venezuela has relied on a fleet of aging vessels to evade crippling U.S. sanctions, a strategy similar to those employed by Russia and Iran. This involves tactics such as ship-to-ship crude transfers, false flags, and turning off transponders to conceal the origin of shipments. The system has allowed Venezuelan leader Nicolás Maduro to continue selling oil to mostly Asian buyers, often paid for in cryptocurrencies, maintaining a lifeline for his government and personal wealth.

“Losing access to that network of ships would reduce Venezuelan revenue by some $8 billion a year,” Venezuelan economist Asdrúbal Oliveros said on public radio.

The U.S military has begun enforcing what officials describe as a quarantine rather than a full blockade, allowing legal tankers free passage while targeting sanctioned vessels. At least one tanker has already been seized, and some ships have turned away to avoid the U.S Navy flotilla in the Caribbean. Currently, about 75 tankers are loitering in Venezuelan waters, with roughly half on the Treasury Department’s sanctions blacklist. About two dozen of these vessels are regularly used to export crude oil.

President Maduro has condemned the U.S measures, calling them an attempt to overthrow his government and seize Venezuela’s oil reserves. “The trade of our oil and all our natural resources will continue, going there and coming here,” he said in a speech. “For centuries and centuries, the sovereign people of Venezuela will be the absolute owner of the land, the soil and all of its riches.”

Venezuela’s national oil company said that shipping continues “with full insurance, technical backing and operational guarantees.” Western diplomats in Caracas reported that the company told them the Venezuelan navy would escort tankers into port.

Analysts warn that stricter enforcement could devastate the country’s already fragile economy. Cutting off hard-currency inflows would worsen food and fuel shortages in a largely import-dependent country, while exacerbating inflation.

The U.S has stepped up military activity off Venezuela, including over 20 strikes on suspected drug-carrying boats, killing scores of people. Navy destroyers, helicopters, and special forces are reportedly prepared to intercept noncompliant tankers.

Bryan Clark, a naval strategist at the Hudson Institute, explained: “The Navy has a whole process for how you go up alongside a ship… If the tanker doesn’t comply, more active measures can be employed, such as blocking the ship from its destination. You don’t anticipate any resistance, because these tanker operators are just people hired to operate tankers, and there’s nothing for them to gain if they fight off one of these inspection parties.”

Some tankers have already altered their routes in response. The ‘Bella 1’, a vessel previously sanctioned for transporting Iranian oil, made an abrupt U-turn and redirected toward Curaçao. On November 29th, the ‘Star Twinkle 6’, a Panama-flagged tanker carrying 830,000 barrels of Venezuelan oil, began loitering in the Caribbean after being sanctioned for transporting Iranian crude.

Experts said that enforcing a quarantine or blockade is difficult and could take time to have a full impact. “Maduro may only blink if the threat of military action is credible,” Nicholas Watson, director at the risk consulting firm Teneo, said.

With the U.S. tightening controls over Venezuela’s shadow oil market, the country faces the prospect of a historic disruption to its exports, a major blow to both Maduro’s personal fortune and the already struggling national economy. The situation highlights the increasing use of U.S. military power to enforce sanctions and the growing challenges facing countries that rely on clandestine networks to bypass financial restrictions.

The Wall Street Journal, Maghrebi.org