US Sanctions Drive Oil Tankers Away from Venezuela

Washington seeks to choke off Venezuela’s main source of income.


Mérida, June 11, 2020 ( – Oil tankers have turned back mid-sea on their way to Venezuela under the threat of US sanctions.

According to industry sources, Malta-flagged ships Seadancer and Novo reversed course this week. They were scheduled to transport 1 million barrels of crude each to refineries in Malaysia and Singapore, respectively.

In addition, data from Refinitiv Eikon showed that three more very large crude carriers, Boston, Commodore and Respect, left Venezuelan waters last weekend and anchored in the Caribbean.

The moves come in the wake of renewed attempts from Washington to target Venezuela’s oil industry. Last week, Reuters reported that the Trump administration was considering sanctions against dozens of vessels, with an anonymous official quoted saying the goal was to have ship owners consider Venezuela “off limits.”

The threats, coming days after four shipping companies were blacklisted, immediately sent freight rates soaring. An estimated 77 tankers, over 2 percent of the global fleet, have docked in Venezuelan ports since December and are reportedly at risk of US sanctions.

Chinese oil companies are likewise considering not using any tanker that has transported Venezuelan crude over the past year in order to avoid any disruption to operations.

The US Treasury Department has increasingly sought to choke off Venezuela’s main export industry. Following financial sanctions against state oil company PDVSA in 2017, the Trump administration imposed an oil embargo in January 2019 and a blanket ban on all dealings with Venezuelan state entities in August 2019.

Additionally, Washington also resorted to sanctioning vessels and shipping companies involved in transporting Venezuelan oil. In recent months, the measures were escalated with secondary sanctions levied against two subsidiaries of Russian energy giant Rosneft.

Under the weight of punishing US unilateral measures, Venezuelan oil production plummeted from averages of 1.911 million and 1.354 million barrels per day (bpd) in 2017 and 2018, respectively, to an average of 796,000 bpd in 2019. Following months of relative stability, output fell again as a result of contracted global demand, low prices, and renewed US sanctions.

Iran and Venezuela recently defied US threats when Tehran sent five tankers carrying fuel and other refining products. US sanctions prohibiting Venezuela from importing diluents and Rosneft’s departure in March have likewise exacerbated fuel shortages. In addition to the recent shipment, Iran, alongside Chinese experts, is also collaborating in repairing Venezuelan refineries.

Sanctions have increasingly forced Caracas and foreign customers to engage in swap deals, in order to avoid traditional financial circuits. However, the US Treasury has also taken aim at those agreements, recently torpedoing an oil-for-food agreement with Mexican companies.