News
How a vast network allowed Venezuela to evade US oil sanctions
18 Jun 2021

By Javier LaFuente, Elías Camhaji, Zorayda Gallegos, Georgina Zerega, Roberto Deniz and Ewald Scharfenberg, El País, 16 June 2021

El País — On March 7, 2019, Venezuela was plunged into darkness. What most assumed was just another blackout lasted an hour, then another, and continued: one day turned into two, and then three. President Nicolás Maduro immediately blamed an act of sabotage by the United States, but his administration also quickly and quietly contacted a group of partners, many of them Mexican, that it has worked with for decades. What they agreed might have appeared at first to be a fix for Venezuela’s energy woes, but it has transformed into something much larger: an international network operating under the guise of humanitarian aid to move huge amounts of oil, money and other resources, including gold, coal and aluminum. The aim, which has largely succeeded, was to avoid sanctions imposed by the United States.

An investigation by EL PAÍS and Armando.info can now reveal how this scheme involving dozens of people and companies across 30 different countries moves money through tax havens. The evidence collected from thousands of documents and dozens of interviews, including some of those involved in this multi-million dollar business, sheds light on how this opaque network was created and how it later expanded. Most sources spoke on condition of anonymity due to fear of reprisals.

The origins of the scheme stretch back to the sanctions imposed on Venezuela since 2014, mostly by the US, against “those responsible for significant acts of violence, serious human rights abuses, or antidemocratic actions” in the country. Pressure on the regime was ramped up in January 2019, when the US recognized opposition leader Juan Guaidó as interim president. The Donald Trump administration went on to impose sanctions on Venezuela’s state oil company (Petróleos de Venezuela, S.A., or PDVSA) and the central bank, in a failed attempt to pressure Maduro to leave power.

A month after Venezuela’s energy meltdown, Vice-President Delcy Rodríguez picked up the phone and called a group of Mexican business associates who were well placed in the energy sector. The idea was supposedly to discuss the acquisition of generators of a type used in the Iraq War, in order to alleviate Venezuela’s electricity shortages. But from the first trip the businessmen made to Caracas, it was clear that the intention was to create something much bigger. Several members of the Venezuelan government and operators of the Chavista regime sowed the seeds of an international plot to generate money that would leave no trace.

Today, sanctions are a bargaining chip used between the opposition and the Maduro government to find a way out of the country’s long-running political crisis. Sanctions have reduced the government’s ability to do business with many companies over fears of retaliation by the US Treasury Department. In a country with one of the world’s largest oil reserves, PDVSA is Venezuela’s main source of foreign-exchange earnings. When PDVSA suffered from a shortage of revenue that the government badly needed, the administration resorted to paying in crude instead of cash.

The scheme first exchanged oil for food and water tankers, but then expanded to earn money from exports via financial networks beyond the reach of the United States. All those involved in the scheme are linked to one person: Alex Saab. He is allegedly Maduro’s front man and is currently in Cape Verde, awaiting extradition to the US to be tried on money-laundering charges. In Caracas, Vice-President Rodríguez was instrumental in activating the Mexican connection. Her brother Jorge is currently the president of Venezuela’s National Assembly, and together they form a power duo that has replaced former parliamentary speaker Diosdado Cabello as the unofficial second-in-command in Venezuelan politics. In April 2019, following the mass blackouts, Rodríguez organized a series of meetings between government officials and pro-Maduro facilitators on one side, and Mexican businessmen on the other. This latter group included José Adolfo Murat, an entrepreneur and politician. The vice-president had met these individuals at international political gatherings such as the Forum of Biarritz.

Former economy minister Simón Zerpa (now facing accusations of disloyalty) attended a discussion about acquiring drinking-water tankers, and enquiries were made about securing a favorable spot in the Mexican port of Veracruz that would act as a gateway to send and receive large shipments in and out of Mexico.

The next meeting in Caracas was attended by Ricardo Morón and José Luis Sandoval. Morón was sanctioned by Washington in July 2020 for aiding President Maduro’s son, Nicolás Maduro Guerra, in his illicit business activities. A US Treasury Department statement says Morón and his brother Santiago “are trusted partners of Nicolas Maduro and his son”. Sandoval, meanwhile, is a PDVSA official who mooted the possibility of trading wheat and corn through Colombia, with the price set and payment made in gold. Present at yet another meeting was Omar Nassif, the brother of a businessman who is close to Vice-President Rodríguez. Nassif suggested moving foodstuffs through Colombia while conducting financial transactions via Hong Kong, and assured the assembled company he had some trusted suppliers in Mexico. Nassif had also participated in the CLAP food distribution scheme touted by Maduro in Venezuela, which has also been mired in corruption allegations.

The name of Alex Saab crops up again. Saab “personally profited from overvalued contracts, including the [Venezuelan] government’s food-subsidy program,” the US Treasury Department has said, and between 2016 and 2018, Saab and his fellow Colombian Álvaro Pulido Vargas – whose real name was Germán Rubio; he changed it after being involved in a drug operation in 2000 – came up with the idea of a network of shell companies in Hong Kong, Turkey and the United Arab Emirates. These companies became linked to the Venezuelan scheme, and one of Saab’s advisors met with the Mexican businessmen in Caracas.

Read more at El País

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet

FREE CPD Wallet