30 Dec 2020
In June, the United States imposed sanctions on half a dozen oil tankers managed by established shipping firms. It was a major escalation of American attempts to choke off Venezuela’s oil trade.
Within weeks, a little-known company based in the United Arab Emirates took over management of several tankers that had been shipping Venezuelan oil. The vessels got new names. And then they resumed transporting Venezuelan crude.
The company, Muhit Maritime FZE, is one of three UAE-based entities identified by Reuters that have shipped Venezuelan crude and fuel during the second half of this year. Their role emerges from an examination of internal shipping documents from Venezuela’s state oil company as well as third-party shipping and vessel tracking data. Tankers managed by the firms have transported millions of barrels of oil produced by state-run Petroleos de Venezuela SA, or PDVSA, since June, according to the internal documents and a publicly available shipping database.
The activity shows how the UAE, one of Washington’s closest allies in the Middle East, is a hub for companies helping Venezuela skirt American sanctions. Washington hopes to topple socialist President Nicolas Maduro by cutting off the oil-rich nation’s crude exports.
The three companies – Muhit Maritime, Issa Shipping FZE and Asia Charm Ltd – did not respond to letters sent to their listed addresses, or to emails sent to their registered email addresses. Reuters was unable to determine the ultimate owners of the three. Their ownership and management details aren’t listed in the UAE’s publicly-available corporate registry.
The role of the three companies in transporting Venezuelan oil underscores how a raft of little-known entities has filled the void as Washington has sought to deter established buyers and shipping companies from facilitating the South American country’s crude exports.
Hitherto unknown companies surfaced this year as major buyers of Venezuelan crude, Reuters reported in November. Most of those buyers were registered this year by a Moscow-based trading firm. Russia is one of Venezuela’s closest allies.
Now, a similar pattern is emerging with companies involved in transporting the oil. The three UAE entities identified by Reuters have built their fleets since early 2019 with vessels that have since made mainly Venezuela-related journeys, according to Refinitiv Eikon vessel tracking data and Equasis, the shipping database. New York-based Refinitiv is part-owned by Reuters’ parent company, Thomson Reuters.
The three companies’ shipments of Venezuelan crude and fuel represented about 3.9% of the South American country’s total oil exports in 2020 through Dec. 18. That oil was worth around $208.5 million at market prices for the country’s flagship crude grade, known as Merey. Crude sales provide 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 the proceeds go to pay down debt rather than generate cash.
“We are closely tracking these kinds of creative efforts by companies to evade sanctions,” a U.S. State Department spokesman said in response to questions about the UAE-registered firms. “Those behind shell companies would not be wise to consider themselves shielded from sanctions.”
The spokesman declined to comment on possible future sanctions, but added: “U.S. friends and adversaries alike should know that their companies, front companies, and tankers remain vulnerable to sanctions if they are complicit in activities that facilitate PDVSA’s exports abroad and the Maduro regime’s efforts to evade sanctions.”
The UAE government said in a statement that “a thorough and comprehensive investigation is fully underway into” Muhit Maritime, Issa Shipping and Asia Charm. That includes using recent legislative changes “designed to improve corporate transparency through a framework for reporting and registering beneficial ownership,” it said.
“The UAE takes its role in protecting the integrity of the global financial system extremely seriously. This means actively administering and enforcing economic and trade sanctions,” the government added.
A representative of the Fujairah Free Zone, where Issa Shipping and Asia Charm are based, said he was not aware of the two companies’ involvement in transporting Venezuelan oil. He said the authority is not responsible for policing the activities of companies registered there.
The authority responsible for the Jebel Ali Free Zone, where Muhit Maritime is based, did not respond to requests for comment.
Venezuela’s Information Ministry didn’t respond to a request for comment. The country’s oil ministry, its embassy in the UAE and state oil company PDVSA also didn’t respond.
Washington has accused another country under heavy sanctions, Iran, of using Emirati companies to facilitate crude exports. The U.S. Treasury has sanctioned more than half a dozen UAE-based entities this year, alleging they were involved in purchasing or brokering the sale of Iranian oil and petrochemical products in violation of its sanctions, and in some instances falsifying documents to conceal the origin.
Iran’s mission to the United Nations did not respond to a request for comment.
The United States significantly expanded Venezuelan sanctions in the aftermath of Maduro’s 2018 re-election, which was described by the United States and many other Western nations as fraudulent.
In January 2019, Washington imposed trade sanctions on PDVSA, the state-owned oil company. U.S. refineries, which had been the top purchasers of Venezuela crude, could no longer do business with PDVSA.
In early 2020, the United States blacklisted two units of Russia’s state oil company Rosneft that had become key intermediaries for PDVSA. The units stopped lifting Venezuelan crude in March.
Then, in June, Washington sanctioned the vessels that it accused of transporting Venezuelan oil and their registered owners.
Determining who’s behind a tanker can be difficult. Oil tankers often are run by a management firm that is in charge of the crew and can administer freight contracts. The management company can be a separate entity from the registered owner, which is typically a special purpose vehicle that owns just that vessel. But it is also common for the manager to own the special purpose vehicle.
For most in the industry, the main point in using special purpose vehicles is to insulate owners and managers from liability, not avoiding law enforcement. Still, changes to a ship’s ownership and management registrations can blur who’s in control, especially if the vessel is registered in jurisdictions with loose disclosure requirements.
Until recently, companies based in Emirati free zones often weren’t required to disclose beneficial ownership, according to Lakshmi Kumar, policy director at Global Financial Integrity, a Washington-based think tank. Since October, new UAE rules require most types of Emirati companies to disclose beneficial owners to authorities. But the new rules don’t require public disclosure, according to accounting firm PwC.
Among the vessels the U.S. Treasury sanctioned in June was an oil tanker called Euroforce, then managed by Greece-based ship operator Eurotankers Inc. The Treasury later lifted the sanctions on the vessels.
By Luc Cohen and Marianna Parraga, Reuters, 29 December 2020
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