China got oil shipments from Venezuela using an intermediary and a roundabout delivery method that made it appear as if the crude came from Malaysia, despite U.S. sanctions and President Trump’s threats, Reuters review of data found specialreports
FILE PHOTO: China's President Xi Jinping and Venezuela's President Nicolas Maduro attend a signing ceremony in Caracas July 21, 2014. China will provide Venezuela with a $4 billion credit line under an agreement signed on Monday, with the money to be repaid by oil shipments from OPEC member Venezuela. The deal was inked during a 24-hour visit to Venezuela by Xi, who is on a tour of Latin America.
But China never stopped buying. Crude from Petroleos de Venezuela SA [PDVSA.UL], 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.
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 , which it alleges was helping Venezuela to export its oil using so-called ship-to-ship transfers to mask the true origin of the crude. Rosneft denied wrongdoing.
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.
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.”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.
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. 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.
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 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.
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.
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.
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.
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