Iran Supplies Venezuela with Crucial Gasoline Shipment

Iran and Venezuela have enough in common with US sanctions slapped on both of them that they have decided to form an oil partnership. Both states have remarkable similarities, each having their heavily dependent oil economies disrupted by the Trump administration. For Venezuela, however, the situation is far worse as President Nicolás Maduro has not only ostracized his nation from the US, but also from Russia.

Buying Time for Venezuela’s Economy

As Venezuelan society continues its slow-motion collapse, Iran has sent five oil tankers as part of a new business relationship. The first, the Fortune, arrived Monday and was hailed as a savior, as the New York Times reported.

“Thanks Iran,” Maduro tweeted on Sunday. He also said that “only the brotherhood of free peoples will save us.”

At first glance, it may seem odd that Caracas needs oil. After all, the state boasts the world’s largest supply of oil reserves. Unfortunately, severe mismanagement by the government and brutal US sanctions that deterred foreign investment have essentially caused all its refineries to shutter.

Venezuela direly needs refined oil, but Iran wins too with the deal by receiving gold. Money seldom flows into Tehran these days after Trump’s sanctions have pushed away most buyers of Iranian oil. The exchange of gold for oil benefits both ailing states.

US Reaction

Understandably, the US is displeased with the news that five tankers sailed around the globe from one sanctioned regime to another, raising questions of what, if anything, the Trump administration will do. America already has a contingent of Navy and Coast Guard vessels in the region that are operating a drug interdiction campaign. However, these ships were not ordered to engage the Iranian tankers.

The Trump administration is likely to let the transgression slide while pursuing the larger goal of unseating Maduro, which it has made little progress toward. In reality, Tehran’s shipment will not be enough to sustain Caracas longer than a month, and there aren’t enough gold reserves for Venezuela to continue the scheme for long. This month’s shipment likely cost $700 million according to Russ Dallen, partner at Caracas Capital Markets, a Florida-based monitoring agency.

If the shipment is a one-time affair, it would make sense for Washington to take care not to overreact. US President Donald Trump hasn’t faired well when he’s tried his hand at foreign policy. Since taking office, he’s managed to escalate tensions with nearly every other nation that he’s tried to secure a deal with — China, North Korea, Iran.

The US–Iran relationship in particular reached new lows this year after the assassination of Iranian Gen. Qasem Soleimani. With only months before the American election, it makes sense to keep the relationship as diplomatic as possible. Furthermore, Iran has made overtures to deescalate tensions since April in ways that would have been unimaginable in January.

Maduro Holds On

The larger issue for the Trump administration is Maduro’s continued hold on the Venezuelan government. In truth, Iran’s economic partnership will help sustain Maduro and is a cause for concern for Washington.

“The president has made clear the United States will not tolerate continued meddling by supporters of an illegitimate regime,” a senior US official said. Trump’s National Security Council also tweeted that the gasoline importation was done in “desperation.”

Washington, while it draws up plans for how to counter continued support of Maduro’s state, is playing the wait-and-see approach. If more tankers make a run for Caracas next month, then American intervention could be likely.

As for Maduro, Washington is burning up its options at a rapid pace. Now it’s left with only economic measures, but those have already been leveraged and by every account working. Trump also put a bounty on Maduro’s head, an incredibly rare move for the US government to do for a head-of-state. That in and of itself is a telling sign that the US really has few options for dealing with Maduro.

Venturing America’s Sphere of Influence

A new issue arises with Iran’s support of Venezuela that could force Washington into action: Tehran’s venture into the Western Hemisphere. For the most part, Iranian influence is limited to the Middle East and Africa. The late Venezuelan dictator Hugo Chavez did sign agreements with Tehran, but little came of them except some foreign investment.

During the recent depression, Iranian companies that did operate in Venezuela pulled out. The recent gasoline shipment marks the first sign of life in the partnership.

“It’s striking that the Iranians feel confident enough that the Trump administration is not going to get in their way and is willing to take this risk and come into what is traditionally thought of as the U.S. sphere of influence,” said Risa Grais-Targow, Venezuela analyst at the Eurasia Group.

Iran, therefore, is taking the largest risk. It has already been in the Trump administration’s sights since his first day in office and he seems to enjoy any excuse to hit Tehran with more sanctions. So far, the US has only condemned the transaction through the US State Department.

“Venezuelans need free and fair presidential elections leading to democracy and economic recovery, not Maduro’s expensive deals with another pariah state,” said spokeswoman Morgan Ortagus.