Venezuelan President Nicolas Maduro has few allies in the international community, and fewer still who can economically assist his starving nation. When Iran came to his aid by sending oil tankers loaded with gasoline, for a brief moment there was a glimmer of hope for Caracas. Now it is clear how the Trump administration is determined to stop the Venezuelan oil trade.
New US sanctions on shipping companies caused a wave of tankers, some of which were set to retrieve Venezuelan oil, to turn away from the state this week over fears of being blacklisted.
The Trump administration has often used tariffs and sanctions as political tools to punish adversaries. Iran and Venezuela have both found themselves on the receiving end of them. In Venezuela’s case, Washington views Maduro’s presidency as illegitimate. In retaliation, the US has applied the same maximum pressure that it has successfully wielded against Iran to cripple its economy.
After five tankers ferrying gasoline from Iran successfully made port in Venezuela last week, the Trump administration initially took a reserved approach. The US has a contingent of vessels already off the coast of the state to interdict drug shipments, but the American ships were not ordered to stop the fuel shipments.
This week, the Trump administration threatened to blacklist dozens of tankers, as Reuters reported. The mere threat of blacklisting ships has already caused ripples in China, which is considering the possibility of denying to use any vessel that has made port in Venezuela over the past three years.
Washington is Not Backing Down
The threats from Washington also serve to stymie the small trickle of Venezuelan oil that is shipped to a few customers across the globe. The state-owned PDVSA refinery company saw exports fall to 452.000 barrels in May, the lowest point since 2003. Simply put, customers are afraid to accept shipments from Venezuela now over possible repercussions from Washington.
Tipco Asphalt, a Thai refinery company, is making plans to replace a vessel owned by Greek-based Thenamaris Ships Management. It was set to transport 1 million barrels of Venezuelan crude in Malaysia.
Some vessels were already blacklisted two weeks ago. The Seahero, owned by Thenamaris, and the Novo, owned by Dyncom Tankers Management Ltd, were on the receiving end of Trump’s maximum pressure campaign. Refineries often do not own their own fleets so they rent vessels, like the Seahero and Novo. When these become blacklisted, it’s not the refinery companies that are hurt the most, but the shipping companies.
“Anything on the potential sanctions list will just become toxic,” an oil company source told Reuters. “No one will touch it until it’s clear what the rules will be.”
No Trade Partners Left
The move will likely cut off the little help that Iran provided. Venezuela faces dual, competing problems. First, it has a severe gasoline shortage, which is where Tehran came in to help. There were some flaws with the strategy, notably that Maduro raided the state’s gold reserves to fund the shipment. Those wouldn’t last forever, experts warned, and therefore couldn’t be a long-term solution.
The second problem ties into the first; money isn’t coming in for the Venezuelan economy because the US has tightened its grip on exports. The states that did buy it, now will be unable to over threats of blacklisting vessels.
The powerful effect of blacklisting ships has even reached China, which is not a consumer of Venezuelan crude. Chinese oil companies will reportedly refuse to charter vessels that have been to Venezuela over the past year, according to a report from Al Jazeera.
US sanctions and the threat of retaliating against any vessel that sets sail for Venezuela will undoubtedly deter any future Iranian help in addition to suffocating the state’s main source of revenue. Going forward, Maduro’s economy will be entirely reliant on trade partners who are willing to risk breaking the rules and sacrificing ships to do so.
Tehran is not such a partner. Iran has been the closest resemblance of an ally that Venezuela had, but now it will be powerless to help. It would be foolish to risk losing a fleet of tankers to help a dictator barely clinging to power.
Maduro’s Days are Numbered
The move from Washington to completely eliminate trade with Venezuela leaves the question of how long can Maduro remain in power?
The state has gold reserves, but not all of it can be readily accessed. As it stands, Caracas is forced to beg the Bank of England to sell some of its reserves to buy food and humanitarian supplies, according to Al Jazeera. Whether the bank allows it remains to be seen. It could be on the receiving end of Trump sanctions if it is perceived as helping the Maduro regime.
Maduro’s hold on the Venezuelan presidency will last only as long as he is able to pay the military that defends his position. Once their paychecks stop, the military will have an incentive to install Juan Guaido, whom 50 states recognize as the rightful winner of the 2018 election.
That moment may come sooner now that the small flow of tankers will dry up completely. The nation already had a fuel shortage and incredibly low exports. International businesses including American and Russian oil companies pulled their operations from the state. At this point, there is very little left to lose, economically, for Maduro, who also has a US bounty on his head.
Maduro’s days are numbered. At some point his people and the military that keeps him in power will turn on him. That timeline seems to be moving up as the Trump administration continues to take aggressive action against the few trade partners Maduro has left.