Special Report: UAE emerges as hub for companies helping Venezuela avoid
U.S. oil sanctions
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[December 29, 2020]
By Luc Cohen and Marianna Parraga
NEW YORK (Reuters) - 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.
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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.”
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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.
EXPANDING SANCTIONS
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.
Between July and August, Muhit Maritime took over management of three
other Eurotankers-operated vessels, according to Equasis, a database
maintained by a group of national maritime administrations.
All three tankers had transported Venezuelan oil prior to the change in
management, according to the internal PDVSA documents reviewed by
Reuters.
A Eurotankers representative told Reuters the firm sold two of the
tankers in the summer to Muhit Maritime. “We don’t have any kind of
equity connection with the buyer,” he said. He didn’t say what
Eurotankers did with the third ship; Equasis records show it too came
under Muhit Maritime’s management.
The registered owners of the three ships also changed in July and
August, Equasis shows. Two of the vessels’ registered owners list their
addresses only as “Care of Muhit Maritime.” The third lists an entity in
Monrovia, Liberia. None of the owners could be reached for comment.
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![](../images/122920PIX/news_n27.jpg)
A worker collects a crude oil sample at an oil well operated by
Venezuela's state oil company PDVSA in Morichal, Venezuela, July 28,
2011. REUTERS/Carlos Garcia Rawlins
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ASIA BOUND
The three tankers also got new names this summer, according to
Equasis -- the Alsatayir, Almada and Alasfal.
A shipping document shows that on July 31, the newly rebranded
Almada set sail carrying some 650,000 barrels of Venezuelan Boscan
crude after a ship-to-ship transfer from the Alasfal off Venezuela’s
coast.
Three weeks later, on Aug. 21, the Alsatayir loaded 650,000 barrels
of Boscan crude in a similar ship-to-ship transfer. Together, those
shipments were worth around $40 million based on market prices for
Venezuelan oil at the time.
The Alsatayir and Almada proceeded to waters off Malaysia, where
they transferred their cargoes onto other tankers at sea in
mid-October, according to Refinitiv Eikon data.
The Alsatayir’s cargo was received by a tanker named the Afra Royal,
according to the data and Emma Li, a Singapore-based analyst at
Refinitiv. The Afra Royal proceeded to China's Qingdao port, where
it offloaded 644,715 barrels on Nov. 5, Refinitiv Eikon data show.
The ship’s listed owners and managers didn’t respond to requests for
comment.
The vessel tracking data doesn’t make clear the ultimate destination
of the Almada’s cargo. The Almada in October again changed its name
as well as its registered owner and shipping manager, according to
Equasis. Reuters was unable to identify who’s behind the new
entities.
Reuters reported in June that 19.7 million barrels of oil arrived in
China by way of ship-to-ship transfers in 2019, a process that
disguised the true origin of the crude. China is a close ally of
Venezuela.
A representative of China’s Ministry of Foreign Affairs said in a
statement that Beijing was “not aware” of Venezuelan crude
continuing to arrive in China. Nonetheless, China pledged to keep
cooperating with Caracas and criticized Washington’s “unilateral”
sanctions and attempted use of “long-arm jurisdiction.”
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“WE CANNOT DO POLICING”
Muhit Maritime’s tanker transactions resemble earlier ones by the
two other Emirati companies, Issa Shipping and Asia Charm.
Issa took over management of three very large crude carriers from
Greece-based Altomare SA between January and May of this year,
according to Equasis. Altomare didn’t respond to a request for
comment.
The three ships are the only vessels in Issa Shipping’s fleet, the
database shows. Issa Shipping was established in the second half of
2019, according to the Fujairah Free Zone Authority.
The three supertankers - the Kelly, Marbella and Rene - each
transported nearly 2 million barrels of Venezuelan crude and fuel in
the first half of 2020 after coming under Issa’s management, a batch
of internal PDVSA shipping documents show.
Those PDVSA documents list destinations for the ships: The Rene was
bound for China, the Kelly for Asia and the Marbella for Fujairah in
the UAE. Reuters was unable to locate where the oil ended up.
Asia Charm, meanwhile, took over management of a tanker from
Finland's Lundqvist Rederierna AB in July 2019, according to Equasis.
Dick Borman, quality and safety management advisor at Lundqvist
Rederierna, said selling the tanker “was simply a business decision”
because it no longer fit the fleet’s age profile.
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The paper trail shows some connections between the fleets of Issa
and Asia Charm.
One tanker Asia Charm took over management of is now called the
Yoselin. In recent months, the Yoselin has carried Venezuelan crude
and fuel to other tankers off the country’s coast that then
proceeded to export it. Among the ships that took on Yoselin’s oil
are the Marbella, Kelly and Rene, now run by Issa. Yoselin is one of
15 vessels in Asia Charm’s fleet, Equasis shows. All 15 have
exclusively made Venezuela-related voyages, Refinitiv Eikon vessel
tracking data show.
Another thing Asia Charm and Issa Shipping share in common: Both are
registered to an address in the same office block in Fujairah,
according to Equasis. The Yoselin’s registered owner did not respond
to a request for comment sent via an email address for Asia Charm.
The Fujairah Free Zone Authority’s director general, Sharief Al
Awadhi, said the authority is aware of the identities of the
beneficial owners of all companies registered there, including Issa
Shipping and Asia Charm, but that it does not publicly disclose that
information. He said Issa Shipping is owned by an individual on his
own behalf; he declined to identify him. Al Awadhi said that Asia
Charm’s parent company was a Liberian firm of the same name.
Al Awadhi said Fujairah provides information about listed companies
to law enforcement agencies if requested. He added that if there was
any indication of rule-breaking, the authority would stop it.
"We're not here to be incubators for anybody who wants to play with
international systems and law," he said. But the authority isn’t
responsible for monitoring the activities of companies registered in
its jurisdiction, he said. "We cannot do policing.”
CARIBBEAN RETURN
Washington hasn’t succeeded in ousting Maduro, but the U.S.
sanctions have crushed Venezuela’s oil sector. Exports plummeted by
a third in 2019 to around 1 million barrels a day. By this October,
they hit a decades-low level of 359,000 barrels a day.But Caracas
keeps trying to move the crude. In November, daily exports nearly
doubled, thanks to the emergence of new, little-known customers.
The rebound also followed a wave of changes of control in tanker
fleets.
Thirty-eight of the 75 tankers that transported Venezuelan crude or
fuel between July and November got new owners, managers or both in
2020, according to internal PDVSA documents and Equasis.
Many of the new owners or managers were little-known companies such
as Muhit Maritime. Before this year’s shipping sanctions, the bulk
of tankers handling Venezuelan crude were owned by established
shipping companies.
The 38 vessels hauled what amounts to just over half of Venezuela’s
total exports from July to November, according to PDVSA documents.
That oil was worth just over $1 billion based on the estimated price
of Venezuela's flagship crude grade, Merey, at the time of the
exports.
Ships managed by the three Emirati-based companies are now in the
Caribbean.
The Marbella, managed by Issa Shipping, journeyed to Venezuela and
loaded nearly 2 million barrels in early December. The Kelly was
scheduled to transport the same amount between late December and
early January, PDVSA documents show.
Muhit Maritime’s fleet is back in the neighborhood, too, Refinitiv
Eikon data shows. As of mid-December, its Alsatayir was 48 km (30
miles) off Venezuela's north coast.
And anchored off the Paraguana Peninsula is the Nabiin. Muhit
Maritime took over that vessel in November, according to the Equasis
database. It used to go by another name, the Euroforce - one of the
tankers Washington sanctioned in June.
(Reporting by Luc Cohen in New York and Marianna Parraga in Mexico
City; Additional reporting by Rania El Gamal, Lisa Barrington and
Aziz El Yaakoubi in Dubai, Matt Spetalnick in Washington, DC,
Michelle Nichols in New York, Chris Scicluna in Malta, Muyu Xu in
Beijing, Lefteris Papadimas in Athens, Mircely Guanipa in Maracay,
Venezuela and Jonathan Saul in London.)
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