Trump threatens the “shadow fleet” of Venezuela, and billions of dollars are at risk

US officials told the Wall Street Journal that the military is targeting a network of ships that have already been sanctioned by the US Treasury. “These tankers account for about 70% of Venezuela’s oil exports, which are sent mainly to buyers in Asia who pay in cryptocurrencies,” Venezuelan economist Asdrubal Oliveros said on the country’s public radio on Wednesday.

According to Oliveros, the loss of access to the shipping network will reduce Venezuela’s income by approximately 8 billion dollars a year. Already, a number of sanctioned tankers have already turned around and returned to avoid running into the US Navy flotilla in the Caribbean.

Venezuela is more sensitive to the oil embargo

According to estimates, about 75 tankers are in Venezuelan waters and half of them are on the US Treasury Department’s blacklist of sanctions-violating vessels; About 25 of them are usually used to export crude oil.

Now, Venezuela is more sensitive to the oil embargo. This is because it is not a military power like Russia or Iran, which also face stiff US oil sanctions that are loosely enforced. Maduro and his aides have condemned the US actions, describing them as part of an effort to topple the government and loot Venezuela’s oil reserves. Caracas has also accused Washington of theft, after capturing a tanker carrying 1.9 million barrels of Venezuelan crude to Cuba last week.

In a speech Wednesday, Maduro dismissed Trump’s latest claims that Venezuela stole land and oil from the United States. “The trade in our oil and all our natural resources will continue, and it will reach everywhere,” Maduro said. “For hundreds and hundreds of years, the sovereign people of Venezuela will be the absolute owners of the country, of the land and of all its wealth.” Meanwhile, Venezuela’s national oil company claims that its shipments continue “with Full insurance, technical backup and operational guarantees.”

Vessels make their way back

In recent weeks, Trump called on Maduro to step down and that “his days are numbered.” He also increased military activity off the coast of Venezuela, including more than 20 attacks on boats allegedly carrying drugs, in which dozens of people were killed. However, Trump did not explicitly link his actions to regime change in Venezuela. He said that US military strikes on Venezuela itself were coming soon.

Cutting off the flow of the sanctioned tankers would be a blow to Maduro’s personal fortune and the money he uses to enrich his inner circle. Moreover, it may destroy the country’s economy.

Economists warn that strict enforcement by the US will harm the country’s economy, increase the shortage of food and fuel in a country that is largely dependent on imports, and at the same time will cause inflation to worsen, which according to the International Monetary Fund’s estimate will reach almost 700% next year.

Venezuela pumps about 900,000 barrels of oil a day, a far cry from the record of 3.5 million barrels a day it pumped in the late 1990s. Now, the only oil that is not subject to sanctions leaving the country is led by the Chevron company, which enjoys a limited exemption from the financial restrictions imposed by the United States.

To ship oil itself, Venezuela relies on a so-called “shadow fleet” of 900 vessels, developed by Iran under heavy sanctions more than a decade ago and later used by Russia after the start of the Ukraine war. The network uses old tankers that sometimes falsely flag a country, moving crude between ships to hide its origin.

US sanctions usually deter outspoken oil traders, but the black market has thrived. Now that the US is threatening to enforce the sanctions harshly, it seems that some of the shadow fleet is reconsidering its conduct.

Just on Monday Bella 1, a vessel sailing to Venezuela from Iran, made a sudden U-turn. The tanker, which is subject to US sanctions for transporting Tehran’s oil in the past, changed its course again on Wednesday towards South America, specifying Curaçao as its destination.

Further disruptions in the transportation of oil occurred on November 29, the day Trump said that Venezuelan airspace should be considered closed, a statement that constitutes a significant escalation. That same day, the Panamanian-flagged Star Twinkle 6 tanker began to linger in the Caribbean, loaded with 830,000 barrels of light Venezuelan oil. The ship, which normally delivers Venezuelan oil to China, was slapped with US sanctions in May for transporting Iranian crude oil in the past.

In the US, “no resistance is expected”

With 11 US warships in the Caribbean, the Trump administration has the resources to enforce the blockade, experts say. Navy destroyers, which are highly maneuverable and carry powerful weapons, will likely be used to intercept oil tankers and escort them to a designated assembly area. Once the tankers arrive at a concentration area, military helicopters will be able to patrol the area to make sure the tankers meet quarantine requirements, experts say.

“The Navy has a whole process for how to stick to the side of a ship” and intercept it, said Brian Clark, a naval strategist at the Hudson Institute. US sailors will use passive means and contact the tanker via walkie-talkie on an international radio channel. If the tanker does not comply, more active measures can be taken, such as blocking the ship’s path to its destination.

“We don’t anticipate any opposition, because these tanker operators are just people hired to operate tankers, and they have nothing to gain if they fight one of these inspection groups,” Clark said. If a tanker still defies US quarantine requirements, special teams such as Marines, the US Navy’s Marine Commando unit and Coast Guard law enforcement units could be called to the ship, the experts added.

However, full enforcement of a closure or blockade is difficult, and may take time to have an effect, prolonging the impasse. “Maduro may only blink if the threat of military action is credible,” Nicholas Watson, director at risk consultancy Teneo, said on Wednesday.