Venezuela, Illegal Fuel and Maritime Security in the Caribbean

This article is a part of our 2021 Series on Caribbean Maritime Security.  Read the Series Introduction at this link.

Fuel smuggling in and out of Venezuela is quietly eroding regional security and threatening environmental catastrophe. In an effort to avoid US sanctions imposed on Venezuela, oil tankers are increasingly going “dark” by turning off their automatic identification systems (AIS). By not reporting their position, the vessels effectively vanish on the high seas. The Greek-owned VL Nichioh went dark as it approached Venezuelan waters. Nine days later, the vessel showed back up on AIS steaming towards Asia but with an extremely low freeboard. Between the vessel going dark, a low freeboard, and heading towards the far east, the VL Nichioh had all the telltale signs of being actively involved in Venezuelan illicit fuel smuggling. But either for lack of assets, willpower or a smoking gun, the vessel was allowed to travel unimpeded by international authorities.

This fuel smuggling, usually crude oil leaving Venezuela and refined fuels entering, helps to prop up the Maduro regime in Venezuela. The import of refined fuels like gasoline helps alleviate a crippling shortage and puts off some of the pain chronic domestic mismanagement is causing in Venezuela. Exports of crude help validate Venezuela’s partnerships with China, Russia and Iran and likely help pay for their support to the regime as well as bringing in much-needed foreign currency.

Production Woes

Venezuela has the largest proven oil reserves in the world and yet the worst economy of all Latin American countries. Oil represents up to 99% of Venezuela’s exports and 25% of the GDP.  Thanks to government subsidies and hyperinflation, fuel costs an estimated at 0.00000002 cents per gallon – in other words, a single dollar could theoretically buy five billion gallons of fuel.  Free gasoline has been a flagship of the Maduro regime in order to maintain the loyalty of businesses and the military during the economic meltdown.

The demand for government-subsidized fuel and increased sanctions have resulted in a severe fuel shortage – Venezuelans who grew up in a country where oil was regarded as a birthright now wait up to a week to fill their car with government-subsidized fuel. Oil production in Venezuela has dropped more than anywhere else in the world in the past four decades. US imposed sanctions have severely limited Venezuela’s ability to import fuel or the necessary parts to repair failing refineries to stave off the shortage. In order to help alleviate Venezuela’s latest production woes, on February 11^th 2021, Iran initiated a second round of airlifts to help restart the 955,000 barrel per day Paraguana Refining Complex in western Venezuela. This follows the restarting of the 310,000 barrel per day Cardon Refinery last year, which partly alleviated acute gasoline shortages. Due to Iran’s help, Venezuela’s fuel production increased by 20% to date when compared to 2020 and is expected to increase an additional 15% in 2021.

Ecological Disaster

The increased production has not been without grave ecological consequences. The state-owned oil giant, Petroleros de Venezuela SA (PDVSA) was responsible for more than 46,000 oil spills between 2010-2016. For example, last year massive oil slicks washed ashore on the beaches of Morrocoy National Park from a spill originating from El Palito refinery but initially speculated to be from an oil tanker. The spill was estimated to constitute 26,000 barrels, the largest in the area in 20 years. Even worse, nearly a quarter of the Venezuelan population lives around Lake Maracaibo, which is severely polluted by poorly maintained PDVSA oil pipelines and wells. The lake has a permanent black tide that coats the shore, fishermen, and their catch in crude oil. At sea, PDVSA owned floating storage and offloading vessel, FSO Nabarima , is reportedly in poor condition and listing as much as 25-degrees. Permanently riding at anchor, it threatens to spill it’s 1.3 million gallons of crude oil into the Caribbean, more than five times what was spilled in the Exxon Valdez disaster in 1989. As Venezuela attempts to reignite its oil oil-based economy, further disasters may occur on a more frequent and grander scale threatening to disrupt livelihoods and ecosystems in the Caribbean.

Insecurity

The average Venezuelan earns 72 cents per day and lost 24 lbs in 2017. In search of a better life, more than 5 million refugees have fled Venezuela, with an 8000% increase since 2014 stemming from Venezuela’s collapsing economy and the exodus shows no signs of stopping. With its infrastructure in a state of decay, a major ecological disaster due to fuel smuggling could displace millions more. The fallout of ecological disasters such as Lake Maracaibo and the El Palito refinery threatens the livelihood of fishermen as well. Fishermen from Lake Maracaibo are forced to throw back half their catches because of oil pollution; the remaining catch is cleaned with gasoline and then sold to unsuspecting customers. Struggling Venezuelan fishermen have resorted to piracy in order to feed themselves and their families, reminiscent of the struggling Somali fishermen that resorted to piracy nearly a decade ago when they could no longer make a living. And it’s not just fishermen, the Venezuelan Coast Guard and National Guard engage in piracy as well. They have also been implicated in brazen murders at sea related to fuel smuggling and extortion.  Venezuela accounted for more than half of all robberies at anchorages in the Caribbean between 2016-2019.

Despite the gravity of the situation, US Southern Command has not deployed local assets to counter fuel smuggling, though it has significantly bolstered its force strength to tackle narcotrafficking. In 2020, President Trump announced, “We’re deploying additional Navy destroyers, combat ships, aircraft & helicopters, Coast Guard Cutters…doubling our capabilities in the region… We must not let narco-terrorists exploit the pandemic to threaten American lives.” Due to effective counter-narcotics operations in the Caribbean, trafficking routes have shifted to the Eastern Pacific in recent years. In 2017, 84% of documented cocaine from South America transited through the Eastern Pacific.

The Middle and Far East Connection

In order to assist Maduro’s government, Iran defied US sanctions placed on both Tehran and Caracas by sending a flotilla of tankers to deliver millions of barrels of refined oil to the stricken nation. A day after fuel arrived in Venezuela from the Iranian tankers, the US Navy conducted a freedom of navigation operation (FONOP) off the coast of Venezuela. The US Navy has since sailed two additional FONOPs outside Venezuelan territorial waters including one by the USS Pickney and another by USS William P. Lawrence, timed the day after another tanker carrying Iranian fuel arrived in Venezuela.. FONOPs have been used as means to combat Venezuela’s excessive territorial water claims but the timing of the FONOPs with the arrival of the Iranian tankers suggest they have also used a means to dissuade the tankers from arriving.

The FONOPs, however, did not deter Iran from sending its largest flotilla to Venezuela in December 2020 with ten tankers. Like the previous smaller Iranian flotilla with five vessels, the Iranian ships turned off their AIS in an attempt to obfuscate their business and avoid US sanctions.

Despite strict sanctions levied against Venezuela, crude oil exports have nearly tripled with most of the crude headed to China. Asian flagged vessels engaged in exporting Venezuelan crude oil not only turn off their AIS, but also mask the origin by adding additives to the fuel, in a process known as oil doping, and engaging in ship-to-ship fuel transfers. These acts help further obscure the origins of  Venezuelan oil in an attempt to avoid US sanctions.

Conclusion

While the US continues to devote significant assets to counter-narcotics missions in the Caribbean, fuel and crude oil smuggling in and out of Venezuela is an overlooked threat. It helps prop up the Maduro regime financially and helps paper over crippling domestic supply issues in Venezuela. At lower levels, the illegal fuel entering and leaving Venezuela is a driver of maritime insecurity and has led to murders like the killing on the San Ramon. Further, it is an already-unfolding ecological disaster likely to worsen. US Southern Command should prioritize enforcing fuel sanctions on Venezuela in order to better secure the region. Much like how the renewed focus on counter-narcotics has forced smugglers to avoid Caribbean routes, a focus on maritime fuel smuggling can force the Maudro regime to abandon their dangerous and illicit practices. The ecological and maritime security consequences are simply too high for anything less.