US Threatens Sanctions to Deter Iranian Tankers

(Dow Jones, 29.May.2020) — U.S. authorities have threatened tankers carrying Iranian fuel to Venezuela with sanctions, aiming to thwart a burgeoning economic alliance between two of America’s biggest rivals.

Two Liberian-flagged, Greek-owned vessels loaded with Iran oil products and headed to Venezuela halted their deliveries after the sanctions threat, according to U.S. officials.

The two were expected to arrive in Venezuela following the arrival of three Iranian tankers carrying gasoline, the most recent on Wednesday. The Venezuelan regime of Nicolás Maduro and the Islamic Republic, both U.S. sanctions targets, have described the oil shipments as a blow to the Trump administration, promoting the events on state media.

The two Greek-owned tankers would have been unable to get insurance and access to international banking if they had carried on, the U.S. officials said.

“We have been in contact with the shipowners, and they are under great risk for sanctions,” one senior administration official said, adding that being sanctioned likely would be an “out of business proposition” for the companies. “Currently, the ships are not headed to Venezuela,” the official said, adding that they are near Cape Verde off the coast of Senegal and headed southwardly.

According to ship-tracking websites FleetMon and MarineTraffic, both vessels loaded in an area of the Persian Gulf known for transshipments of Iranian oil last month. One of them gave its destination as Trinidad on May 4 before changing it to a “continent” a week later. Both vessels switched off their transponders while in the Mediterranean in early May and have been off radar since then.

A State Department spokesperson didn’t immediately respond to a request for comment about the threats to sanction the vessels. Venezuelan and Iranian officials didn’t respond to requests for comment.

Collectively, the seven vessels represent only a fraction of the gasoline and other oil products that the Latin American nation must import because of a dearth in refining capacity, despite owning the world’s largest crude-oil reserves.

The U.S. has been considering other alternatives, such as blockading or getting allied nations through whose waters the tankers sailed to take charge of the vessels as sanction violators, according to a senior Western diplomatic source and a U.S. official.

But U.S. officials said the strategy of deterrence — rather than armed confrontation — represents a workable compromise for the predicaments faced by the Trump administration. Washington wants to avoid a military escalation on America’s doorstep in the middle of the Covid-19 pandemic, but it also intends to cut short Iran’s ambitions in the Caribbean.

These officials said Washington also didn’t see any political gain in spoiling a temporary reprieve for Venezuela’s gasoline-starved population, but wants to ensure the trade doesn’t become permanent. Iran is expected to attempt other deliveries to meet Venezuela’s fuel demand, especially as Russia and China, which have long supported Mr. Maduro, recently have taken a step back from full engagement, the Western diplomat said.

“It was obvious that the Trump administration wasn’t going to let this situation continue,” said Russ Dallen, a managing partner at the brokerage Caracas Capital Markets who closely follows Venezuela’s oil industry. “There is no way that the U.S. is going to allow a few gallons of gas to become a pipeline.”

Many U.S. officials have been reluctant to use U.S. naval forces, including its joint-narco-trafficking operations with allies in the region, to stop the Iranian vessels. The U.S. has sought to avoid an escalation of tensions after Washington and Tehran narrowly avoided a full military conflict following a U.S. strike that killed a top Iranian general, Qassem Soleimani, in January.

Instead, the U.S. has favored nonmilitary measures such as sanctions or legal action to confiscate the vessels if they stop at foreign ports, the officials said. The Western diplomatic official said Venezuela is in part planning to pay Iran back for the fuel with crude-oil exports, deliveries that the U.S. or allies could also then seize.

The U.S. and dozens of its allies have deemed Mr. Maduro illegitimate since a 2018 election was marred by fraud allegations. They back main opposition leader Juan Guaidó as the country’s legitimate president, though Mr. Maduro maintains control of the armed forces and most state institutions.

While the interrupted oil sales are a lucrative trade for Tehran, the regime in Caracas has been deepening ties with Iran since last month, when Mr. Maduro appointed Tareck El Aissami, a close ally, as Venezuela’s oil minister. Mr. El Aissami, whom the U.S. has designated as a narco trafficker, has strong connections in the Middle East, according to U.S. intelligence and law-enforcement officials.

Around the time Mr. El Aissami was appointed, Iran’s Mahan Air, which has been sanctioned by the U.S. for carrying military personnel, weapons and cash for Iran’s Islamic Revolutionary Guard Corps, delivered engineers and equipment to refurbish a decrepit Venezuela refining complex, Iranian, Venezuelan and U.S. officials all have said.

The flights returned to Tehran carrying gold and cash, some of the officials have said.

— Benoit Faucon and Ian Talley

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