Russia and Venezuela Allied in Skirting U.S. Sanctions

This week, fresh from meeting his “dear friend” Russia’s president Vladimir Putin, China’s leader, Xi Jinping’s objective is clear: position himself and China as counterweights to U.S. world dominance.

One way to do it, playing an instrumental role in helping U.S. adversaries skirt Western sanctions.  Case-in-point: Russia and Venezuela.

As sanctions have cut off Russia from Western energy markets and access to advanced U.S. and European technology, Beijing has offered Moscow an economic lifeline by buying its oil and gas and selling semiconductors and other items needed to keep Russia’s war machine going.

NBC News reported that China spent $81.3 billion on imports of Russian oil, coal, and natural gas last year, up from $52.1 billion in 2021, according to data analyzed by the Center on Global Energy Policy at Columbia University.

Just like Venezuela, as Russia can no longer sell its oil and gas to its natural markets (Europe in this case,) Russia has exported its surplus to China at deep discounts.

Putin not only increased oil export revenues; but he has also collected more cash through this “obscure” supply chain. For instance, Russian oil exports to India have increased 16 times since the beginning of the Ukrainian war.

Earlier this month, Bloomberg reported that contrary to what one might think, since Russia invaded Ukraine and Western oil companies left, Russia drilled more wells in a decade, and the total number of oil wells increased by 7%.

Russia and Venezuela have become experts at skirting oil sanctions:  re-directing crude exports to Asia rather than the West; recruiting undercover tankers that literally operate “under the radar” to illegally transport oil, and developing obscure supply chains that continue to keep oil flows, exports and cash coming in.

Between 2019, when oil sanctions were hardened, and 2021, the Venezuelan government received substantial oil revenues (a 350% increase in oil export volumes; 650% increase in effective revenue).

A good part of these increases resulted from the fact that, after the maximum-pressure sanctions were instituted, PDVSA received 100% of the oil profits, as its Joint Venture partners were prohibited from receiving their share.

The enormous scale of Venezuela’s oil export revenues since 2020, has become even more evident after the resignation of Tareck El Aissami, Venezuela’s Oil Minister, for his alleged involvement in a massive corruption scheme at state oil company PDVSA.  According to Reuters, “PDVSA has accumulated $21.2 billion in accounts receivable, after turning to dozens of little-known intermediaries three years ago to export its oil under U.S. sanctions.”

These unpaid sales represent about 84% of PDVSA’s total value of invoiced shipments, Reuters reported.

Economic sanctions were supposed to strangle Putin’s ability to finance the war on Ukraine; in the case of Venezuela, they were supposed to cash-strap Maduro and force democratic change.

Neither of these have happened. Javier Corrales, Professor of Political Science at Amherst College and author of ”Autocracy Rising: How Venezuela Transitioned to Authoritarianism”, said in a recent Boston University panel discussion on the effectiveness of sanctions that, “While the aim of sanctions is to embolden the soft-liners, when they fail, they have the opposite of the desired effect, transferring the advantage to the targeted regime and hardening the autocracy you were hoping to topple.”

Freshman lawmaker, Rep. Cory Mills (R), who is considered a foreign policy expert, believes that existing oil sanctions against Venezuela must be reevaluated “if they have ceased to be effective measures.”

“Sanctions against Venezuela’s murderous regime are crucial, but if they have ceased to be effective measures to combat Maduro’s reign of terror, then we must evaluate those sanctions in order to help the Venezuelan people,” said Rep. Mills in a statement to The Floridian.

In the meantime, this new “Axis of Evil” continues to deepen.  A few weeks ago, Venezuelan dictator Nicolas Maduro welcomed Russia’s National Security Secretary Nikolai Patrushev and other Russian officials to strengthen their partnership in” strategic matters.”

Venezuela also recently announced another contract with the Iranians to continue with the process of re-establishing key refineries.

Rep.Mills, warns of the economic investment in Venezuela by the aforementioned “Axis of Evil” and how that investment poses a direct threat. “The ongoing investment into Venezuela from the “Axis of Evil” should worry Americans. Their motive to engage in the Western Hemisphere is a direct threat to the U.S. The U.S. needs to solidify its relationships and partnership in Latin America and offer our partners better economic options and opportunities than those Russia, China, and Iran are offering,” added Rep. Mills.

For his part, freshman Rep. Jared Moskowitz (D), said: “If the United States fails to engage in the region, we are creating a void that authoritarian nations will be all too eager to fill.” He added that the “growing alliance of authoritarian nations, led by China with Russia and Iran, are coordinating with one another geopolitically and increasingly militarily, posing a challenge that the United States must confront head-on.”