Iran, Venezuela Continue Exchanging Oil Despite US Sanctions

Iran and Venezuela continue exchanging oil products despite US sanctions on both countries, without any visible action by US which tries to engage with both.

An Iran-flagged supertanker has sailed from Venezuelan waters carrying 2 million barrels of heavy crude provided by state-run oil firm PDVSA, according to documents seen by Reuters and vessel tracking services.

The shipment is part of a deal agreed by PDVSA and its counterpart National Iranian Oil Company (NIOC) that exchanges Iranian condensate for Venezuela's Merey crude. The swaps aim to ease an acute shortage of diluents that has cut Venezuela's oil output and exports, Reuters reported last month.

In August 2020. the United States confiscated four Iranian fuel shipments that had been bound for Venezuela, disrupting at the time a key supply line for both Tehran and Caracas as they defied US sanctions. In October 2020, US announced that it had sold the gasoline and refined oil.

Dino I, a very large crude carrier (VLCC) owned and operated by NIOC's National Iranian Tanker Company (NITC), finished loading the Venezuelan oil at PDVSA's Jose port late Friday, according to the documents, a source and monitoring service TankerTrackers.com.

The bilateral oil trade could be a breach of U.S. sanctions on both countries, the US Treasury Department told Reuters last month, citing government orders that establish the punitive measures.

Reuters said a Treasury spokesperson on Saturday declined to comment further on the latest development. If the US allows the shipment to proceed, it would be a change from the Trump era policy of vigorously enforcing US sanctions against Iran.

Already the vessel was allowed to reach Venezuela in September with its transponder turned off while carrying 2.1 million barrels of Iranian condensate.

A second condensate cargo of similar size is expected to be delivered to Venezuela in the coming weeks as part of the swap routine, which will be in effect for six months in its first phase.

The Biden administration has declared its opposition to Trump’s withdrawal from the 2015 nuclear deal with Iran and has entered indirect talks with Tehran to revive the agreement. So far, Washington has kept the Trump-era sanctions, as Iran has failed to reach an agreement to revive the Joint Comprehensive Plan of Actions, JCPOA.

PDVSA first launched the exchange last month by sending 1.9 million barrels of Merey heavy crude on the Iran-flagged supertanker Felicity.

The exchange provides the OPEC nation with a stable supply of blending material needed to convert its extra heavy oil into exportable grades. The pact also delivers heavy oil to Iran for blending, refining or marketing to Asian customers.

Iran and Venezuela have strengthened their cooperation in the last year even under the watchful gaze of the United States, which has in recent years reimposed sanctions on Iranian state entities, including NIOC, and in 2019 blacklisted PDVSA.

With reporting by Reuters