Will PDVSA be sanctioned for Iran fuel sales?

Ending updated

Venezuela’s on-again, off-again approach to fuel sales to Iran has become more intriguing in recent weeks, since Reuters published a story saying that Venezuela had shipped two cargoes of fuel. It would be of purely passing interest except that the U.S. strengthened its sanctions (PDF) on Iran last year to punish companies that provide fuel to the country, as a way of pressuring the Islamic Republic to be more servile about proving it has no nuclear weapons-related program activities.

This makes it explosive that there are supposedly documents proving a sale of reformate from PDVSA to Iran. Josh Shahryar posted three documents purporting to show that the shipments happened. As for describing his sources, he said only “Documents obtained by credible sources close to the matter.”

PDVSA President Rafael Ramirez has repeatedly denied such sales in recent months (news reports from October and February), and a PDVSA spokesman, who requested not to be named citing company policy, referred me to Ramirez’s remarks in response to the Pajamas Media article. I sent him links to the documents and am awaiting a reply about whether the company can confirm their veracity.

A U.S. State Department brochure on Iran sanctions (sorry, no link as my source requested that the document not be distributed in full) says the executive branch has little discretion when it comes to companies known to have violated the law. It’s not like some foreign policy items, like deciding whether a country is cooperative against terrorism or drugs, where judgment can play a role. If a country ships fuel to Iran, sanctions click in:

Iran Sanctions Act … requires the President to impose sanctions on a wide variety of activities in Iran’s energy sector. Activities that can trigger sanctions include … Selling or providing Iran with refined petroleum products, with
– Fair market value of $1 million or more; or
– Aggregate fair market value of $5 million or more in a 12-month period

And the sanctions are:

Three or more out of nine possible sanctions shall be imposed on any person determined to have engaged in sanctionable activities. The nine sanctions would prohibit:
1. Export assistance from the Export-Import Bank of the United States;
2. Licenses for exports;
3. Private U.S. bank loans exceeding $10 million in any 12-month period;
4. If the sanctioned person is a financial institution, designation as a primary dealer in USG debt instruments or services as a repository of USG funds;
5. Procurement contracts with the United States Government;
6. Foreign exchange transactions subject to U.S. jurisdiction;
7. Financial transactions subject to U.S. jurisdiction;
8. Transactions with respect to property subject to U.S. jurisdiction;
9. Imports to the United States from the sanctioned entity.

Under this law, it would be possible to hit PDVSA hard by applying sanctions 7, 8, and 9, or to hit it in an almost insignificant way, with measures 1, 2 and 5, for example. Regardless, sanctions is sanctions.

Shipping companies and their insurers can also be sanctioned for being involved in Iran trade, according to a separate State Department brochure.

As far as the supposed PDVSA documents’ credibility, I sent the link to a reporter who covered Venezuela oil for years and that person said it was “real stuff.” I also sent it to a trader who said that while it’s hard to say if the documents are real, the vessel is real “and appears to have been in Jebel Ali in Dubai in January.” It would be really nice to know a bit more about the source of these documents and why Sharyar considers the “sources” credible.

If the documents are real, a very interesting game starts to play out — U.S. leaders, looking at Cuba, for example, must know that sanctions can strengthen a target regime. Does the U.S. want to be the main issue in the next Venezuelan election? Who would benefit?

Direct links to Sharyar’s documents:

Update: It occurs to me that I should emphasize that I am skeptical of these documents. I have no evidence of forgery but in a situation like this, I wouldn’t be surprised to find out that they were fake. So please be cautious in dealing with this situation, at least until someone who has actually seen a PDVSA fuel shipping receipt confirms that the basics of these documents match up with reality — that the form has the right codes, the person named still works at PDVSA, etc. The Curacao document is awful blurry — I’m sure someone physically on the island can get a better copy if it’s real.