Chinese Supertankers Divert from Venezuelan Oil Pickup

Two Chinese oil supertankers, originally on their way to Venezuela to load oil for debt repayment, have reportedly turned back toward Asia, according to shipping data from LSEG cited by Reuters on Monday.

The Venezuelan government, under socialist leadership, owes significant sums to China, a debt stemming from the era of the late dictator Hugo Chávez. The precise amount owed hasn’t been publicly disclosed yet, but reports in December put Venezuela’s credit exposure to China at approximately $59.2 billion since 2005.

The Venezuelan regime has been repaying these debts through shipments of sanctioned oil. Additionally, China has been instrumental in assisting Venezuela in circumventing U.S. sanctions on its oil exports. There have been instances where Venezuelan crude destined for China was “rebranded” as “Brazilian crude” to sidestep these restrictions.

Recent reports suggest that the turnaround of the two tankers might indicate that Venezuela will not be exporting oil directly to China, a major purchaser, “for the foreseeable future.” In December, former President Donald Trump had called for a “total and complete” blockade on all sanctioned oil tankers engaging with Venezuela.

Last week, Trump also signed an executive order aimed at safeguarding Venezuelan oil revenues held in U.S. Treasury accounts from being seized or subjected to legal actions. The intent was to “ensure that these funds are preserved” to further U.S. foreign policy goals.

Amidst these developments, oil industry analysts are anticipating that China may begin to replace Venezuelan oil imports with Iranian crude, especially following the U.S. enforcement actions that led to the arrest of deposed dictator Nicolás Maduro and his wife, Cilia Flores.

The Venezuelan government, now led by “acting president” Delcy Rodriguez, has indicated plans to sell up to $2 billion worth of oil to the United States. This approach aims to shift supplies away from China and avoid further reductions in oil production.

Trump remarked that after the recent U.S. announcement of a plan to export up to 50 million barrels of Venezuelan oil from storage, China would not be able to take control of Venezuelan oil supplies. However, the specifics of how this supply would be managed remain unclear. As of now, China has not received any oil shipment from Venezuela’s state oil company PDVSA since December.

Last year, China had been the primary destination for Venezuelan crude, receiving about 642,000 barrels a day, which made up around three-quarters of the total exports of 847,000 barrels, based on an internal PDVSA document reviewed by Reuters.