China continued to import Venezuelan crude oil while getting away from US sanctions through ship-to-ship (STS) transfers, Reuters reported. China has been a major export destination for Venezuelan crude. It imported 350,000 bpd of oil from the South American country in the first half of 2019. However, imports seemed to slow after state-controlled CNPC stopped loading of Venezuelan crude following Washington’s warning in August.
However, the report said that Rosneft’s Switzerland-based unit continued trading Venezuelan oil which was rebranded as if it originated from Malaysia. Tanker tracking data, satellite imagery, and Automatic Identification System (AIS) data suggest that at least 18 shipments totalling 19.7 million barrels of rebranded Venezuelan crude arrived at Chinese ports in the second half of 2019. The data also showed that China’s oil trade with Venezuela continued in 2020.
China’s customs administration reported a 228,700 bpd import of Venezuelan oil in 2019. However, according to this finding, the actual import volume can reach as high as 283,000 bpd last year. The amount cannot offset the 500,000 bpd imports that were lost when the US imposed the sanction, but it provides lifelines for Venezuela’s PDVSA and President Maduro’s administration.
To avoid US sanctions, Chinese shipments of Venezuelan crude did not sail directly to China. Instead, they headed to Malaysian coasts first where they met with a second, empty tanker that would load the cargoes and continue the delivery to China, the report said. The STS transfers appear to imitate Iran’s strategy to continue importing its oil, which is also under US sanctions.
STS transfer is usually used for legitimate reasons, such as moving cargoes from VLCC onto smaller tankers that can sail through shallow or narrow waterways. China also uses STS transfer to import oil from Brazil and Russia, and its customs accurately recorded the transfer. However, it does not appear to be the case in imports of rebranded Venezuelan crude. As a result, China’s official data showed that imports of crude oil originated from Malaysia surged 400% in 2019, from three years earlier.
China’s STS manoeuvre falls under a grey area, according to Peter Harrell, an analyst with the Washington-based Center for New American Security. However, the Trump administration has paid attention to the issue. In February, it imposed sanctions on Rosneft Trading SA, which lifted Venezuelan crude for Chinese shipmen, and urged its business partners to unwind relationships with RTSA.
