It may be the oil market’s worst-kept secret: Millions of barrels of Venezuelan heavy crude, embargoed by the U.S., have been surreptitiously going to China. The cat-and-mouse games that avoid detection and sanctions include ship-to-ship transfers, shell companies and silenced satellite signals. But there’s another aspect to the dodge. It involves “doping” the oil with chemical additives and changing its name in the paperwork so it can be sold as a wholly different crude without a trace of its Venezuelan roots.
Invoices and emails reviewed by Bloomberg show the lengths to which some traders will go to disguise the crude’s origin and get it to Asia, making Chinese refineries an essential lifeline for Venezuela’s battered oil industry. U.S. officials, of course, can’t ban Chinese or any international companies from buying Venezuelan oil. They can financially squeeze them, though, by prohibiting them from then doing any business with American companies. That is why such intricate steps are taken to disguise the origin of the crude.
The documents show crudes that loaded in Venezuela, like one called Hamaca, are treated with chemical additives off the coast of Singapore and reappear on the market as cargoes with new names such as “Singma” or simply a bitumen mixture. Swissoil Trading SA, a Geneva-based house, made the transactions seen in the documents, acting on behalf of Mexican oil trader Libre Abordo SA, which was sanctioned by the U.S. in June for buying Venezuelan crude.
In an email responding to questions, Swissoil’s attorney said, “Swissoil Trading SA is not marketing and has not marketed crude oil from Venezuela.”