According to three individuals and tanker tracking data, China has entrusted a state-owned company with a defense focus to transport millions of barrels of Venezuelan oil despite US sanctions as part of an agreement to pay off Caracas’ enormous debt to Beijing.
After Washington reinforced sanctions against the South American producer, China National Petroleum Corp (CNPC) halted transporting Venezuelan oil in August 2019. However, it kept making its way to China thanks to traders who repackaged the petrol as Malaysian, according to reporters.
According to the sources, China Aerospace Science and Industry Corp (CASIC), a listed entity of CNPC, has been transporting Venezuelan crude since November 2020 on three tankers it purchased from PetroChina that year on a tank farm that it also acquired from etroChina, where the oil is kept.
According to Eikon data, the three CASIC tankers loaded in Venezuela with their transponders turned on, enabling third-party tracking.
According to the loading plans of the Venezuelan national oil company PDVSA and tanker tracking data from Refinitiv and Vortexa Analytics, the company has so far taken 13 cargoes totaling around 25 million barrels of oil, including two vessels scheduled to arrive in China in September.
The 13 shipments were labeled “crude oil” at Chinese customs without distinguishing provenance, according to one of the sources, and are estimated to be worth $1.5 billion at current rates for Venezuela’s premium Merey crude.
According to the source, “These shipments are strictly pursuant to a government directive, where CASIC was designated to convey the oil as payment to offset Venezuelan debt (to China)”.
Requests for comment from the media departments of CASIC, the General Administration of Chinese Customs, and the Ministry of Foreign Affairs of China went unanswered.
An official from CNPC declined to comment.
According to a second source, although some of each shipment is used to pay off debt, other products like COVID-19 vaccines are also deducted from the crude sales.
“All revenues are retained in China. According to this person, Venezuela’s foreign affairs ministry is in charge of accountability and reconciliation.
According to Emma Li, an analyst with Vortexa, which studies such flows, these shipments have brought the overall amount of Venezuelan oil to China to nearly 420,000 bpd between January and July of this year, or about 3% of China’s consumption.
Since October 2019, China has not acknowledged any official imports of Venezuelan crude oil.
Venezuela’s debt stretches back to 2007, under the administration of former President Hugo Chavez, when the nation entered into loan-for-oil agreements with Beijing and borrowed more than $50 billion.
The amount of unpaid debt owed by Venezuela was not known to reporters. According to Reuters, Beijing agreed to extend a grace period for one of the loans worth $19 billion in August 2020; however, neither China nor Venezuela has indicated if the grace period has ended.
GRAPHIC CHANNEL
China, the largest oil consumer in the world, has profited from cheaper oil supplies from Iran and Venezuela over the past few years, and in recent months, amid strained relations with Washington, has increased imports from Russia.
The nation controls its imports of crude oil through a strict quota system for licensed refiners. According to the first source, the CASIC shipments are an exception and have no quota.
The individual answered, “They enter China through a special green channel.
Requests for comment from PDVSA and Venezuela’s oil and foreign affairs ministries went unanswered.
Sanctions enforcement agency, the US Treasury Department, declined to comment.
Over the years, CASIC, which began in 1956 as a defense research division that created China’s first missile, has grown into a defense conglomerate with a focus on space technology.
According to the first source, it was chosen for the oil task due to its political clout and little worldwide financial exposure, which makes it less susceptible to sanctions.
According to business websites, the company has collaborated on projects overseas and in the manufacturing of petroleum equipment with state oil giants including CNPC and Sinopec since 2015.
TANKER TRANSFER AND STORAGE
According to PDVSA loading schedules and ship tracking by Vortexa and Refinitiv, three Very Large Crude Carriers—Xingye, Yongle, and Thousand Sunny—are transporting the CASIC Venezuelan oil shipments.
After PetroChina obtained custody of the vessels following a court dispute with PDVSA over assets included in a joint venture bankruptcy, CASIC acquired the vessels from PetroChina in 2020, according to two people who spoke to Reuters. In 2020, PetroChina confirmed to Reuters that it had transferred the warships, but it would not specify to whom.
According to the sources, PetroChina also transferred a tank farm with a location in the eastern coastal city of Ningbo, where the shipments are transported, to CASIC.
According to PDVSA schedules, Cirrostrati Technology Co LTD, a company with no prior experience in oil trading, working as a middleman for only these cargoes, first picked up all Venezuelan oil shipments received by CASIC at the Jose port.
No one could get in touch with Cirrostrati for comment. Reuters was unable to independently ascertain any connections between Cirrostrati and CASIC or locate the company’s registration or incorporation details.
The majority of the oil transported by CASIC is used by independent refineries in China, which have had to rely more and more on less expensive crude from Russia, Iran, and Venezuela in order to keep their operations going.
Compared to a discount of more than $30 for comparable-quality crude sold as a Malaysian export, one independent refiner claimed they were offered the oil at a price of $8 per barrel less than benchmark Brent crude ex-storage.
An executive with the refiner remarked, “It is more expensive, but it is good that the government is now in charge of these Venezuelan supplies, saving us a lot of logistical hassles and sanction-related concerns.
