US seizes 1.1 million barrels of Iranian gasoline bound for Venezuela: DOJ

The US government has seized four Iranian gasoline cargoes totaling 1.12 million barrels bound for Venezuela, the latest move in the Trump administration's increased sanctions pressure on both oil-producing countries.

The US Department of Justice announced Aug. 14 it had executed a US district judge's seizure order and confiscated the cargoes from four tankers: the Bella, the Bering, the Pandi and the Luna.

DOJ filed a complaint in July in the US District Court for the District of Columbia seeking to forfeit all petroleum product cargo aboard the four vessels.

After confiscating the fuel, DOJ said Iran's navy "forcibly boarded an unrelated ship in an apparent attempt to recover the seized petroleum, but was unsuccessful."

President Donald Trump told reporters the cargoes were en route to Houston.

'Trying to close the spigot'

Former DOJ prosecutor Evelyn Sheehan predicted the government would likely move quickly to sell the fuel to avoid high storage costs and logistical risks, even though the seizure is just the beginning of the forfeiture process. Parties can still make claims to the proceeds that will be held by the court or the Marshals Service.

Sheehan, a Kobre & Kim attorney who was deputy chief of the asset forfeiture division for DOJ's Southern District of Florida, said the case shows how the US government is increasingly turning to the civil forfeiture process — on top of criminal charges and sanctions — to increase pressure on national security targets.

"It's not just the value of the oil or these particular cargoes," she said. "It's meant to send a message both to Iran and Venezuela, but also to anyone doing business with them. It chills all of those relationships.

"They're really trying to close the spigot of any source of money and, of course, oil is the biggest source of money for them," Sheehan added. "I see this as an escalation."

Pressure on shippers

Venezuela has turned to Iran, another target of US oil sanctions, to meet domestic gasoline demand as the South American country's crude production and refining capabilities have crumbled in the face of US sanctions and dire economic turmoil.

The US government has issued repeated warnings in the past year that it would crack down on companies and ships helping to facilitate Venezuelan oil exports and therefore fund the Maduro regime.

"We are seeing more and more global shipping fleets avoiding the Iran-Venezuela trade due to our sanctions implementation and enforcement efforts," Department of State spokeswoman Morgan Ortagus said Aug. 14. "The United States remains committed to our maximum pressure campaigns against the Iranian and Maduro regimes."

The Department of the Treasury on June 24 sanctioned five oil tanker captains for delivering 1.5 million barrels of Iranian gasoline and related supplies to Venezuela earlier this year.

Production collapse

Treasury on June 18 sanctioned Mexico City-based Libre Abordo and Schlager Business Group and their executives for their roles in finding international buyers for more than 30 million barrels of Venezuelan crude, including roughly 40% of PDVSA's April exports.

Treasury said the companies brokered the resale of $300 million worth of Venezuelan oil under the guise of an "oil-for-food" program that never followed through on promised corn and water deliveries to the beleaguered South American country.

The US originally imposed sanctions on Venezuela's state-owned PDVSA in January 2019, blocking US imports of Venezuelan crude and exports of US diluent to Venezuela.

Venezuelan oil production rose a marginal 50,000 b/d month on month to 330,000 b/d in July, according to the latest S&P Global Platts survey of OPEC production.

S&P Global Platts Analytics expects Venezuelan supplies to the global market to be capped at 300,000 b/d through the end of 2021, given the US sanctions crackdown, Rosneft's departure as a conduit for exports and the oil price collapse reducing the appeal of discounted Venezuelan oil.