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More Iranian gasoline appears headed to Venezuela despite US DOJ seizures


Three Iranian MR tankers spotted off South Africa

Analysts expect flows to continue despite US pressure

Fuel seized by DOJ to be auctioned by US Marshals

Washington — Another round of Iranian gasoline shipments appears to be headed to Venezuela despite the US government's move last month to seize similar cargoes to increase pressure on both sanctioned countries.

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Analysts expect Iranian gasoline to continue flowing to fuel-starved Venezuela despite the US Department of Justice turning to the civil forfeiture system to intercept the flows.

"This will add to frustrations in the Trump administration over Maduro's resiliency and likely to strengthen the position of sanctions hawks who are pushing for an end of the crude-for-diesel sanctions waiver," said Fernando Ferreira, director of Rapidan Energy Group's Geopolitical Risk Service, referring to Venezuela's imports of diesel for power generation that are still allowed for now under US sanctions.

Three MR tankers owned by the National Iranian Tanker Co. -- Forest, Fortune and Faxon -- were seen Sept. 14 off South Africa headed for South America without broadcasting their destinations, according to Kpler, a data intelligence company. The site estimates they will arrive by Sept. 29.

Tanker Trackers, which uses AIS, satellite and other geospatial data, said the ships were carrying Iranian gasoline to Venezuela.

All three ships have delivered to Venezuelan refineries this year, according to Kpler data.

Fuel auction

The DOJ turned to the civil forfeiture process this summer to target four cargoes of Iranian gasoline bound for Venezuela. In mid-August, it executed a US district judge's seizure order to confiscate the cargoes totaling 1.12 million barrels, which are now set to be auctioned by the US Marshals Service.

Use of civil forfeiture was seen as an escalation by the Trump administration to increase pressure on national security targets and crimp any source of oil revenue.

Francisco Monaldi, an expert on Venezuela's energy sector, said the DOJ strategy has exacted a price on Iran and Venezuela by making them take a longer route, even if it can't stop the shipments.

"Even if they arrive and it is not a full deterrent, it made it harder, costlier and it took longer — putting more pressure on both Iran and more so in Venezuela, where there is no gasoline," said Monaldi, director of the Center for Energy Studies at Rice University's Baker Institute for Public Policy.

Iran-China oil trade

Rapidan's Ferreira expects DOJ to pursue additional fuel seizures whenever possible, but it takes time to build the cases.

"Investigators have to meet a high bar to justify a warrant -- they must establish a clear connection between the property and a criminal or terrorist organization," he said. "Iran has developed sophisticated smuggling networks to circumvent US sanctions — establishing a connection for a civil forfeiture case often requires a lengthy investigation."

Ferreira said DOJ and the State Department are likely both trying to increase their capabilities to crack down on illicit trans-shipments but expects they will focus on the higher-volume Iran-China oil trade.

"Shipments to Venezuela could occasionally be caught in that web, but we also expect Tehran will rely more on Iranian-flagged tankers to shield against future forfeiture cases," he said. "Short of interdiction in international waters by the US Navy or the Coast Guard to enforce a warrant (possible, but a big escalation), Washington will find it hard to stop trade between Iran and Venezuela."