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Feature: US sanctions on Venezuelan cryptocurrency concerns shipping market

Highlights

US sanctions prohibiting American citizens and or entities operating within the US from doing business in Venezuela's "petro" cryptocurrency have left US and foreign shipowners alike searching for ways to have their vessels call at that country's ports.

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Payment for shipping services are often made in US dollars and move through the US banking system. Since a portion of the funds paid by foreign shipowners may be used by local Venezuelan shipping agents to buy petros for payment, US banks would be engaged in a transaction related to petros and shipowners could be accused of violating the sanctions, enacted March 19, according to the New York law firm of Freehill Hogan & Mahar.

Four days later, on March 23, Venezuela's National Institute of Aquatic Spaces took its own action, requiring all Venezuelan shipping agencies to pay foreign flag vessels for services in petros. This was first reported by the London Protection and Indemnity Club. (P&I clubs are non-governmental, non-profit associations that provide marine insurance to their members, which include shipowners, operators, charterers and seafarers).

Market sources in the Americas dirty tankers market said Thursday that although Venezuelan maritime agencies have indicated the petro will be the only form of payment accepted for ships calling at Venezuelan ports, hard currencies, including US dollars and euros are still being accepted.



"They will tell you they want to be paid in the petro currency but people just aren't doing it, and they aren't able to do anything because they want the money," a shipbroker said.

Shipowners said they are not willing to risk severing relationships with the US and are amending charter parties to place port dues in a charterer's account and passing on the risk.

VLCCs are booked 15-45 days prior to calling at ports, raising concern that upon arrival, currencies other than the petro will be refused by port agents.

"Shipowners have fear that when a ship is fixed and arrives in Venezuela a month later, the petro payment will be implemented," the shipbroker said.


SHIFT TO THE EAST


A second shipbroker said some companies are avoiding Venezuela altogether, adding that implementation of exclusive petro transactions could shift Venezuelan exports to only Eastern companies.

"Traders who are big in Venezuela own enough debt, such as Rosneft and Lukoil, and won't accept this clause from PDVSA," a dirty products market source said. "If enough other trading companies reject the clause, Venezuela will have to accept payment in a recognized currency."

S&P Global Platts fixture logs show two Saudi Bahri-owned VLCCs booked by Eastern companies to load crude out of Venezuela last week.

Reliance placed a Bahri to-be-nominated VLCC on subjects on a Caribbean-West Coast India run at $2.8 million, loading May 10, while Essar booked the Bahri-owned Habari on the same run at $2.7 million loading May 20; Navig8's Nave Quasar was booked at $2.75 million.

Freight for all three fixtures was heard to exclude port dues and that the fees had been put in the charterer's account.

A shipping market source said port dues at Venezuela's Puerto De La Cruz are currently $275,000 lump sum, adding that Indian companies only load crude oil out of Venezuela.

Bahri had not responded to a request for comment by Thursday morning.

A third shipping source said that in addition to US sanctions, fluctuating port fees increased financial risk exposure, prompting shipowners to cap those fees.

With port dues at Puerto De La Cruz were heard to be ranging from $200,000-$300,000, sources say it is unknown what the fee will be until the vessel arrives at the port.

Additional fees for hull cleanings and inspections are also heard to be frequently tacked on to port dues.

"There is no rule of law when it comes to Venezuela anymore, they're trying to get as much money as they can," the third shipping source said.


CLEAN TANKER CONCERNS


Venezuela is becoming a destination of increasing concern to clean tanker owners, due to high exposure to delays, leading to hull contamination and associated financial risk.

The majority of clean tankers discharge product at Venezuelan ports, especially now that Venezuelan refineries are running at historically low utilization rates.

Only a year ago, shipowners protected themselves by writing "undisputed demurrage" clauses into charter parties for ships traveling to Venezuela because of long delays for port calls.

The undisputed demurrage is usually paid on the account every seven to 10 days once the lay time is exceeded by the ship, rather than the normal practice of processing demurrage claims 90 days after discharge.

Some shipowners simply avoid calling at Venezuela as a principle. Those who do go are requiring the charterer takes care of all port dues; others are pushing for a $25,000-$30,000 premium.

"It depends on who it is; out of principal we would say we will not go to Venezuela," a shipowner said.

A charterer who regularly loads naphtha in Venezuela to carry in 38,000 mt lots to the US Atlantic Coast mentioned that Medium Range tanker owners cap the port dues at $85,000 lump sum, charging any excess to the charterer's account.

While major oil companies made for preferred charterers, the shipowner described the combination of a new charterer and Venezuela calling a lethal cocktail.

"What is frustrating to us is the P&I clubs are not mentioning this and there are no safeguards put in place," he said.

The Venezuelan petro's associated risks, along with fluctuating port dues and delays, make Venezuela a dicey destination.

"Calling Venezuela is like playing Russian roulette with only one empty chamber," a shipbroker said.

Attempts to contact Venezuelan government officials and state oil company PDVSA for comment on this story were unsuccessful.

While some market players are pushing to make Venezuela a premium destination, the current bear market does not lend itself to these kind of surcharges.

"If the tonnage is there and freight is in the toilet, it is difficult to charge a premium," a second charterer said.

The charterer who recently won tenders to supply PDVSA with ultra low-sulfur diesel and heavy naphtha for delivery through April indicated that while the charters were challenging, he did not encounter problems beyond the usual delays.

"Most charterers have in the contract that they comply with all the sanctions," he said.

--Sarah Raslan, sarah.raslan@spglobal.com

--Barbara Troner, barbara.troner@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com