The Swiss-based crude oil trading arm of Russia-backed Rosneft has been added to the US OFAC sanction list. US companies and citizens have until 20 May 2020 to unwind contracts
In a move that may trigger another mini-boom in tanker earnings in the same way US sanctions on COSCO tanker companies did in H2 2019, on 18 February 2020, the US Office of Foreign Asset Control (OFAC) added Rosneft Trading SA to the general sanctions list on Venezuela.
Rosneft Trading SA is the Switzerland-based crude oil trading arm of the Russian state-owned Rosneft oil company. Bloomberg news agency reports that Rosneft Trading’s vice president for refining, petrochemical, commerce and logistics, Didier Casimiro, brokered a deal for Rosneft Trading to provide US$6.4Bn of funds to Venezuela’s state-owned cash-strapped Petroleos de Venezuela SA in exchange for Venezuelan crude oil.
The deal ultimately provides funds to embattled president Nicolás Maduro’s administration, which is supported by the Venezuelan military. In exchange, Rosneft Trading handled half of the Latin American country’s 874,649 barrels a day of exports in January 2020, according to Bloomberg. Didier Casimiro is personally named in the OFAC communication.
Keys buyers of Venezuela’s crude oil are the Indian companies Reliance and Nayara Energy (part-owned by Rosneft), which according to Poten & Partners, import around 300,000 b/d of heavy sour crude oil.
In a recent note, Poten & Partners commented that buyers of Venezuela’s heavy sour crude have switched to alternatives from Columbia and Canada.
OFAC has decreed that US companies and citizens have until 20 May 2020 to unwind contracts with Rosneft Trading. There will be a period of uncertainty, as with the COSCO sanctions, as to which tankers are under charter to Rosneft Trading or might a Rosneft Trading connections and will become untouchable as the sanctions bite.
Rosneft Trading has no tankers loading in Venezuela at the moment, but according to Bloomberg, another Rosneft-affiliated company, TNK Trading International is scheduled to load or has loaded 14.3M barrels of Venezuelan crude oil in the first two months of 2020. OFAC sanctions may be a blunt tool, but are relentless.
How do US OFAC sanctions impact the tanker trade? Hear more at the inaugural Tanker Shipping & Trade Conference, Americas on 15-16 April 2020 in Houston, Texas, USA.