Iran and Venezuela, two countries sanctioned by the United States, have made attempts to strengthen their partnership in recent weeks. The economic fallout resulting from sanctions and COVID-19 has pushed Tehran and Caracas closer.
Venezuela has lost close to 1.3 million bpd of oil refining capacity, exacerbating its fuel shortage crisis in recent months. Tehran’s cooperation with Caracas to restore this capacity goes in hand with their schemes to evade US sanctions.
The recent relationship between Iran and Venezuela is shrouded in secrecy. But on April 30, the US State Department Special Representative for Venezuela Elliot Abrams said that Iran was sending planes to Venezuela and they could be carrying gold out of the country.
Iran denies helping Venezuela’s oil sector by sending workers, technicians, equipment, gasoline additives and parts to refineries in the country in return for gold bars as a form of payment. The country’s Foreign Ministry spokesman Abbas Mousavi says claims of oil and gold trade between Tehran and Caracas are baseless.
But other reports point that Iran is taking gold bars out of Venezuela’s national reserves by recruiting the Colombian financier Alex Nain Saab Moran. In July 2019, the US Department of Justice charged Moran for money laundering in Venezuela between 2011 and 2015. Moran’s Miami-based lawyer Maria Dominguez denies the latest reports that say he traveled to Tehran with executives from the Venezuelan state-owned oil and gas company Petróleos de Venezuela S.A. (PDVSA).
Additional evidence points to other steps taken by Tehran and Venezuela to circumvent sanctions. The former Venezuelan military intelligence chief and retired major general Hugo Carvajal, who will be extradited to the United States after a hearing at the National Court of Madrid, has reportedly served as a middleman between Venezuela and Iran. His extradition to the United States could unveil a hidden network of middlemen used by Tehran and Caracas to advance their interests by evading sanctions. Venezuelan politicians seem to be warming to Iran due to mutual interests. Venezuela’s new Oil Minister, Tareck El-Aissami, has taken over the task of repairing local oil refineries with help from Iran. This task has been facilitated by Tehran re-opening air links with Caracas.
Iran’s ambassador to Venezuela Hojatollah Soltani confirmed that 10 to 17 flights take place per day from Iran to the Paraguaná Refinery Complex (PRC), landing at Las Piedras airport on the Paraguaná Peninsula.
It is now known that Mahan Air, affiliated with the Islamic Revolutionary Guard Corps, delivers gasoline blend stock and ensures the provision of repair services to PRC. It is possible that these flights have previously included refueling stops in Algiers. Washington has asked Algeria, Morocco, and Tunisia to deny a flight corridor to Mahan Air to reach Venezuela. Mahan Air has been sanctioned since 2011 by Washington, and banned by France and Germany.
But other US steps have proven counter-productive in breaking growing cooperation between Tehran and Caracas. The United States increased sanctions against PDVSA and imposed sanctions on trading subsidiaries of the Russian state-owned energy company Rosneft for supplying gasoline and gasoline components to PDVSA. These steps have created an opportunity for Iran to swiftly penetrate Venezuela’s oil industry and to increase its influence within it.
Tehran has sent catalytic cracking units to the PDVSA operated Cardon refinery. It deactivated its cracking units in early 2018, and Iran helped in restarting the country’s refinery reformation and distillation units that went out of service in January.
But Iran does not have enough catalysts to supply to Venezuela’s Cardon refinery. According to Soltani, their supply is in line with efforts to consolidate trade ties with Caracas. Iranian President Hassan Rouhani and Venezuelan leader Nicolas Maduro recently discussed forming a united front against sanctions. Earlier in April, they stated their intention to cooperate in various fields such as energy, agriculture, and finance.
With Iran’s growing penetration into Venezuela and possible further outreach into Latin America, Washington’s backyard, it is unclear what steps the United States can take to contain the influence of Iran in Venezuela. It is apparent that Tehran and Caracas have a mutual desire to increase cooperation, with COVID-19 providing an added reason for them to move closer to deal with its economic fallout. So far US steps have failed in achieving the wanted result, and it remains to be seen whether the United States will escalate further to end this warming of relations or not. With the United States preoccupied with dealing with the economic fallout of COVID-19 and with presidential elections fast approaching, Iran could exploit this window of opportunity to further cement its relations with Caracas, which would make it much more difficult for the United States to unwind this relationship in the future.