(Bloomberg) -- Venezuela has grown increasingly dependent on one little-known trading firm in Mexico to help sell its crude abroad as the country faces U.S. sanctions starving it of oil profits in a campaign to oust President Nicolas Maduro.
Late last year, traders with decades of experience in the tight-knit Latin American oil market had never heard of Libre Abordo SA de CV, a trading company based in Mexico City. Today, it is one of the few -- and one of the largest -- buyers of Venezuelan oil.
That has landed the firm at the center of a U.S. probe into how companies in Mexico and Malta are helping Maduro’s regime effectively skirt sanctions and sell oil, people with direct knowledge of the matter said. Agencies including the Treasury Department and the Federal Bureau of Investigation are looking into three companies: Libre Abordo, Schlager Business Group -- which Libre Abordo describes as a subsidiary -- and Jomadi Logistics & Cargo, the people said, asking not to be identified because the information isn’t public.
Libre Abordo said it’s unaware of any investigation being carried out by the U.S. government. The firm isn’t subject to primary or secondary sanctions because it’s supplying humanitarian aid to Venezuela in exchange for commodities, and the arrangement doesn’t result in financial gain for the company or the Venezuelan government, Libre Abordo said. Jomadi didn’t respond to requests for comment. Treasury Department and FBI spokespeople declined to comment.
Libre Abordo’s sole administrator -- similar to a director -- is a 23 year-old named Olga Maria Zepeda Esparza, according to corporate records seen by Bloomberg. She is also one of the company’s two shareholders and no one other than them is authorized to represent the company, Libre Abordo said in a statement.
Public records from Mexico’s education secretariat show that, at the age of 15, Zepeda completed her junior-high studies under an adult learning program run by the government. Little else is publicly known about Zepeda, and the company declined to comment on her age, or her professional and educational background.
According to copies of contracts seen by Bloomberg, Libre Abordo has received oil and copper from Venezuela in exchange for supplying corn and water-tank trucks. The company characterized the trades as being part of a humanitarian aid agreement and said it was advised by several law firms to ensure its compliance with sanctions.
Libre Abordo and Schlager have received almost 32 million barrels of Venezuelan crude since last year, according to data compiled by Bloomberg. Even after prices were depressed by the outbreak of Covid-19, the oil is worth more than $300 million, more than enough to cover the total cost of the contract between Libre Abordo and Venezuela’s state foreign trade corporation, known as Corpovex, of 195.5 million euros ($217 million). Over the course of the period, however, Corpovex agreed to cover unforeseen expenses, such as shipping costs and shipping delay fees, and still owes the company money, Libre Abordo said, without providing details.
Spokespeople for Venezuela’s information ministry and state-run oil company Petroleos de Venezuela SA didn’t respond to telephone and emailed requests for comment. A message sent to Corpovex’s email posted at its website was returned with an error message. A spokesman for the country’s Economy Vice Presidency, of which Corpovex is a unit, didn’t respond to a message seeking comment.
Enforcing Sanctions
The transactions come as the U.S. is working to strengthen sanctions to cut off Venezuela’s oil trade. China National Petroleum Corp. and Rosneft Oil Co PJSC (OTC:OJSCY), once major buyers of Venezuelan crude, have halted purchases. But myriad small companies -- using circuitous routes, through which the nation’s oil changes hands several times and is sometimes re-branded before final delivery -- remain trading partners.
The FBI is involved because of the potential role of U.S. citizens in the dealings and because of the possibility that U.S. gasoline may have ended up in Caracas, people familiar with the investigation said. Reuters reported earlier this month that the FBI is investigating. The Treasury Department says on its website that American citizens are prohibited from dealings with Caracas unless exempt or authorized by the agency.
The amounts these small companies are exporting are a fraction of what PDVSA used to sell abroad, and the Maduro government is receiving goods and services instead of foreign currency from the trades. But the deals are so crucial to shore up political support that the country will continue to seek them out, said Raul Gallegos, a Bogota-based director at Control Risks, an international consulting firm.
“You’ll see more of that coming,” Gallegos said.
Venezuela is already getting help from another country crushed by American sanctions: Iran has sent tankers full of gasoline to Venezuela in the past week. It has also flown technicians and equipment to help Venezuela repair its run-down refineries. The Latin American nation is suffering from gasoline shortages, and the U.S. sanctions have cut it off from most foreign suppliers.
In October, Libre Abordo loaded 2 million barrels of Venezuelan crude on the vessels Delta Kanaris and Delta Harmony, according to documents seen by Bloomberg. When the ships anchored off the coast of Malaysia, Libre offered the oil not as a Venezuelan grade, but as Lingyun Blend, a separate email between a broker and Libre Abordo shows.
After multiple ship-to-ship transfers, the oil was delivered to China, tanker-tracking data compiled by Bloomberg show. China’s customs data show no imports from Venezuela since September, while imports from Malaysia tripled in the first quarter compared with the same period last year.
The company denies that Venezuelan oil is sold as a different kind. “Oil titled to Libre Abordo or its subsidiary Schlager Business Group remains fully identified from its origin to its delivery to our final buyer,” according to a statement.
Shipowner Delta Tankers didn’t respond to telephone and emailed requests for comment.
U.S. agencies are also looking into the connection between the Mexican companies and a Maltese firm, Elemento Ltd., as part of their probe, according to the people with knowledge of the situation. The company, at one point, helped Libre Abordo arrange transportation for Venezuelan oil, documents obtained by Bloomberg show. Elemento said through a lawyer that it is unaware of an investigation involving the company.
Elemento’s attorney said the company does not provide shipping logistics to Libre Abordo and that, outside of “three historic cargoes,” it had no involvement with the Mexican company.
Elemento is wholly owned by CISA Holdings Limited, another Maltese company owned by Ricardo Jose Cisneros, of the wealthy Cisneros family in Venezuela, according to a U.K. court ruling involving a case brought against Elemento by shipping firm Tansy Shiptrade Inc. Mark Lopez, who identified himself in a telephone call as legal counsel for Cisneros Corp., a company owned by Ricardo Jose Cisneros, said he couldn’t confirm whether CISA is beneficially owned by Cisneros and declined to direct a request for comment to him.
Fully Compliant
Elemento said through an attorney that it has complied with legal advice to ensure its activities are fully compliant with sanctions, is no longer involved in oil cargoes of Venezuelan origin and doesn’t intend to have any such dealings in the future.
Malta’s most-recent business registry lists an American citizen, Richard Rothenberg, as the only director of Elemento. According to an emailed statement from Elemento’s lawyer, Rothenberg is a director for the company but had recused himself from all of the company’s dealings in Venezuelan oil by the time U.S. sanctions came into force.
Rothenberg didn’t return voicemails left on a phone number listed for him. In a separate statement, Libre Abordo said it does not have a current relationship with Elemento.
U.S. officials have warned the Mexican government in private to stop domestic firms from doing business with Venezuela, according to the people familiar with that messaging. A spokesman for Mexico President Andrés Manuel López Obrador didn’t respond to an emailed request for comment.
The Treasury Department is monitoring where the oil bought by Libre Abordo has been sold and where proceeds were deposited for potential enforcement actions, the people said.
Venezuela, a founding member of OPEC and the nation with the world’s largest proven oil reserves, was exporting 2 million barrels a day a decade ago. In April, it averaged 739,400 barrels a day. The volume slumped in large part due to sanctions.
“Sanctions are being extremely successful in making Maduro’s life harder, but they’re not enough by itself to bring a regime change,” Gallegos said.
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