Russia Takes $30 Million In Venezuela Oil Hostage Over Unpaid Debt

Tyler Durden's picture

Despite having made its bond payment due last week, Venezuela’s state oil company, PDVSA, remains in fire financial straits, with virtually no funds or liquidity, and regardless of the close Russia-Venezuela ties, a Russian state-run shipping company has taken a tanker of PDVSA crude "hostage" in the Caribbean over $30 million worth of unpaid shipping fees.

Russia’s shipper Sovcomflot sued PDVSA in the Dutch island St. Maarten in the Caribbean and “imposed garnishment on the aforementioned oil cargo,” Reuters reported on Tuesday, citing a St. Maarten court decision. PDVSA had sent the oil cargo to the Caribbean in October last year, hoping it could net around $20 million from the sale of the crude, but Sovcomflot claims the cash-strapped state-run Venezuelan company owes $30 million in unpaid shipping fees.

Nearly half a year after crossing the Caribbean, the NS Columbus has transfered its cargo of crude to a storage terminal on St. Eustatius, an island just south of St. Maarten, under the court court. Another tribunal in England will decide if Sovcomflot will ultimately take the oil. Reuters adds that the dispute, which is being heard by the United Kingdom Admiralty Court, highlights how shipping companies are becoming increasingly aggressive in pursuing PDVSA's debts.

It also shows that political allies such as Russia are losing patience with delinquent payments from Venezuela, whose obsolete tankers are struggling to export oil and even to supply fuel to the domestic market.

Making matters even more complicated, PDVSA owes not only shipping fees to the Russian company, but also millions of U.S. dollars to terminals around the Caribbean, including the St. Eustatius terminal - where the oil is currently held - owned by U.S. company NuStar Energy, Reuters reported citing a PDVSA executive and an employee at one of the terminals. Furthermore, PDVSA's "tangled web of payment disputes" now spans the entire world, from unpaid shipyards in Portugal and half-built tankers in Iran and Brazil to the seized cargo in tiny St. Eustatius, whose strategic location in the Caribbean made it an 18th century colonial-era trading hub.

That's not all: as a result of the recent liquidity crunch at PDVSA, the oil company also finds itself months behind on shipping crude oil and fuel to China and Russia under oil-for-loan agreements with its two key political allies. The shipments that PDVSA has failed to deliver to Chinese and Russian state-held companies were worth around $750 million, a Reuters analysis showed back in February.

Will the issue be resolved amicably?

On one hand, Russia has consistently supported President Nicolas Maduro with financing arrangements and oilfield investments. State-run oil firm Rosneft has lent money to PDVSA since 2016 and last month was in talks to help PDVSA make a hefty bond payment. However, problems had been brewing for months between Venezuela and Sovcomflot, which provides about 15% of vessels that PDVSA charters to ship crude to its clients amid a steady deterioration of its own fleet, according to a captain and two shipbrokers working with PDVSA.

Debts to Sovcomflot had by 2016 swelled enough that company's top brass complained in person to PDVSA President Eulogio Del Pino in the Russian city of Sochi, according to source from PDVSA's trade department with knowledge of the meeting.

 

Del Pino agreed to a payment schedule proposed by his trade and fleet executives and accepted by Sovcomflot, the source said. But PDVSA - saddled with heavy bond payments and billions of dollars in unpaid bills to oilfield services providers - was unable to make sufficient payments to avoid Sovcomflot's unusually public debt-collection gambit.

"Hostage" situations such as this one are rare: detentions of oil cargoes have been unusual because creditors rarely have sufficiently detailed information on tanker movements to obtain timely court orders.

Furthermore, since Venezuela also tends to ensure that any cargoes that leave its ports legally belong to the clients rather than to PDVSA - meaning they are rarely in a position to be seized - suggests that either the company made a rookie contractual error or it can't even afford to buy insurance on its cargo. Additionally, the Sovcomflot dispute was unique in that the creditors are the tanker owners. Although the crude onboard the NS Columbus had already been sold to Norway's Statoil, the cargo was being carried in a tanker navigating with a bill of lading under PDVSA's name, according to two inspectors and a representative of one of the companies involved.

Meanwhile, the liquidity crisis at PDVSA, not to mention the economic crisis in Venezuela, has spiraling so far out of control, that the nation with the world’s largest oil reserves recently raged after a gasoline shortage developed in its capital of Caracas.

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Boris Alatovkrap's picture

Do not mess with Vlad!

Yes We Can. But Lets Not.'s picture

Vlad like Black Gold.  Texas Tea too.

toady's picture

What ever happened to supporting their communist brethren around the globe?

Boris Alatovkrap's picture

Communism is not engender loyalty, only envy and strife.

NoDebt's picture

Russia should seize control of Venezuela as creditor in possession.  I know how much you guys are into warm water ports. 

 

HowdyDoody's picture

"Communism is not engender loyalty, only envy and strife."

Sounds a lot like US Crapitalism

Manthong's picture

Chump change

SoDamnMad's picture

Russia has better dibbs on Cuba.   Venezuala is too screwed up. A shooting revolution is coming there when there is no money to pay the army.  Maybe all those FARC weapons are heading to Caracas.

Happy to see Russia using intelligence and attorney's to grab the ship'scargo  rather than a naval ship seizing it on the high seas. 

nmewn's picture

Wait, I thought all the Chavez-Maduro apologists were saying this is all a rightwing plot to takedown the socialist paradise that is Venezuela? 

What the hell is going on, I'm sooo cornfuzed  ;-)

PrometeyBezkrilov's picture

I don't know why you are confused. If the rightwing indeed whants to take over, and I have no doubtes about it because in order to save petro-dollar someone needs to sell oil in petro-dollars, so Russia is taking over the assets. Otherwise after a successfull Orange/Flower Revolution the US will seize the assets and Russia is not going to get anything, it is under US "sanctions", isn't it?

HenryHall's picture

>> What ever happened to supporting their communist brethren around the globe?

 

In the case of Russia, that happened when Russia ceased to be Communist. A little over 25 years ago, do try to keep up!

MEFOBILLS's picture

Venezuala was attacked by Western financial interests.

No resource rich country, especially one with oil will be left alone.

Read Perkins book, "Confessions of an economic hitman" to get an idea of the mechanism.

So, it is disengenuous to assign Socialism as the cause.  Correlation is not causality.

 

With regards to navigating with a bill of lading under PDVSA's name.  

This bill of lading can be put on a banker's double entry ledger.  At that point it can be hypothecated into a new loan.  The loan is paid back when the oil sells.

Also, Russia is no longer communist.  It is a republic.

Volkodav's picture

      Federal Republic

Arnold's picture

Democratic Federal Republic.

Got carried away, there.

I think USSR had more pop.

toady's picture

Ahhh, the good ol' days.... the USSR, the cold war... it's so popular they want to start cold war II!

AllBentOutOfShape's picture

Russia and Venezuela are still very close allies.

I also haven't been able to find this story on any of the pro-Russian or pro-Venezuela websites.  This story is probably fake news.

steelhead23's picture

Maduro hasn't yet joined the oligarchy.  Please note, Russia is an oligarchy with a hint of socialism.  Communism only exists in textbooks.

manofthenorth's picture

Vlad to Maduro;

"Your oils are belong to us."

"Send MORE Gold now."

wren's picture

Maybe they would be able to pay their bills IF THEY DIDN'T TURN SOCIALIST!

It's such a shame! Venezuella, if I remember correctly, used to be the #1 country in the world for plastic surgery. To me that is a signal that a country is doing well as it is not a necessity. When the people are blowing their money on stuff like that, they are obviously doing alright. Such a beautiful nation. Then government took everything and bankrupt them. Now they can't even eat!

Lesson, this is what socialism does. It takes $1 from you, $0.90 is kept by some government dicktaster, then $0.10 is handed out to someone else.

I hope the country ousts that idiot and brings in a real government! The people there deserve better than what they are getting!

Flybyknight's picture

Why don't they just print some Venezuelan Peso's or whatever they use and pay their bills. That is what the great capitalist USA does.

MrSteve's picture

Their "whatever" is called a Bolivar, after the great liberator who freed many countries from Spain's colonial rule. Bolivar said freeing these countries was like plowing the ocean, they kept reinstalling autocratic rulers after they were "liberated". The current slave overseers are Cuban internal security specialists, advising the Maduro SS.

wren's picture

They have been. Their printing presses are running out of ink so their starting to use their citizens blood. Unfortunately, their people are anemic from lack of nutrition so their blood isn't sticking to the paper anymore.

We are able to print currency and export our inflation due to the petro dollar. They don't have a petro dollar to save their hides.

MEFOBILLS's picture

Lesson, this is what socialism does. It takes $1 from you, $0.90 is kept by some government dicktaster, then $0.10 is handed out to someone else.

 

No.  Chavez was taking oil out of the ground, converting it to money by selling it, and then re-distributing it to the peasants.  The land and gifts of the earth can be considered a birth-right.

That the Amerindian peasants are low IQ and not capable of building a high tech civilization is another issue.  Socialism stops working when the productive are shifting their labor/wealth to the unproductive.  It then becomes a system for rewarding parasitism.

In this case, the oil is free gifts of the earth, and has only a small labor component.  If it were me, I would also shift the wealth to the peasants, but they would be allowed to only have one child.  Screwing over the future has a cost.

Ghaddafi did the same.  He kept the tribes quiesent.  Now that Ghaddafi is gone, how is that massive movement of low IQ africans into Europe going?  What is the cost to the future of Europe for the LACK of socialism.  Remember costs are more than money, it can be cost of rapes, and not being free, and even having to look at your country be destroyed.

steelhead23's picture

Oh boy.  Venezuela is an oil-rich country and became very dependent on oil revenues to support its socialist agenda.  The problem with Venezuela's oil is that it is heavy and quite tight, meaning it is expensive to develop.  At the current price of oil, new development is nil and production has fallen steadily since 2012.  And in 2014 the U.S. Congress imposed economic sanctions, making financial transactions much more difficult.  Hence, the idiots running the country had little to do with its economic trouble.  I note that they are not managing the crisis very well.

BorisTheBlade's picture

Even if you are Maduro. That said, Trump will see an opportunity in this one to reassert Monroe doctrine.

Vageling's picture

LoL! I see what you did there, Boris. Being goofy playing on sentiment.

Though Vlad has nothing to do with it. It's law. Sint Maarten is an autonomous state. Well the Dutch part anyways. It's up to the maritime court (also called admiralty court) now.

HRClinton's picture

He who confiscates first, confiscated best.

Vlad knows what is coming, and is front-running the rest. Check.

bobdobolina's picture

Serves the Venezuelans right. They could have had our protection if they had made an iota of effort but clearly they turned the other way and now they are at the whims of the Czar

MEFOBILLS's picture

Serves them right that Chavez was murdered.  

The spice must flow, and must be priced as a petrodollar.  No petrodollars, then dollar as reserve status fails.  Dollar as reserve status fails, then our illuminist overlords cannot take their pound of flesh.

VWAndy's picture

 So they show a picture of an empty tanker. Kinda fitting Id say.

wally_12's picture

Maybe tha tanker is not empty. Someone stole all of their toilet paper. Their trying to sell on the black or brown market.

ParkAveFlasher's picture

Monroe Doctrine, bitcheZ!

Squid Viscous's picture

yeah the Caribbean is like US outdoor hot tub, do something Drumpf!!!

Spungo's picture

Pay your bills, faggots

wmbz's picture

Wonder what the source of all of Venezuela's problems is?

Yes We Can. But Lets Not.'s picture

I'll start it off:

Gimme an 'S'...

MEFOBILLS's picture

Gimme an 'S'...

 

Come on - this is false attribution.  You have been duped.  It's no fun being played for a dupe.

 

Read Perkins book, "Confessions of an economic hitman."

Like Putin says,  Things are not always what they appear to be.

Voice of insanity's picture

The Russians did it ....

They hacked our democracy ...

They hacked our oil tankers ...

They hacked our porn sites ...

RhoneGSM's picture

I was ok with it all till they hit the porn sites.

HowdyDoody's picture

But they replaced the fake US women with real Russian women.

silverer's picture

Russia wants no part of supporting your socialism, Maduro. It's the "running out of other people's money" problem. For Russia, they don't have to put their money in the game. For that matter, neither does any other country. Say goodbye to imports if you can't pay for them. Venezuelans now get two acres and a shovel and a small bag of seeds. Welcome to paradise.

barysenter's picture

Soon you will all live in shipping containers, and British admiralty law shall claim thee.

dogismycopilot's picture

I believe the proper Maritime term is "arrested". 

Arrest Definition: The detainment or restraint of a person or thing for the purposes of determining legal rights as regards a thing, or suspicion of criminal activity as regards a person. Related Terms: Seizure, Search, Arrest (Maritime Law), Arrestment, Investigative Detention.