A new report from Bloomberg exposes how international traders can skirt around US sanctions to buy and sell Venezuelan oil, which allows the Maduro regime to remain in power.
Dragoslav Ilic, a Serb with a Panamanian trading company, trades Venezuelan oil and avoids US sanctions in global markets by bartering oil and reselling to third parties. MS Internacional Corporation exchanges crude for gasoline and gasoline components, allowing the Maduro regime to supply heavily subsidized fuel to his faithful supporters.
Bloomberg notes, until the last several months, no one in the business has ever heard of Ilic or his company.
Francisco Monaldi, a professor at Rice University's Baker Institute, said the emergence of new traders reminds him of those who helped the Venezuelan government survive the strike of 2002–2003.
"These tiny trading houses are doing the same, helping out the regime to either get cash or gasoline or dilutents to produce crude oil," Monaldi said.
Along with new trading houses, Russia's state-controlled oil company Rosneft, Indian refiners and China are supporting Petróleos de Venezuela, SA (PDVSA) with billions of dollars in loans for the chance to purchase oil.
The mystery trader has been in the headlines: Ilic was accused -- and acquitted in a drug-trafficking scandal in Argentina about a 12 years ago. The scheme was known as Vinas Blancas, or White Vineyards, in which drug runners would smuggle Colombian cocaine to Europe in wine bottles.
Venezuela's economy is mostly the energy sector. In 2014, total trade amounted to 48.1% of the country's GDP. Exports accounted for 16.7% of GDP, and crude accounted for about 95% of those exports.
A decent portion of the exported oil ends up in Cuba, which in return, they provide Maduro with military supplies, military personnel, and critical intelligence, according to US officials.
Venezuelan crude production fell from 3.71 million barrels per day to 741,000 as the country descends into collapse with the inflation rate of 53,798,500% between 2016 to April 2019.
The Trump administration unsuccessfully tried to overthrow the Maduro regime earlier this year. More than 50 nations across the world recognize Juan Guaido as the legitimate interim president.
To further suppress Maduro, Trump slapped even more crippling sanctions on Venezuela's oil industry in May.
Guaido's movement against Maduro has slowed since the April 30 riot. Attendance at Guaido's public rallies has dropped.
Maduro, who has the full support of Russia and China, has branded Guaido an American puppet.
Bloomberg notes that purchasing oil from Venezuela was almost a privilege, according to traders.
But since the economy crashed, buyers have the upper hand with PDVSA. US sanctions dictate to whom PDVSA sells are often ignored. US refiners including Valero, Phillips 66 and Chevron Corp., stopped buying its oil. Trafigura Group Ltd. and Lukoil PJSC also cut ties with PDVSA.
"We are aware of companies buying and selling Venezuelan oil despite the US sanctions," Jose Ignacio Hernandez, special prosecutor for the interim government, said in an interview in New York.
"Maduro is using support he's getting from companies transacting Venezuelan oil to buy loyalty from companies and countries, including Cuba," he said.
With MS Internacional and other small trading shops filling the void, PDVSA continues to trade oil despite US sanctions. This means that the Maduro regime will continue to stay in power, further angering the Trump administration.