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Venezuela’s secret plot to sell banned Syrian oil in U.S. market

By Ben Bartenstein Bloomberg

Syria and Venezuela plotted in recent years to evade international sanctions on Syria through a secret deal to transport its crude oil through Russia to the Caribbean.

The previously undisclosed plan aimed to sell Syrian oil at a big discount to Venezuela through a Russian shell company, which would send it to Aruba for refining and distribution to gas stations in the U.S. and elsewhere, according to dozens of emails, documents and interviews.

The scheme, which hasn’t been executed, indicates the extent to which the two pariah nations are willing to go to evade international rules and antagonize global powers. President Bashar Assad of Syria, written off repeatedly during the past six years as hundreds of thousands of his citizens have been killed in a brutal civil war, has clung firmly to power.

For Venezuela, the plan forms part of an international agenda initiated by the late socialist President Hugo Chavez that has made the country an ally of Iran and Cuba. Now under the leadership of his embattled disciple, Nicolas Maduro, Venezuela is desperate for cash after years of government mismanagement drove oil output to a three-decade low, plunged the economy into a depression and fueled weeks of deadly nationwide protests. The Syrian initiative underscores Venezuela’s international ambitions, indicating that its current crisis could have repercussions far beyond its shores.

It’s unclear whether the plan is still under consideration. A key player, Wilmer Ruperti, a Venezuelan oil trader who grew enormously wealthy through his closeness to the country’s leadership, acknowledged in a phone interview his participation but said he no longer has a role in it. Syrian officials approached him in early 2012 during a party at the Syrian Club of Caracas.

At that time, Ruperti began renting a lavish guesthouse on Aruba’s northern coast to scout out a refinery and meet a local realtor, Oscar Helmeyer. He had his eye on a facility that had just been shut down by its owners, San Antonio-based Valero Energy Corp., causing massive unemployment on the island.

Ruperti offered to pay Helmeyer $15 million for help in buying the refinery, one of the world’s largest, although in the end Venezuela’s state oil company leased it. In an interview, Helmeyer said Ruperti also met with Aruban Prime Minister Mike Eman and another top official, Mike de Meza. Both declined repeated requests for interviews.

In a September 2012 letter to Syria’s then-ambassador to Venezuela, Ghassan Abbas, Ruperti said the point of the scheme would be to “avoid the boycott that has been implemented by United States of America and the European Community.”

He proposed heading a business group called “Sirius Venezuelan” and recommended a five-year contract to supply 50,000 to 200,000 barrels a day of Syrian crude, as well as storage capacity for another 6 million Syrian barrels. Stamped beneath Ruperti’s signature, in bold italics: “Socialist fatherland, we will win and we will live.”

What followed was a chain of communication between Syrian and Venezuelan officials that included several executives of Houston-based Citgo Petroleum Corp., the U.S. subsidiary of PDVSA, or Petroleos de Venezuela, according to two people familiar with the talks. One note from Ambassador Abbas urged a Venezuelan official to come to Damascus to discuss volumes, terms and conditions of the deal.

In the phone interview from Caracas, Ruperti said the oil deal wasn’t meant to make a political statement. “It was a logistical solution to make a lot of money,” he said.

PDVSA did not respond to requests for comment. A Citgo official said the company “is not considering and will not consider Syrian crude imports to supply the Citgo Aruba Refinery. The company is committed to the operation of the Citgo Aruba Refinery in compliance with all applicable laws, and this includes all U.S. sanctions laws.”

Abbas couldn’t be reached for comment.

Citgo attracted attention in Washington earlier this year by donating $500,000 to the inauguration fund of President Donald Trump, a sum that exceeded gifts by Shell, Walmart and most other U.S. companies. The donation raises concerns about how a foreign government might seek to buy influence inside the Oval Office, according to Richard Painter, who served as White House ethics counsel under President George W. Bush and has been critical of the Trump administration.

Citgo’s inauguration gift surfaced after a bipartisan group of U.S. senators said that “critical energy infrastructure” in the U.S. owned by Citgo could come into the hands of Russian oil giant Rosneft PJSC.

PDVSA used 49.9 percent of its Citgo shares as collateral for a loan from Rosneft last year, according to a Nov. 30 financial statement filed in Delaware. Senators, including Marco Rubio, a Florida Republican, and Bob Menendez, a New Jersey Democrat, have said that the Russian company’s purchase of additional PDVSA bonds on the open market would bring its total ownership potential, if PDVSA were to default, to more than 50 percent.

Treasury Secretary Steven Mnuchin said last week that, in the event of a PDVSA default, Citgo’s loan from Russia will be reviewed by the department’s Committee on Foreign Investment in the U.S., which can derail deals on national security concerns. The U.S. is the largest buyer of Venezuelan crude, and Citgo takes the largest share of those imports, according to analysis of U.S. government data compiled by Bloomberg.

For many in Aruba, learning of a refining deal that would have included Syrian oil has come as something of a shock. U.S. officials have said that even planning such a scheme violates international sanctions. Alvin Koolman, the top official of Aruba’s state refining company, Refineria di Aruba N.V., said in an interview that the company will investigate attempts to violate sanctions at the facility and cooperate with U.S. officials. “If anything like that comes above water, it will be stopped,” Koolman said at the company’s headquarters in San Nicolas, Aruba.

The facility hasn’t processed any oil since Citgo signed the lease, Koolman said, and there’s no evidence of oil tankers actually taking the route from Syria to Russia to the Caribbean, according to shipping data tracked by Bloomberg.

While many Aruban officials say they had no knowledge of the Syrian oil plan, parliamentary elections will be held in September and the refinery may turn into a political pawn because its closing caused so much suffering and unemployment. When Valero shut operations in March 2012, it was one of Aruba’s largest employers and the island plunged into a double-dip recession. Its economy is now the third-most dependent on tourism in the world, according to the International Monetary Fund.

On a recent weekday, the only signs of life in once-bustling San Nicolas were two pimps standing guard on the street corners as Venezuelan and Colombian prostitutes in blue and yellow bikinis posed alongside abandoned row houses. Outside the refinery entrance, five donkeys plodded through a field of cacti.

Whatever happens to the refinery, the uncovered plot to reopen it raises questions about possible efforts that haven’t been exposed.

“Syria is searching for alternatives and ways to get around the law and they’ve found friends in our own hemisphere,” said Shannon O’Neil, senior fellow in Latin American studies at the Council on Foreign Relations. “If Venezuela is willing to go through all of these contortions to help the Assad regime, what else are they willing to do?”

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