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Venezuela receives new shipments of gasoline from Iran amid severe shortage

Venezuela has received 3 new shipments of gasoline from Iran, but experts say it's not sustainable as the South American nation is running out of cash. Venezuela has the largest oil reserves in the world, but in recent weeks it was forced to close gas stations across the country due to shortages.
2 Oct 2020 – 01:49 PM EDT
A man smokes as he queues to refill the tank of his car outside a gas station of the Chacao neighborhood in Caracas on September 11, 2020, amid the novel coronavirus pandemic. Crédito: Federico Parra/AFP via Getty Images

Venezuela has received a new shipment of much-needed gasoline from Iran which could help stave off growing social unrest over shortages that has sparked protests across the South American nation.

The second of three ships loaded with gasoline from Iran arrived this week off the coast of the South American nation, despite U.S. sanctions designed to cut off oil and exports and imports as part of an international ‘maximum pressure’ campaign to force Nicolas Maduro to give up power.

Maduro’s government blames the lack of gasoline on U.S. sanctions, however the Trump administration points to a steep decline in production under corrupt and incompetent socialist rule in Venezuela, which was once one of the largest exporters of oil in the world.

' We are aware of reports of Iranian petroleum arriving in Venezuela,” a State department spokesperson told Univision. “This is another reminder of how, through its incompetence and mismanagement, the Maduro regime has destroyed Venezuela’s institutions, economy and infrastructure, and created the need to import gasoline into this oil-rich country.”

The U.S. is actively seeking to use sanctions to prevent shipments of oil and gasoline in and out of Venezuela, and has successfully shut down some cargos involving Russian entities.

But lately it has turned to Iran, a close ally to the government of President Nicolás Maduro that is also targeted by strict sanctions from Washington.

While Venezuela still produces oil, it needs to import gasoline because its own production is a form of heavy sulphur crude oil and it lacks the capacity to refine it due to a lack of investment and maintenance.

The role of Iran

“While we continue to engage with the energy sector on the possible risks they face by conducting business with PDVSA, the illegitimate regime in Venezuela has turned to international pariahs to enable their exploitation of Venezuelan wealth,” the State Department spokesman said.

The Iranian tanker Forest arrived Tuesday at a Venezuelan port carrying 275,000 barrels of gasoline, and the Fortune arrived a day later, said Russ Dallen, head of the Miami-based investment firm Caracas Capital Markets, who tracks Venezuela shipments.

A third tanker, the Faxon, is expected to reach the South American nation this weekend, Dallen said.

Five Iranian tankers earlier this year delivered 1.5 million barrels of fuel and additives, temporarily easing a severe gasoline shortage that Venezuelans had endured.

Risk of conflict

Dallen and others say there is little more that the U.S. do, short of the U.S. Navy intercepting the tankers at sea and risking an accident with a highly flammable cargo. If the U.S. Navy were to get involved that also risks retaliation by Iran in the Persian Gulf, and a possible military conflict.

“The U.S. could win a war with Iran, but do we really want to get there through a series of escalating moves?” said Dallen.

The Iranian shipments - three tankers with a total of 815,000 barrels of gas - will likely only provide short respite from the nation’s deep shortages, a couple of weeks at best, according to experts.

“Ultimately, Venezuela cannot continue buying all the gasoline needed as it doesn't have enough money. So, Venezuela gets gas temporarily and Iran gets a little money or gold -- it is not yet a sustainable business," said Dallen.

In recent weeks, Venezuela, which has the world’s largest oil reserves, shut down gas stations nationwide due to shortages, sparking long lines with frustrated drivers waiting hours and days to fuel up their cars.

More than 100 street demonstrations have flared up in remote towns over the last week, according to The Associated Press. Despite each being relatively small, they have raised concern among Venezuelan authorities, who have responded forcefully, sending in soldiers and local police, activists and residents told AP.