CARACAS – One startup lists as its address a small home in a working-class district in Venezuela's capital whose owner has never heard of the firm. Another is a Hong Kong-based shell company created in 2020. Yet another belongs to a Spanish commodities trader indicted in the U.S. for allegedly helping Russian oligarchs launder ill-gotten profits.
They are among the dozens of obscure middlemen at the center of a new crackdown in Venezuela on corruption in the state-run oil industry that has government insiders scurrying for cover — and regular Venezuelans are asking how more than $20 billion in proceeds from oil shipments seemingly vanished.
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The purge began this month when authorities arrested 21 business people and senior officials as part of an investigation into missing payments for oil. To promote the anti-corruption crusade, state media this week was filled with images of the defendants dressed in orange jumpsuits walking into their initial judicial hearing.
Corruption has long plagued Venezuela — the OPEC nation was the fourth-most corrupt in the world in the latest rankings by Transparency International — but those in positions of power are rarely held accountable.
And when high profile arrests do take place, Venezuelans tend to view them as the result of a behind-the-scenes tug of war among heavyweights in the ruling socialist party, and not any impartial meting out of justice in a country where most institutions lack independence.
An entrenched culture of corruption and the inherently opaque nature of trading illegal crude oil take malfeasance to another level.
“It would be very difficult for even a much less corrupt state to implement all the necessary controls," said Francisco Monaldi, a Venezuelan who heads the Latin America energy program at Rice University’s Baker Institute for Public Policy.
While the fallout from the scandal continues, it already has felled one major power broker: Tareck El Aissami, the country's oil czar. He quit in the wake of the arrests, which included the detention of a close associate, Joselit Ramirez, who had been serving as Venezuela's cryptocurrency regulator.
While Venezuelan authorities have not mentioned El Aissami as a target in the investigation, most of the shady transactions at state-run oil giant Petroleos de Venezuela SA occurred under his watch.
Internal PDVSA documents obtained by The Associated Press show the state oil company was owed $10.1 billion as of August 2022 from 90 mostly unknown trading companies that have emerged as major buyers of Venezuelan crude since the U.S. imposed economic sanctions in a campaign to oust President Nicolás Maduro.
An additional $13.3 billion, corresponding to 241 shipments, is owed directly to the national government as a result of an October accounting maneuver by PDVSA that reassigned responsibility for collecting the unpaid invoices directly to the Maduro administration in lieu of cash royalties. That is more than the country's entire foreign currency reserves.
All the oil cargoes were sold on consignment at a deep discount owing to the sanctions, which have scared away more established traders.
PDVSA's reliance on intermediaries surged in 2020, when the Trump administration expanded sanctions with the threat to lock out of the U.S. economy any individual or company, regardless of nationality or location, that did business with Maduro's government.
The punishing action, combined with a pandemic-induced global slump in demand for oil, led production that summer to plummet to 350,000 barrels a day — 10% of what it produced when Chávez took office in 1999.
To sell what little is being produced, Maduro, with the help of allies Russia and Iran — themselves under U.S. sanctions — has had to rely on a complex network of intermediaries. Most are shell companies, registered in jurisdictions known for secrecy. The buyers deploy so-called ghost tankers that hide their location and hand off their valuable cargoes in the middle of the ocean before they reach their final destination..
To avoid Western banks, Venezuela started accepting payments in Russian rubles, bartered goods or cryptocurrency.
But not everyone paid.
Among those on the delinquent list is Walker International, which owes PDVSA about $77 million, according to the documents. The company is registered in the United Arab Emirates but lists as its Venezuela address a modest house at the foot of the mountain range that separate Caracas from the Caribbean Sea.
The owner of the home, Andres Muzo, expressed shock that his home could somehow be caught up in a case of international corruption.
“I’m finding about this right now,” Muzo said after seeing his address in Dubai corporate records, which were first unearthed by Venezuelan news website Armando.info. He shook his head and said he would inquire with the people who rent his adjacent garage for an oil-change business.
“We don’t know anything,” Muzo said.
The broker with the largest debt is M and Y Trading Co, which was registered in Hong Kong in 2020. It owes PDVSA more than $1.2 billion, according to the internal documents, which someone knowledgeable about the transactions shared with AP on the condition that they remain anonymous.
Another preferred vendor was United Petroleo Corp, which was registered in Panama in 2021 and owes more than $468 million. One of United's cargoes — a 600,000-barrel shipment last September — is at the center of a controversy on the Dutch Caribbean island of Curacao, where the Venezuelan crude is being stored at a facility tied to U.S. investors in possible defiance of sanctions.
Yet another of PDVSA's go-to partners was Treseus International. The commodities brokerage, which did not respond to an email seeking comment, is run by Juan Fernando Serrano, a Spaniard indicted last year on money laundering charges in Manhattan federal court for conspiring to smuggle oil on behalf of wealthy Russians. That court also wants El Aissami and Ramirez on charges of violating U.S. sanctions stemming from El Aissami's 2017 designation by Washington as a “drug kingpin” for allegedly helping cartels smuggle cocaine through Venezuela.
Authorities have yet to say how much money may be missing. But Maduro has used some of his recent public appearances to warn officials against graft. Supporters even gathered for an anti-corruption protest in Caracas.
Past crackdowns — like the arrest of a former PDVSA president in 2017 — did little to clean up the oil industry, which is responsible for almost all of the country's hard currency earnings. Many analysts suspect Maduro is looking to stabilize the economy before next year's presidential election.
“Coffers are bare and the country is entering an election year in which Maduro wants to convey a message that Venezuela is back on track,” said Geoff Ramsey, a senior fellow at the Atlantic Council. “The more it becomes clear that the economy remains in dire straits, the more Maduro will look for people to take the fall.”
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Goodman reported from Miami.