The Energy Sector

In addition to serving diplomatic objectives, Iran’s petrochemical shipments to Venezuela and its involvement in the Venezuelan energy sector also have a more direct profit motive. In 2007, the two countries agreed to a four-year $700 million project to build a methanol facility in Venezuela after launching a similar project in Iran. The Venezuela project would help Iran get closer to the Latin American market, while the one off the coast of Iran would help Venezuela get closer to Asian markets.

Since 2007, Iran has depended on Venezuela to help it meet its fuel demand. For instance, in 2011, as U.S. sanctions were squeezing Iran’s oil export revenues and depriving it of fuel imports, Venezuela agreed to ship it gasoline and other petrochemical products, despite the risk of damaging its relations with the U.S. The Obama Administration responded by imposing retaliatory sanctions on Venezuela’s state-owned oil company, Petróleos de Venezuela (PDVSA), but the measures did not impede Venezuelan oil exports to the U.S. These sanctions, considered among the least severe options available to Washington, prevented PDVSA from accessing U.S. government contracts and export financing. At the time, the U.S. was the destination for approximately 60 percent of Venezuela’s total oil exports.

Since May 2020, amid widespread blackouts and gas shortages, Venezuela has relied on Iran for gasoline imports. Due to the weakness of Venezuela’s national currency and the impact of Western sanctions on its banking sector, the country uses its natural resources, namely gold and heavy crude, to make payments to Iran. In 2020, reports emerged of a gas-for-gold barter agreement whereby Iranian gasoline was exchanged for Venezuelan gold. The first gasoline shipments from Iran to Venezuela began in May 2020, with five Iranian tankers delivering approximately 1.5 million barrels of gasoline worth $45 million. During the same period, Venezuela began receiving catalysts from Iran needed to refine gasoline at its Cardon oil refinery, which had stopped distilling earlier that year. Before these initial shipments, Bloomberg reported that the total value of the gold loaded onto planes bound for cash-strapped Tehran was $500 million, or nine tons, leaving Venezuela’s reserves with a mere $6.3 billion in hard currency. It remains unclear where the $500 million payment went, considering that the delivered gasoline was worth only $45 million.

In 2021, the National Iranian Oil Company (NIOC) agreed to supply PDVSA with gas condensate in exchange for oil. This arrangement has helped Venezuela preserve its currency reserves and allowed it to dilute its oil for sale to China. The blended product is more desirable to refineries worldwide compared to Venezuela’s typically very heavy crude. Venezuela has also received refinery parts and technical assistance in exchange for its heavy crude. Additionally, given the surplus of jet fuel at the time due to Covid-19 restrictions, Venezuela bartered jet fuel in exchange for Iranian gasoline.

Iranian gas condensate and crude oil deliveries to Venezuela accelerated the following year. In 2022, Iran exported just under 20 million barrels of oil to Venezuela, according to UANI ship-tracking data. While there were multiple companies involved in shipping gas condensate and crude oil to Venezuela, the National Iranian Tanker Company (NITC) played a significant role by delivering the bulk of Iranian products and facilitating the import of Venezuelan oil back to Iran. Iran has imported approximately the same volume of fuel oil from Venezuela as it has exported gas condensate and crude oil to Venezuela. UANI has documented 75 vessels transporting both Iranian and Venezuelan oil and oil products.  

In December 2022, an Iranian tanker arrived in Venezuela carrying about two million barrels of ultra-light crude oil, according to UANI ship-tracking data and analysis. That same month, reports emerged that Iran was smuggling gold it received from Venezuela to Hezbollah, its proxy in Lebanon. Thus, the gold payments help Venezuela circumvent sanctions and contribute to Iran’s sanctions evasion schemes to fund terrorism. According to a Lloyds Marine alert, the IRGC’s Quds Force worked with Hezbollah to facilitate the transfer of Venezuelan gold via the IRGC-linked civilian airliner Mahan Air. In February 2023, Israeli intelligence confirmed that proceeds from the gold were in fact transferred to Hezbollah.

Pending the successful implementation of announced agreements, Iran will provide parts, equipment, and technical assistance for projects to repair Venezuela’s key refineries, including the PDVSA’s El Palito refinery and its Amuay and Cardon facilities on the Paraguana peninsula. PDVSA and the National Iranian Oil Refining and Distribution Company (NIORDC) signed a $117 million agreement in May 2022 to repair and restart the El Palito refinery, which at the time was operating at half its production capacity. In 2020, Iranian technicians—some from the IRGC’s Khatam al-Anbiya construction conglomerate—arrived in Venezuela to install refinery components. The agreement to revamp El Palito accelerated the influx of Iranian technicians into Venezuela, displacing local oil technicians and spurring protests.

PDVSA and NIORDC were expected to sign another agreement valued at just under $500 million in February 2023 to repair the Venezuela’s largest refinery complex, at Paraguana, which at the time was operating at 25 percent of its production capacity of almost one million barrels per day. Under the agreement, Iran would procure and install refinery parts and inspect the facilities. Four hundred Iranian technicians were expected to arrive in Venezuela to work on this project. However, it remains unclear whether the deal was finalized or the Paraguana refinery complex repairs have begun. Additionally, Venezuela’s export infrastructure—the pipelines carrying oil from its interior to its seaports—needs repairs and maintenance, though it is unclear whether Iran will do this work.  

In mid-2022, Venezuela started to buy Iranian-made oil tankers to replenish its depleted fleet. By September, the IRGC-affiliated Marine Industrial Company (SADRA) had delivered three of the tankers, according to Venezuelan President Nicolás Maduro. Contracts for two additional SADRA-made Aframax tankers, each valued at $33 million, were under negotiation in early 2023. These contracts would be part of an existing agreement dating back to the Chávez era, which has reportedly been affected by payment delays and certification difficulties, further exacerbated by U.S. sanctions.

National Iranian Tanker Company Vessel
National Iranian Tanker Company Vessel