Risky Business: Two Liabilities For The Price Of One

(New York, N.Y.) – Venezuelan President Nicholas Maduro’s recent announcement that he will soon visit Iran demonstrates how eager Caracas is to grow its burgeoning relationship with Tehran to keep itself afloat. For international companies doing business in or with Venezuela, this should ring alarm bells because they risk exposure to potential violations of both U.S. sanctions on Caracas and U.S. sanctions against its major trading partner, Iran.

While many experts agree that between one- and two-thirds of Iran’s economy is controlled by the Islamic Revolutionary Guard Corps (IRGC) and its affiliated front and shell entities, the extent to which the Maduro regime uses illicit shell and front companies in Venezuela is more difficult to fathom. It is nonetheless clear that the same problem exists in both countries. Transparency International ranks Venezuela 176 out of 180 nations in its index of public corruption, and according to the U.S. Treasury Department, the Maduro regime “has engaged in massive corruption through state-owned enterprises (SOEs) and offshore third-parties” and warned that “all Venezuelan government agencies and bodies, including SOEs, appear vulnerable to public corruption, money laundering, and other financial crimes.” Venezuela’s state-run food subsidy program, for example, has been accused by the U.S. of money laundering. One year after the Treasury designations, an IRGC-backed agribusiness established supermarkets in Venezuela, stocking them with food transported from Iran aboard U.S. sanctioned vessels.

In the face of increasing Western pressure on both countries, Iran has offered the Maduro regime considerable material assistance, including repairing Venezuela’s oil refineries and imparting a variety of sanctions-evading wisdom. Venezuela in turn has offered Iran a forward operating base for malign activities in Latin America and a lifeline from U.S. sanctions. 

“Doing business with the Maduro-controlled Venezuelan economy implicitly ties U.S. companies to the Maduro regime, and its opaque, corrupt economy is known to be infected with Iranian enterprises,” said United Against Nuclear Iran (UANI) Research Director Daniel Roth. “However, despite the risk of violating rigid U.S. sanctions against either or both countries, prominent U.S. companies like Ford Motor Company, Mack Trucks, Chevron, Procter & Gamble still conduct business with Venezuela. It is critical that these companies realize that in today’s geo-political landscape, doing business with the Venezuelan economy increasingly runs the risk of entanglement with Iran. 

Importantly, the exchange of money and goods to Venezuela from U.S. companies will inevitably find its way to the Iranian economy and the IRGC. The IRGC, through a series of front companies, makes it enormously difficult for corporate compliance officers to detect if their company’s business is supporting a terrorist organization. Worse yet, the IRGC actively engages in illicit actions in Venezuela ranging from terrorism to money laundering and smuggling through its Iran-sponsored terror proxy Hezbollah. As UANI Advisory Board member and former Florida Governor Jeb Bush recently stated, “Hezbollah uses Venezuela to raise funds for terror operations through illicit businesses. It also bolsters the Maduro regime’s defense capabilities in the event it ever faces a military assault. Notably, Hezbollah’s friendliest base of operations in Latin America is in Caracas.”

Reputable companies should recognize that the liability of doing business with Venezuela is compounded due to its coalescing with Iran. Roth concluded, “The flourishing Venezuela-Iran relationship makes the choice crystal clear for the business community: Stop doing business with Venezuela; if not for national security and ethical reasons, then for your own self-interest.”