The present and future of Venezuela’s shipping contractors
It took Skuld only a few weeks to see its predictions become reality, with Reuters reporting in mid-March that two of Venezuela’s major contractors had decided to withdraw their services.
In fact, weeks of uncertainty and delayed operations led US-based ship owner McQuilling Partners and German tanker operator Bernhard Schulte Shipmanagement (BSM) to announce they would no longer provide oil-shipping services to Venezuela.
BSM, which had been working for Venezuela for almost 25 years, said in a statement that due to the latest political developments, managing assets for Venezuela had become an “almost impossible task”, and would return its fleet of 15 vessels to PDVSA by the beginning of April.
Meanwhile, a McQuilling shipbroker told Reuters: “We’re steering clear. We obviously are not moving any barrels over there.”
As a result, being short of two major suppliers and stranded by sinking oil exports and growing political frictions, Venezuela now seems to be on the brink of collapsing.
As Capital Economics’ Glossop explains, the US is now more than ever dictating the rules of the game, putting new pressures on India and other countries to stop collaborating with PDVSA in what it hopes to be the final straw for the Maduro government.
“It is a similar situation to what happened with Iran,” says Glossop, referring to the sanctions the Trump administration inflicted on Iran last year, which were intended to hit the oil industry, as well as shipping and banks.
According to Rapidan Energy’s Ferreira, if President Maduro continues to hold on, a similar fate could await Venezuela: “Increasingly, PDVSA will have to do what Iran is doing; eventually, they're going to have to provide their own insurance for the shipments, because they won't be able to clear payments or because insurance companies may not be able to insure PDVSA shipments.”
The situation is further aggravated by the fact that power is concentrated in the hands of very few, leaving no space for shipowners, PDVSA, or any other companies involved to lobby in favour of Maduro’s departure.
Nevertheless, Ferreira believes that the US’ ever tighter restrictions, falling oil prices and internal turmoil could eventually determine Maduro’s debacle: “Venezuela’s ability to get cash is crucial. Over the coming months, as production continues to decline and the risk of additional sanctions goes up, it is going to be very hard for Maduro to hold on. We expect him to be gone by the fourth quarter of the year.”