Another Way to Evade USA Economic Sanctions
Updated: Apr 3
The PDVSA, the Venezuelan state oil company uses third parties to guarantee the operation of the company, despite the USA sanctions on them.
by Maibort Petit
Freedom Voice Reporting
Maibort Petit is a Venezuelan writer, researcher and political scientist specialized in Transnational Organized Crime. Based in New York, she works for various Hispanic media outlets and as a consultant for various firms in New York and Washington DC.
She is also founder of Freedom Voice Reports which is an Investigative Reporting team, started over 25 years ago, with an emphasis on protecting our freedoms. Reporting on authoritative government, dark money used by business to persuade our political institutions, our court system, drug trafficking stealing so many lives, parental rights being lost in our educational system and so much more.
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Since it was subject to economic sanctions by the government of the United States and the European Union, Venezuela and its flagship company, Petróleos de Venezuela S.A., have turned to third parties to seek the placement of crude oil and other products in the markets.
Thus, to make oil sales to China – now its main buyer – a set of front companies has made it possible to realize exports.
Meanwhile, Iran has been the source of fuel and other inputs to ensure both domestic consumption and the operation of the company.
In this same sense, the "commercial alliances" implemented by the state oil company are framed, which are the reason for this informative note.
And, given that the operation of the company becomes impossible without a series of inputs, services, raw materials and equipment, PDVSA resorts to the aforementioned commercial alliances to procure them and manage to keep the engines of the company that has managed to put into operation lately, after a long time of inoperability.
In a report dated June 2021, U.S. and European companies have reduced their presence in the country to comply with the restrictions or to avoid possible punishment, PDVSA has resorted to partnerships with small local companies to stop the definitive debacle of the oil company and keep production at reduced levels.
In this way, the national oil company focuses on delegating more and more tasks to local contractors under new business models
says the note that quotes Raúl Gallegos, director of the consultancy Control Risks that focuses on the Andean region, who estimates that
"The situation in the [Venezuelan] oil sector is so serious that there are fruits at hand" and "The regime is trying to seize those opportunities with entrepreneurs who don't mind engaging with the government under the current sanctions."
In this installment we present one of these commercial alliances, established between PDVSA Petróleo S.A. and the company Yogar C.A., which, according to data collected by Venezuela Política is domiciled in Morón, Carabobo state, legally represented by José Yovanni García Tovar.
Our information sources report that he is a local businessman who has achieved various contracts and businesses through his relations with the Chavista ruling party.
Meanwhile, for the state oil company, Ramón Curapiaca, general manager of the El Palito Refinery (REP), stamped his firm. The signing took place in 2021.
According to documents in our possession, to violate the sanctions imposed by the United States and the European Union, PDVSA resorts to mechanisms of contracts signed with associated companies and the interposition of a third party, to guarantee with these alliances, the diligences and objectives that it cannot directly seek due to the sanctions.
A fundamental point for PDVSA is confidentiality, so the contracts emphasize the commitment that commercial allies establish when carrying out such alliances.
In a contract in our possession, clause three PDVSA establishes a warning to its associates about the consequences of not complying with the obligation of silence.
Commercial partners are committed to maintaining strict confidentiality of the information entrusted to them by PDVSA. "The commitment to confidentiality extends to all people who have access to information. For such reasons, 'La Aliada' will be liable for the acts of its employees, agents and other persons under its authority, without prejudice to the responsibility that may correspond to each individual, provided that it has been informed by 'La Aliada' of the terms and conditions of the contract".
In the case of the commercial alliance between PDVSA and Yogar C.A., it is the fourth, fifth and sixth clauses that make the specifications related to payment.
In this sense, the payment will be made after defining the activities inherent in the provision of services or execution of works to be carried out by La Aliada, as well as the price / investment associated with said activities, in favor of the interests of PDVSA. It is indicated that the oil company will make the payment of the stipulated price to the Ally, in accordance with a series of requirements and controls that are specified in the fifth clause.
The payment for the provision of the service or execution of works by the Ally, will be made in bolivars "with reference in Euro for the purposes of calculation as an account currency whose payment obligation will be released at the exchange rate in force for the date of payment of the invoice".
It is warned and with this seeks to protect PDVSA in order that such task is fulfilled in its entirety by the Aliada that, the services or execution of works "includes among others, materials, machinery, tools and equipment supplied by La Aliada, in accordance with the conditions established in the Commercial Alliance".
In this sense, in the contract it is stated that "The Aliada declares that in the determination of the corresponding price, it has taken into account all the conditions, costs and expenses related to The Service or Execution of Works, which it declares to know, which it declares to know in all the details, for which the Aliada accepts that it will not have the right to any claim against PDVSA due to difficulties in the execution of The Service or Execution of Works, provided that said reason of difficulty is attributable to La Aliada, with the exception of the modifications that may be introduced in the Commercial Alliance due to variations in the amounts due to the effect of laws, decrees, resolutions and collective labor agreements, which directly and significantly affect the costs of The Alliance, approved within the validity of The Alliance".
Such variations will be paid using the procedures established by PDVSA.
It is topped by stating that "if The Ally incurs any expenses or costs above the agreed price in accordance with the procedure provided for in clause five, The Ally shall assume on its own account and charges any additional expenses or costs that may have arisen from the execution of the Service or Execution of Works".
Advances will be granted as a contractual advance of up to 50 percent of the amount of the contract without taxes and a spatial advance of up to twenty percent of the amount of the contract without taxes and with the necessary guarantees to protect the investment of the State, in accordance with the provisions of the Public Procurement Law in force.
The fifth clause establishes the procedure to be followed so that the payments have origin, while the sixth clause governs what is related to the advances, which "The Ally must justify to PDVSA" by rendering an account of the resources received, which must be presented "within a period not exceeding 30 business days counted from the formalization of issuance of the resources that are destined for the development of the acquisitions object of this Commercial Alliance".
In the same way, it is stipulated that "PDVSA may request or execute the material and physical verifications of the provision of services, execution of works or delivery of supplies of goods object of the Commercial Alliance, being able to request the information and / or documentation related to the destination, management and use of the assigned resources".
Errors and guarantees
PDVSA makes it clear that the Ally will be responsible for the damages caused during the execution of the commercial alliance, either due to errors, eviction, omission or negligence.
Therefore, it must take the necessary precautions to avoid the occurrence of damage to third parties, seeking to protect the properties and property of the Republic as well as individuals and the environment in general.
The Commercial Alliance can only be modified by mutual agreement and ratified with a complementary contract.
The transfer and transfer of the alliance without authorization from PDVSA is prohibited.
It is warned that PDVSA may require the commercial partner to present bonds or guarantees. Likewise, "PDVSA may, in case of payments, apply the withholdings on each payment it makes to the Parties, until it covers the amount of coverage required as a guarantee of the suitability of the contract necessary for PDVSA (...)".
Among other considerations, PDVSA states that it will not contract any labor responsibility with the personnel that provide services to the commercial ally, being the sole and exclusive responsibility of the ally, the fulfillment of the corresponding obligations with said personnel.