The Shadow Supply Chain: How Sanctions-Evading Venezuelan Oil Fuels China’s Refineries

In the shadowy underbelly of global energy trade, a clandestine operation is keeping Venezuela’s oil flowing to China—despite U.S. sanctions designed to starve the regime of Nicolás Maduro of revenue. Through GPS spoofing, falsified documents, and a web of intermediaries, traders are rebranding Venezuelan crude as Brazilian, evading sanctions and delivering an estimated $1.2 billion worth of oil to Chinese buyers since July 2024. This article explores the mechanics of this scheme, its implications for investors, and the risks lurking beneath the surface.

The Mechanics of Sanctions Evasion

Venezuelan state oil company PDVSA has long sought to bypass U.S. sanctions targeting its exports. The latest scheme involves rerouting shipments through intermediaries like China’s Hangzhou Energy, which disguises the oil’s origin. Tanker trackers like TankerTrackers.com reveal that tankers such as the Karina (operating under the alias Katelyn) loaded Venezuelan Merey 16 crude in Caracas before spoofing their AIS signals to appear as if departing from Brazil. This method avoids the need for costly ship-to-ship transfers at sea, reducing logistics costs and voyage times by four days.

Chinese independent refiners, or “teapots,” are the primary beneficiaries. These companies—such as ZhenHua Energy and Rongsheng Petrochemical—are hungry for heavy, low-cost crude like Venezuela’s bitumen, which doesn’t require government import quotas. By mid-2025, Venezuela’s exports to China had surged to 463,000 barrels per day, up from 351,000 bpd in 2024, with less than 10% of shipments officially labeled as Venezuelan.

The Risks and Rewards for Investors

For Chinese Refiners:
The access to discounted Venezuelan crude provides a competitive edge. Merey 16 trades at a $5–10/barrel discount to Brent, making it attractive for refiners processing heavy crude. However, the reliance on a sanctions-burdened supply chain carries risks. U.S. Treasury sanctions on intermediaries like Rosneft Trading SA in prior years suggest the threat of financial penalties or asset freezes remains. A crackdown could disrupt supply and expose companies like ZhenHua to reputational damage.

For Venezuela:
The scheme props up Maduro’s government, which relies on oil revenue for 95% of its export earnings. But the long-term stability of this arrangement is questionable. If the U.S. tightens sanctions—such as targeting Chinese banks facilitating the trades—the flow could dry up, leaving Venezuela’s economy more vulnerable.

For the U.S. and Geopolitical Investors:
The persistence of this scheme underscores the limits of secondary sanctions. While U.S. measures have squeezed Venezuela’s oil exports since 2019, the rebranding tactic highlights the need for more sophisticated enforcement, such as tracking spoofed AIS signals or auditing documentation chains.

Data-Driven Insights

• Export Surge: Venezuela’s exports to China jumped 32% in 2024–2025, even as global oil prices fell by 15% year-on-year.
• Documentation Fraud: Brazilian customs records show 2.7 million metric tons of bitumen imports from “Brazil” in 2024–2025—a contradiction, as Petrobras does not export bitumen.
• Banking Risks: Transactions labeled as Brazilian crude attract more bank financing than those flagged as Venezuelan, per PDVSA traders.

Conclusion: A Volatile Trade with a Short Shelf Life

The rebranding scheme reflects the ingenuity of global traders in circumventing sanctions—a testament to the complexity of enforcing secondary sanctions in a multipolar world. For investors, the calculus is clear:

1. Chinese Teapots: Benefit from cheaper feedstock but face escalating geopolitical risks. Monitor U.S.-China trade relations and Treasury sanctions lists.
2. Venezuelan Bonds: Short-term gains from higher oil revenues may mask systemic instability.
3. U.S. Sanctions Enforcement: The Biden administration’s success in tracking spoofed tankers and auditing trade documentation could disrupt this supply chain.

The $1.2 billion trade is a lifeline for Maduro but a precarious bet for investors. As one tanker tracker noted, “This isn’t just about oil—it’s about how far China and Venezuela are willing to go to defy the sanctions regime.” With U.S. enforcement tools evolving, the clock is ticking on this shadow supply chain.

In the end, the rebranded oil shipments highlight a broader truth: in energy markets, the cheapest crude often comes with the highest political—and financial—risk.