President Donald Trump earlier this month ordered a “total and complete blockade of all sanctioned oil tankers” coming out of Venezuela. Since then, the U.S. Coast Guard has been actively enforcing the blockade. 

Should Venezuela-sanctioned oil be taken off the market, it could impact markets globally. Last summer, a group of researchers led by Jesús Fernández-Villaverde, Professor of Economics at the University of Pennsylvania's Ronald Perelman Center, calculated that the amount of sanctioned oil finding its way to market has substantial impacts on the global economy. 

Increasing interdiction 

The attention on Venezuelan oil began when the president designated the regime of Venezuelan President Nicolás Maduro a foreign terrorist organization on December 16. The president accused Maduro of using sanctioned oil to finance drug terrorism, human trafficking, murder and kidnapping. 

Since the announcement, the U.S. has seized sanctioned tankers off the Venezuelan coast. Bloomberg News reports that over the weekend, the U.S. Coast Guard boarded a Hong-Kong-based entity, the first non-sanctioned vessel to be blockaded, and it’s been intercepting others as part of the blockade. 

Concerns about sanctioned oil finding its way to the global market are not limited to Venezuela. Last year, Just the News reported on five Republican House lawmakers who were asking then-President Joe Biden to investigate allegations that Iraq was facilitating sanctioned oil shipments out of Iran, the proceeds of which were funding Middle East terrorist groups. The Iraqi Minister of Oil denied the allegations. 

Dark ships carry half of seaborne oil exports

Fernández-Villaverde, who is also a visiting scholar of the American Enterprise Institute, a free-market research think tank, teamed up with researchers in China and the United Kingdom to estimate how much sanctioned oil was getting to market and what the impacts were on the global economy. 

Their study, released in July, estimated that “dark ships” carrying oil from countries with sanctions transported 9.3 million metric tons of crude oil per month, or approximately 670 million metric tons over the six-year period. That constitutes nearly half of global seaborne oil exports. 

That’s 4.9 billion barrels of oil. To put that in perspective, that’s enough oil to supply the U.S. for 234 days, based on an average consumption of 21 million barrels of oil per day. China, according to the study, takes in 15% of this sanctioned oil. 

“Let that sink in: nearly 10 million tons of crude every month off the books, outside official trade flows,” Fernández-Villaverde said in a post on X. 

The researchers conclude that this volume of oil rebalances oil markets by mitigating the supply shocks that come from sanctions. The cheaper energy costs the Chinese enjoy from the sanctioned oil imports offsets the lower oil prices that hit American producers, the researchers conclude. 

The European Union, on the other hand, because it’s a net importer — unlike the U.S. which is a net exporter — benefits from reduced import costs and stronger Chinese demand, which produces more growth and moderates inflation in the European economy. 

The authors speculate that these benefits may explain why sanctioning countries haven’t enforced their sanctions more vigorously. 

Gaps in data 

The researchers continue to explain that producers offer tanker operators premiums if they’re willing to transport oil covertly. 

These ships deliberately deactivate their Automatic Identification System transceivers (AIS), which are a bit like transponders on aircraft that transmit altitude and location information to air traffic controllers. On ships, the transceivers broadcast the vessel’s location, heading and speed. According to the study, this dark shipping traffic has surged in recent years. 

The smugglers also perform ship-to-ship transfers of oil on the open waters and reflag the ships, meaning they change its registered nationality — the flag it sails under — to a different country. They also use forged paperwork to mask the identities of the crew. 

“Although seaborne transport accounts for over three-quarters of global crude oil trade … the absence of systematic monitoring has left the broader economic impact of this practice poorly understood,” the researchers state. 

While there is no data on the movements of these dark ships, the researchers created a model that uses an artificial intelligence model to fill gaps in available data and estimate the volume of shipments in these covert transports. 

Future research 

The major exporters of sanctioned oil are Russia, Iran, Syria and Venezuela. Their data shows that the primary importers of the sanctioned oil transported on dark ships are China, South Korea, Egypt and the United Arab Emirates. Other importers in the top 10 are Japan, India, Turkey, The Netherlands and Malaysia. 

A large share of these imports, the researchers note, came after sanctions were imposed on Russia. 

The researchers say they hope to explore more options in the future to improve their model accuracy, such as a deeper integration of satellite imagery. 

Of the four major exporters of sanctioned oil, Venezuela exports the smallest amount, but it still represents a significant portion of the total exports of sanctioned oil. As Trump’s blockade pulls that off the market, the economics of supply and demand will play out in the coming months. 

Kevin Killough is the energy reporter for Just The News. You can follow him on X for more coverage.