The U.S. Coast Guard is currently pursuing an oil tanker in international waters near Venezuela, marking the second operation in a weekend of heightened maritime activity. If it is successful, this operation would be the third of its kind to go right in less than two weeks. The United States is increasing pressure on a country under heavy sanctions to crack down on its oil trafficking.
Just last month, U.S. authorities announced that the first two oil tankers they seized were operating in the black market. In addition, these tankers provided oil to countries under international sanctions. U.S. President Donald Trump touted the seizures as part of an expansive new strategy of “blockade.” This strategy has the direct purpose of preventing all sanctioned oil tankers from entering or leaving Venezuela. Third, naval operations are intensifying, which greatly increases geopolitical risks. Ironically, this increased activity may increase tensions among the shadow fleet transporting oil from countries such as Venezuela, Russia, and Iran.
During the last confrontation, around 100 military casualties were reported, highlighting the deadly and risky characteristics of this confrontation. This could be particularly painful at the moment, as Venezuelan and Iranian oil production is said to be slowing sharply. Russia is forecast to experience the largest output drop. Analysts caution that continued seizures could raise oil prices moderately. Intermediaries and other market participants are quickly going to start responding to the new risks associated with Venezuelan oil supplies.
From December 20, the U.S. Coast Guard boarded the Panama-flagged Centuries. Their capture was the first made east of Barbados in the Caribbean Sea. To his credit, Kevin Hassett, then director of the White House’s National Economic Council, directly confronted fearmongering about possible price effects on American consumers.
“And so I don’t think that people need to be worried here in the U.S. that the prices are going to go up because of these seizures of these ships,” – Kevin Hassett
Hassett further noted, “There’s just a couple of them, and they were black market ships,” indicating that the impact on the broader market may be limited.
UBS analyst Giovanni Staunovo was more optimistic, saying that the market reaction might be less extreme.
“We might see prices increasing modestly at the opening, considering market participants could see this as an escalation with more Venezuelan barrels at risk as the tanker was not on a U.S. sanctions list,” – Giovanni Staunovo
President Trump is intensifying his maximum pressure campaign against Venezuelan President Nicolas Maduro. According to officials, this effort includes a deployment of military assets to the region and more than two dozen military strikes on vessels in the Pacific Ocean and Caribbean Sea. This strategy not only seeks to target and disrupt Venezuelan oil exports but can serve a deeper purpose of promoting geopolitical stability.
The recent seizures have the potential to legitimize Ukraine’s ongoing military actions against Russian vessels and may encourage European nations to detain vessels linked to Moscow’s shadow fleet. The challenge of America’s international relations within this new context further illuminates the profound ties that exist between our energy security and military strategy.