Tankers Carrying Iranian Fuel Approach the Caribbean

A flotilla of five tankers carrying Iranian fuel for gasoline-starved Venezuela is approaching the Caribbean, with the first vessel expected to reach the South American country's waters on Sunday, according to Refinitiv Eikon tracking data.

Iran is supplying about 1.53 million barrels of gasoline and alkylate to Venezuela, according to both governments, sources and calculations made by TankerTrackers.com based on the vessels' draft levels.

The shipments have caused a diplomatic standoff between Iran and Venezuela and the United States as both nations are under U.S. sanctions. Washington is considering measures in response, according to a senior U.S. official, who did not elaborate on any options being weighed.

The United States recently beefed up its naval presence in the Caribbean for what it said was an expanded anti-drug operation. But a Pentagon spokesman, Jonathan Hoffman, said on Thursday he was not aware of any operations related to the Iranian cargoes.

"We have continued to say that Iran and Venezuela - both two outliers in the international order - (are) clearly violating international sanctions on both nations with this transaction," he told reporters.

Venezuela's defense minister said its military will escort the Iranian tankers once they reach the nation's exclusive economic zone.

Iran-flagged tanker Fortune, the first in the flotilla, was approaching the Caribbean Sea on Friday. It has been navigating with its satellite signal on since it passed the Suez Canal earlier in May. The four other vessels are following the same route across the Atlantic Ocean, the Eikon data showed.

The OPEC-member country desperately needs fuel for up to 1,800 gasoline stations that have been partially closed for weeks due to insufficient supply from state-run PDVSA's refineries, which until March worked at about 10% of their joint capacity of 1.3 million barrels per day.

PDVSA's gasoline output is now limited to a single facility, the Amuay refinery, but most fuel produced is low octane as most of the country's alkylation units are out of service, according to company sources. Imported alkylate could improve the quality of domestic gasoline.

PDVSA did not immediately reply to a request for comment.

Venezuela was consuming 170,000 bpd of gasoline before coronavirus-related lockdown measures. Fuel sales at stations declined to about 40,000 bpd due to rationing, according to analysts.

Over a decade of mismanagement and lack of staff, combined with U.S. sanctions that since 2019 have limited imports, Venezuela's refineries are in poor condition. Shipments of equipment in flights by Iran's Mahar Air have arrived in Venezuela in recent weeks to start repair work.

The U.S. Treasury Department this week blacklisted the Chinese firm that provided the refinery parts. Beijing called the sanctions "illegal."

(Reporting by Marianna Parraga; additional reporting by Matt Spetalnick, Phillip Stewart and Luc Cohen; Editing by Marguerita Choy and Dan Grebler)