China, Oil and Cocaine – Shadow Play in Aruba

August 15, 2014

Caracas, August 15, 2014: It is not every day that a large, continental neighbour hints to a Caribbean island it will jeopardise its oil refinery, cancel major air routes and, for good measure, send in a couple of gunboats. But Aruba’s detention of Venezuela’s former military intelligence chief triggered just that.

The pressure worked. The Netherlands bogusly cited diplomatic immunity to overrule Aruba, a Dutch protectorate, and refuse a US extradition request for retired Major General Hugo Carvajal who is formally accused – with other Venezuelan generals – of coordinating hundreds of tons of cocaine shipments with Colombia’s leftist FARC guerrillas.

Ostensibly, Carvajal, who has been listed on the U.S. Department of the Treasury’s Office of Foreign Assets Control as a drug “kingpin” since 2008, was arrested on July 23 while arriving in Aruba to become Venezuela’s new, but as yet unaccredited, consul.

For Venezuelans, Aruba is a popular tourist destination as well as offshore corporation and banking center. Furthermore, Venezuela’s state oil entity, PDVSA, leases storage units from Aruba’s (currently non-producing) oil refinery, which is owned by Valero Energy, of Texas. The refinery has been up for sale for some time, with Aruba desperate to protect the 780 jobs involved.

In 2012, Valero reported in an SEC filing it had received a non-binding offer of $350m plus working capital. Although Valero did not identify the prospective buyer, Aruba’s prime minister, Mike Eman, stated that the government was in talks with PetroChina Co, a subsidiary of China National Petroleum Corp (CNPC).

Carvajal landed in Aruba on an aircraft leased by Roberto Rincon, a Venezuelan entrepreneur who is closely associated with Rafael Ramirez, the head of PDVSA, and whose companies are key PDVSA suppliers. According to a social media report back in June, Rincon also has an interest in buying Valero’s refinery.

Curiously, Carvajal’s Aruba visit came two days after XI Jinping, the Chinese president, was in Caracas signing a raft of oil and mineral deals in exchange for a US$4bn credit line. And a day after Carvajal’s arrest, Rafael Ramirez, who was to meet with PDVSA investors in New York the same week, inexplicably cancelled his trip.

According to sources cited by Reuters in 2012, PetroChina had reached a deal with PDVSA for supplying the Aruba plant with crude produced jointly between Chinese firms and the state. The plant has two coker units able to semi-process the heavy Venezuelan crude. The product would be shipped to China for finishing in its refineries.

Venezuela, which by 2015 aims to increase its oil supply to China to 1 million barrels a day – nearly half its current output – is already building a $9 billion joint refinery with CNPC on China’s southern coast.

Neither Carvajal nor Roberto Rincon is a stranger to Aruba. Rincon, who like another high-profile Venezuelan oil trader, Wilmer Ruperti, began his meteoric rise as a trusted PDVSA supplier as a result of his support during the PDVSA strike in 2002, has a number of properties there.

And according to a Venezuelan military source, since 2012 Carvajal, operating through a key former intelligence associate, has been working with Wilmer Ruperti on… the purchase of the Aruba refinery, a deal in which Carvajal would include Carvajal investing his own money from Panamanian bank accounts.

Carvajal was at the apex of the Venezuelan drug trade. When the late President Hugo Chávez appointed him head of military intelligence in 2004, an estimated 60 metric tons of cocaine passed through Venezuela, according to US sources. Three years later that figure had risen to 260 tons, after Chávez – on Carvajal´s recommendation – rescinded counter-narcotics agreements.

March 2008 helped to explain why. That month the Colombian armed forces attacked the camp of the FARC’s number two, alias Raul Reyes, in neighbouring Ecuador, killing Reyes and capturing computer data that showed links between the FARC and the upper echelons of the Chávez government that went far beyond what US intelligence organizations had hitherto suspected.

Carvajal was one of the key figures coordinating those links. Nine months later, he was blacklisted for ‘protecting drug shipments from seizure … and providing weapons to the FARC’, as well as for granting Venezuelan identity documents to FARC members.

President Nicolas Maduro relies in intelligence matters to a large extent on Cuba’s G2. He dispensed last year with the services of Carvajal, who sources say is jealous of the Cubans’ influence and distrusted by them. Rumours were rife – as they have been for a number of years – that he was negotiating his surrender to the US in exchange for a reduced sentence.

Following his arrest, there were those who said the Cubans had betrayed him – while others suggested it might have been an elaborate act of theater by Carvajal to close a deal with the US. Carvajal certainly seemed neither willing prisoner nor victim of a revolutionary plot. The regime put every branch of the state, from the foreign ministry to the Supreme Court, to work to avoid his extradition, which posed a very real threat to many of its most senior members.

But the rejoicing that greeted his return to Caracas was part show and part relief. There is no love lost among the rival clans that control the drugs trade in Venezuela, and Carvajal knows where the bodies are buried, making him a dangerous, and perhaps a marked man.

One major, longstanding feud is between the trafficking organization run by National Guard officers and the more recently formed army ‘cartel’. Both are sometimes referred to as the ‘cartel of the suns’, in reference to the insignia Venezuelan generals wear on their epaulettes. Their rivalry is rumoured to have been behind the unsolved, 2012 murders of two ex-army officers, Gen. Wilmer Moreno and Capt. Jesús Aguilarte, former governor of the border state of Apure.

Another who met a sudden end was Colombian capo Wilber Varela, found dead in a Venezuelan hotel in 2008. According to the US indictment on which Carvajal was to have been extradited, Carvajal helped Varela ship tons of cocaine to the United States. Varela’s death in turn has been attributed to Walid Makled, a Venezuelan capo who in 2008 fled to Colombia and was later returned, despite a US extradition request. Makled claimed to have 40 Venezuelan generals on his payroll – including Carvajal.

Strangest of all in this tale of China, oil, cocaine, murder, guerrillas, generals and money laundering is the untimely death on 18 June of a German businessman, shot dead as he checked in to the Eurobuilding hotel in Caracas, after arriving on a private jet. Christoph Wilhelm Kleuters had arrived at the PDVSA ramp at Maiquetía and had not gone through customs or immigration. He had a National Guard bodyguard, who shot the gunman but could not save his client.

According to a social media report by the same Venezuelan journalist, Jenny Oropeza, who in June disclosed Roberto Rincon’s alleged interest in the Aruba refinery, Mr. Kleuters arrived in Caracas on an aircraft leased by the same entrepreneur who loaned his jet for Carvajal’s flight to Aruba – Roberto Rincon.