A British businessman has struck a secret mining deal with the government of Venezuela despite US sanctions designed to choke Nicolás Maduro’s repressive regime.
Former investment banker Basil Shiblaq secured permission to scope out projects from a government that has been accused of presiding over brutal abuses and environmental destruction in the mining industry.
The US has recently sought to enforce its much-expanded sanctions regime beyond its borders, as part of its six-year bid to remove Maduro from office. Washington has targeted non-Americans in its efforts to enforce an economic blockade, including recent steps to punish European traders selling Venezuelan oil.
After Brexit, the UK largely adopted the EU’s sanctions against Venezuela. The sanctions do not name any of the parties to Shiblaq’s deal. Shiblaq told the Financial Times: “As a UK citizen, I cannot comment on US sanctions. I will only obey UK rules.” He added: “The UK government does not prohibit UK citizens from doing business in Venezuela. We have a British embassy here.”
A UK sanctions lawyer said Shiblaq would still need to take care that the ultimate beneficiary of any economic activity, rather than simply any named business partner, was not subject to sanctions. “It’s not just: I’m dealing with Joe Bloggs,” he said. “It’s: what is Joe Bloggs going to do with the economic resources you make available?”
The greater risks for Shiblaq’s venture appear to come from Washington. Barack Obama’s administration imposed sanctions on members of Maduro’s regime, including asset freezes and visa bans, in 2015 after the authorities met anti-government protests with violence. Donald Trump intensified the sanctions, targeting more members of the regime as well as whole sectors of the economy, to the point where the UN’s human rights chief denounced them as “extremely broad”. Joe Biden has signalled he is in “no rush” to relax them.
Washington has prohibited US citizens, and anyone using dollars or the US financial system, from doing business in the gold sector. Gold is one of the minerals Shiblaq is developing plans to mine, according to a copy of the deal seen by the FT. It was signed by Carlos Osorio Zambrano, a senior Venezuelan official, as head of the state-owned Venezuelan Mining Company (CVM). The US named Osorio as a target of its sanctions in 2017, saying he had been “complicit in swindling the state out of up to $573m through corruption in Venezuela’s food programme”.
Although the agreement was signed by Shiblaq and Osorio in Caracas in October 2020, Shiblaq said he had never met the Venezuelan. Asked whether Osorio’s involvement meant the deal was at risk of breaking US sanctions, Shiblaq said Osorio was “not part” of any of his projects in Venezuela. “I have no further comments to make,” he added.
Andrea Delisi of the Washington law firm Morrison & Foerster, who was until last year a top lawyer in the US Treasury’s sanctions unit, said Shiblaq could risk becoming a target for US sanctions if he subsequently went ahead with gold mining or pursued a venture that involved doing business with an existing sanctions target. “Doing business with a designated person or in certain sectors of the Venezuelan economy can get you sanctioned,” she said.
Neither Osorio, nor CVM, nor Venezuela’s mining ministry, which also signed the agreement, responded to requests for comment.
Maduro regularly describes the US and EU sanctions as “illegitimate” and a consequence of “imperialism” and “colonialism”. He recently ejected the EU ambassador from Caracas after the bloc imposed more sanctions, saying: “We cannot accept people offending, threatening and sanctioning Venezuela. We won’t accept that from anyone.”
According to a published presentation, Shiblaq has worked at Merrill Lynch, Kidder Peabody and Credit Suisse in the Middle East and London. While at Merrill, he provided training for Abu Dhabi’s state investment funds, he said.
In 2013, he founded Soma, a London-based company chaired by former Tory party leader Lord Michael Howard that won rights to explore for oil in war-torn Somalia. The UK Serious Fraud Office opened an investigation into payments by Soma to Somali officials. Soma denied wrongdoing. In 2016 the SFO closed the case, saying that while there had been reasonable grounds to suspect the commission of offences involving corruption, there was “insufficient evidence to provide a realistic prospect of conviction”.
Howard, who was Conservative leader from 2003-2005 and remains a prominent Tory peer, told the FT he was no longer a business partner of Shiblaq and was not involved in the Venezuela venture. Shiblaq gave £25,000 to the party between 2007 and 2012.
Shiblaq’s Venezuelan agreement appears to have been drafted with sanctions risk in mind. It says he will work to identify potential mining ventures “at his expense” and “will not be directly or indirectly supervised, directed, controlled, financed or subsidised” by Venezuela’s government, nor will he be “remunerated”.
However, the agreement says that further negotiations could lead to Shiblaq being granted mining rights lasting 20 years. He said he would commission a “top UK law firm” to write any concession contract.
In 2020, a UN report into the Arco Minero del Orinoco, the mining region where Shiblaq is exploring projects, found evidence of extortion, amputation and miners being buried alive. Criminal groups exercise control over a large number of mining operations in the area, where children as young as nine have been seen working, the UN report said.
Commanders of the Venezuelan military in the area failed to intervene after being paid off via a “system of corruption and bribery”, the UN report found. Human Rights Watch, a non-governmental organisation, has published witness reports that top government officials are aware of the abuses. Freedom House, a pro-democracy campaign group, has published a report saying that gold mining in the region is “unleashing environmental devastation”.