The Tainted Matrix: Oil’s Substitution Logic and the Limits of “Clean” Trade

[Ariel Costa holds a doctorate in public international law and has worked with universities and research institutions across Europe, Asia, and the Americas. The author lives in the US on a temporary research visa. They are writing under a pseudonym because they are concerned this post will subject them to arrest or removal proceedings.]

On January 3, US forces captured Venezuela’s President Nicolás Maduro. Soon after, President Trump said that major US oil companies are ready to “spend billions” in Venezuela’s oil sector. In the weeks preceding this escalation, the US Coast Guard boarded and seized a crude oil tanker on the high seas after it departed Venezuela, pursuant to a US seizure warrant later unsealed by the Department of Justice. President Trump also suggested publicly that the United States might “keep” or “sell” oil seized near Venezuela. In subsequent remarks, Trump said the United States would “run the country” in Venezuela until a “safe, proper, and judicious transition” can take place. Analysts have also noted that Venezuelan crude is a heavy, sour grade with high sulphur content, which aligns with the configuration of US Gulf Coast refineries.

Whatever the contested operational details, the argument below uses these reports as a thought experiment about how coercion is made spendable in a commodity system designed to erase provenance.

Assume, for present purposes, what many will argue from the outset: that regime change by force is unlawful under the UN Charter art. 2(4). But rather than advancing a doctrinal assessment of exceptions or justifications, this post treats illegality as the starting point. It asks how illegality is made spendable, and therefore how it might be resisted, in a commodity system designed to erase provenance.

A familiar compliance reflex would be distinctively barrel‑level, e.g., identifying the tainted cargo, blocking imports, voiding contracts and refusing to recognise title transfers grounded in coercion. That reflex assumes that the relevant “object” of illegality remains an object. As with most commodity markets, oil markets do not work that way: they are organised around pools, commingled inventories, swaps, blending, refinery optimisation, and the steady conversion of specific cargoes into fungible value.

This mismatch produces a practical question that is also, in its way, a normative one. If coercion yields access to Venezuelan crude or Venezuelan oil rents, whether by seizure at sea, coercive offtake, or coercively induced extraction arrangements, can third states avoid assistance by refusing only “Venezuelan barrels”, or does the wrong seep into the aggressor’s wider petroleum system through ordinary substitution?

We can engage that seepage under the tentative notion of the tainted matrix: the aggressor’s petroleum system considered as a whole, in which commingling and substitution allow an unlawful increment to reappear as ordinary exportable surplus. The move here is a unit-of-analysis shift: in a pooled commodity market, the petroleum system—not the barrel—is where coercion becomes exportable surplus.

Why “Tainted Barrels” are the Wrong Unit of Analysis

In ordinary oil commerce, provenance is rarely a naturally produced fact. Storage hubs pool volumes by grade, pipelines mix flows, traders rely on swaps to meet delivery obligations, refineries optimise across blended input slates, and products exit refineries with no practical link to the identity of any particular upstream cargo. Provenance can be reconstructed in some contexts, but the market does not generate it by default. It is an enforcement artefact, costly to produce at scale and easy to frustrate once commingling becomes the baseline.

Hence, it changes what “laundering” looks like. The most powerful laundering mechanism in oil is not disguise, relabelling, or forged paperwork, even though those things do exist. It is displacement: using the unlawful increment to meet domestic constraints, which frees other volumes for export under a clean label without needing to hide anything.

Substitution Without Disguise: Displacement as Laundering

A typical petroleum system comprises supply, domestic use, and exports. Domestic use is often sticky in the short term; refineries usually keep running, demand does not collapse neatly because politics has shifted, and governments work hard to avoid domestic fuel shocks.

Now introduce an unlawful increment: Venezuelan crude or Venezuelan oil rent obtained through coercion. Even if every buyer refuses to touch a single “Venezuelan barrel”, the aggressor does not need to export that increment to benefit from it. It can consume it domestically, and by doing so it can release other barrels and other revenues into export channels.

Three displacement routes matter.

First, there is crude displacement inside domestic refining. Imagine a refinery system that requires steady throughput. If unlawfully acquired crude is directed into domestic refining, the system can reduce purchases of lawful crude that would otherwise have been used at home. Naturally, those lawful barrels do not disappear. They are reallocated, marketed elsewhere, and often end up exported. In this scenario, “dirty” crude need never cross an external border, and yet it increases exportable surplus.

Second, there is import displacement and swap chains. Crude is not perfectly fungible. Oil density and sulphur content, refinery and logistics may constrain substitution. Rather than eliminating displacement, those frictions act as configurators. If the unlawful increment matches specific domestic refinery requirements, it can displace imports of similar grade, easing the aggressor’s import bill and freeing export capacity. If it does not match neatly, storage, blending, and swap arrangements can still translate it into system flexibility, and flexibility in a pooled system is itself export‑enabling.

Third, there is the product channel. Where crude substitution is constrained, product substitution may remain more elastic. If unlawful crude keeps domestic refineries supplied, it can stabilise domestic petrol and diesel markets, reduce product imports, and free domestic product volumes for export. The economic gain is then detached from the original crude, and “barrel policing” becomes even less responsive to how value is actually realised. A familiar illustration is the way sanctions practice has struggled with refined products made from restricted crude, including repeated efforts to close ‘transformation’ and routing loopholes in the Russia context.

The relevant claim, then, is not that oil is perfectly fungible at scale. It is that partial substitutability at the margin is enough to shift a system’s residual, while the system’s design makes it difficult to say which exported molecules were “enabled” by the unlawful increment even when the enabling effect is real.

Fiscal Fungibility: The Treasury Completes the Laundering

Even if one were sceptical about how far physical displacement runs in practice, fiscal fungibility is harder to contest. If seized or coerced oil is sold, or if coercive control enables a revenue stream that would otherwise accrue to the victim state, the aggressor captures rents. Those rents enter a treasury, a state oil company, or a corporate group, and they become available for anything that sustains oil capacity, from maintenance and infrastructure to subsidies and logistics, including the shipping and insurance costs that allow exports to clear. It also surfaces a nexus objection, since contributions mediated through pooled revenues can appear too diffuse for ‘aid or assistance’ (cf. ARSIWA art. 16).

That fiscal channel is not speculative. Currently, public remarks about keeping or selling seized Venezuelan oil make the conversion of coercion into revenue unusually explicit, and they highlight how quickly coercive gains can be translated into general state capacity. Where the seizure itself is effected through ordinary domestic legal process, the conversion can look like “normal law” inside the seizing state even when the underlying pattern is part of an unlawful project.

If oil rents are fungible, then the question “which barrels are dirty?” misses the point. The value has already entered the system, and the system can spend that value anywhere.

The Tainted Matrix Claim

The tainted matrix is the aggressor’s petroleum system considered as a whole: domestic supply pools, storage and refining networks, product flows, export streams, and the fiscal and logistical apparatus that supports them. Once coerced Venezuelan crude or coerced Venezuelan oil rents enter that matrix, the system can cash out the increment through domestic balancing and fiscal reallocation, and the resulting exports can be marketed as ordinary national output.

A response that targets only “tainted Venezuelan barrels” can therefore become an inadvertent laundering device, because it leaves open the easiest route to whitewashing: consume the unlawful increment at home while exporting clean product on the other end. The buyer does not need to touch Venezuelan molecules to purchase a barrel whose availability, at the margin, has been enabled by coercive appropriation.

What ‘Non‑assistance’ Would Need to Mean, Under Conditions of Fungibility

International law’s language on serious breaches is often invoked, cautiously or forcefully, to insist that third states should not help normalise or sustain the situation produced by grave illegality. On the assumptions of this thought experiment, the candidate norm is the prohibition on aggression/use of force, with implications for territorial integrity and self‑determination. The ILC’s Article 41 formulation is familiar: a duty to cooperate to bring serious breaches to an end through lawful means, alongside duties not to recognise as lawful the situation created by such a breach and not to render aid or assistance in maintaining it. Whatever one’s view of the customary status and precise operational content of Article 41, it is the standard vocabulary through which international lawyers frame third‑state participation in grave illegality.

In doctrinal terms, the hinge is Article 41 of the Articles on State Responsibility (non-recognition and non-assistance), read alongside the ICJ’s Namibia and the Wall in Occupied Palestinian Territory advisory opinions: the concern is participation and normalisation, not only formal recognition.

But the point here is not to offer a doctrinal claim about thresholds or scope. Rather, it is pragmatic. If oil markets launder coercion through displacement and fiscal fungibility, then a narrow, barrel‑level approach to “non‑assistance” risks collapsing into symbolism. It allows the aggressor to keep the unlawful increment within its system while exporting other crude or products, and it allows unlawful rents to stabilise capacity, so that third‑state purchases of “clean” oil become, in effect, participation in the monetisation of the wrong.

A predictable objection is that substitution effects are real but diffuse, so that it is analytically and legally overstated to treat the whole export stream as ‘tainted’ once an unlawful increment enters a national system, and that Article 41 cannot plausibly imply an obligation to embargo an entire sector. That is a fair challenge in terms of attribution and proportionality. The tainted matrix claim, however, is precisely about why pooled commodities make attribution-with-confidence structurally difficult: shipment-level tools either accept systematic under-enforcement, or they force a system-level response that internalises uncertainty, whether through risk‑based due diligence or through a rebuttable presumption, by shifting evidentiary and commercial risk back onto the aggressor and its counterparties.

A Rebuttable Presumption of Matrix‑level Taint

One way to translate this into a high‑level thought experiment is a rebuttable presumption. Where credible evidence exists that coerced Venezuelan oil or coerced Venezuelan oil rents have entered an aggressor’s petroleum system, third states could treat the aggressor’s oil exports as presumptively tainted, and market access would depend on credible segregation and remediation measures that address the system, not merely a shipment.

In principle, rebuttal could take the form of verifiable segregation of seized volumes, credible non‑use for domestic balancing, escrow or restitution of proceeds—shifting the compliance focus from molecules to money— and reporting robust enough to demonstrate that the unlawful increment is not being converted into exportable surplus. The problem, which is structural rather than incidental, is that oil systems are built to pool and substitute, and that design makes segregation and proof exceptionally hard. That difficulty is precisely what gives displacement‑laundering its force. In practice, meaningful rebuttal may be feasible only at the margins, which is why the presumption may function chiefly as a catalyst for broader constraints.

If the presumption cannot realistically be rebutted, broader measures begin to look like the only way to avoid participation in laundering‑by‑substitution, whether through an embargo on the aggressor’s petroleum exports or through functionally equivalent denials of market access via shipping, insurance, finance, and ports.

Closing

Even as headlines fade and facts remain contested, the tainted matrix problem persists. Still, the tainted matrix problem remains, because it rests on a standing feature of the oil economy: commingling and substitution are normal, and that normality can be exploited to convert coercion into clean trade.

If the aim is to prevent illegality being monetised, then responses calibrated only to “tainted Venezuelan barrels” risk missing the main laundering mechanism. Under conditions of fungibility, the meaning of non‑assistance may need to be reconstructed at the level of the export matrix, or it will be emptied out by the market’s most elementary design.

Photo attribution: Photo by Shaah Shahidh on Unsplash