Ecuadorian President Guillermo Lasso stands alone, with no congress to check his power after he invoked the muerte cruzada — “mutual death” — clause of the country’s constitution to end a political game of chicken with opposition lawmakers.

At the centre of the fight that led him to dissolve the National Assembly and cut his own presidency short was a tanker deal that government-controlled shipping company Flota Petrolera Ecuatoriana (Flopec) continues to grapple with in the wake of the political crisis.

Lasso’s move on 17 May made good on a threat to defuse the National Assembly’s plans to impeach him over a deal between Flopec and a low-profile operator known as Amazonas Tanker Pool.

That came after opposition lawmakers had started a trial aiming to oust the president for failing to do enough to put an end to the deal, even though the agreement was signed before Lasso was elected in 2021 as the country’s first conservative leader in decades.

The Amazonas deal had been a subject of controversy in Ecuador for some time.

Starting in late 2018, Flopec had an agreement with a company identified as Dragun USA to move cargoes for PetroChina on tankers operated by the Mjolner Aframax Pool. The deal saw Flopec charter its owned aframaxes to Mjolner, with a profit-share arrangement, according to a government report.

That deal was then amended in March 2020, while Jaime Condoy Blacio was general manager of Flopec, to create Amazonas Tanker Pool in a transaction that has been criticised by two of his successors and extended by another in the musical chairs of changing top executives at the Ecuadorian state company.

Core Petroleum

Former Flopec leaders have described both Amazonas Tanker and Dragun as affiliates of US-based Core Petroleum, which has since been renamed Core Synergy. Public documents in Ecuador reveal no allegations against the companies, as the criticism has focused on the internal processes at Flopec and within the Ecuadorian government that controls it.

Core Synergy did not immediately respond to TradeWinds’ request for comment.

New York asset manager Mjolner Integrated, previously known as Mjolner Shipping, told TradeWinds that it ceased to be majority owned by Core in 2020 and is not associated with management, ownership or operations of Amazonas Tanker. It also divested from its two aframax tanker pool subsidiaries that year.

Hernan Luque Lecaro (left), the president of the Ecuador’s Coordinating Company for Public Companies (EMCO), shakes the hand of vice admiral Johnny Enrique Estupinan Echeverria during the latter’s appointment as the new general manager of Flopec. Photo: Flopec

Tania Coronel Reyna, Flopec’s head of social communication, said the government company’s board of directors will be looking at the Amazonas Tanker deal “shortly”. She said the company cannot answer questions about the contract until the board takes action.

TradeWinds has reported on how Flopec’s former acting general manager, Pilar Ferri Moncayo, found herself investigating suspected irregularities under Condoy when she took the reins in December 2020, sparking an audit of the deals forged by her predecessor.

Among the deals at issue was the Amazonas Tanker Pool.

Ferri raised concerns about the structure of the contract, giving Flopec what she believed was insufficient control over the management of the pool, as well as a lack of triangulation of voyages.

Condoy, who had quit to defend himself against unspecified allegations, could not be reached for comment for this story. Ecuador’s government-appointed vice admiral Johnny Enrique Estupinan Echeverria was named as Flopec’s permanent general manager in October 2021 when he replaced Ferri.

In the days before she left the company, Ferri told TradeWinds in an interview that Flopec was working to renegotiate the Amazonas Tanker deal, as well as an expensive string of tanker time charters.

Comptroller’s report

A month later, Ecuador’s State Comptroller General’s office issued a report digging into the Amazonas Tanker Pool transaction, which it valued at $32.7m, as well the time charters investigated by Ferri.

According to the report, the 2020 amendments to what had been the Dragun USA agreement resulted in a new arrangement under the new Amazonas Tanker entity, without a profit-share component, that would see the Mjolner Aframax Pool and Flopec work together to move PetroChina cargoes as well as exports from Ecuador.

Pilar Ferri Moncayo was the former acting general manager of Flopec from December 2020 until October 2021. Photo: Flopec

Under the arrangement, the new Amazonas Tanker venture would contribute at least eight ships to the Mjolner Aframax Pool to move PetroChina cargoes and exports from Ecuador, with Flopec providing up to half of those ships.

To achieve that, Flopec signed time charters for five aframax tankers for periods lasting one to three years from various shipowners.

The pool was administrated by Amazonas Tanker Pool Company and Mjolner Ship Management.

According to the comptroller report, Flopec’s owned and chartered vessels involved in the pool earned $41.5m in the tanker market between March and December 2020, but Flopec’s share was $35.4m after the redistribution of profits to pool members.

That resulted in a difference of $6.15m, according to the comptroller’s report signed by Carlos Varela Nunez, Ecuador’s national auditing director for transport.

Amendment not approved

But Varela wrote that the 2020 contract amendment was not approved by the Flopec board of directors.

And in 2021, when auditors were looking at the transaction, a search of the Flopec archive found none of the documents that were required for such a deal, such as technical, financial, legal and risk analysis reports, according to the comptroller document.

Flopec’s headquarters are located in Esmeraldas, north-west of Quito on Ecuador’s Pacific coast. The company is owned by the Ecuadorian government. Photo: Afrox/Creative Commons

The amendment was followed by a series of changes in the general manager position, which is effectively Flopec’s chief executive, including Condoy’s departure that hoisted Ferri into the job in an acting capacity.

In October 2021, Estupinan was appointed to the role, replacing Ferri, who quit the company when she was passed over for the job full time.

Irregularities

Like Ferri, Estupinan complained of irregularities in Flopec’s shipping contracts, and he attempted to put an end to the Amazonas Tanker deal, according to a source with knowledge of Flopec’s internal workings and multiple media reports.

The source said he then switched gears when confronted with the agreement’s termination fees.

Changes at the top

Since 2020, no Flopec general manager, including those in the role on an acting basis, has held the job for more than a year.

14 February 2020 to 11 December 2020: Jaime Condoy Blacio

12 December 2020 to 5 October 2021: Pilar Ferri Moncayo (acting)

6 October 2021 to 9 March 2022: Johnny Estupinan Echeverria

9 March 2022 to 8 July 2022: Cristian Omar Panchi Zambrano

8 July 2022 to 14 July 2022: Johnny Estupinan Echeverria

15 July 2022 to 3 February 2023: Oswaldo Rosero Quiros

4 February 2023 to present: Luis Lavayen Cardoso

Flopec’s board of directors sacked Estupinan in March 2022, which saw him replaced by acting general manager Cristian Omar Panchi Zambrano. A timeline by Ecuadorian news site Primacias shows Estupinan then was restored to the Flopec helm again, but it took around a week for him to be out of the door again.

However, Estupinan did not go quietly. In addition to taking legal action against Flopec for his removal, he sent out a number of letters raising concerns about the company, including its deal with Amazonas Tanker Pool.

One of those letters was addressed to President Lasso, fuelling the fire of his opponents.

“The congress in Ecuador took this letter and said he knew something wrong was happening with Flopec and there was a lot of corruption there and he didn’t do anything,” the source said.

“It’s impossible for one person to cover all the things and know about every government company ... because you have delegated these companies to other people, and these people also have managers. There’s a management structure, so you cannot say the president knew.”

Oswaldo Rosero Quiros became acting general manager after Estupinan’s second departure, and he held the job until February of this year.

Contract’s end never comes

Under the 2020 amendment to the Amazonas Tankers deal, the contract was poised to expire in December 2022.

But the source with knowledge of Flopec’s dealings said the contract was extended during Rosero’s term in charge, as part of an agreement aimed at addressing Flopec’s failure to provide its share of ships to the Amazonas Tanker Pool during a hot period-charter market.

The 45,274-dwt Santiago (built 1999) is one of the owned tankers in the fleet of Flota Petrolera Ecuatoriana (Flopec). Photo: Flopec

Since February of this year, the general manager job has been held by Luis Lavayen Cardoso, a former navy officer and technical manager at Flopec.

As the controversy over Flopec’s deal with Amazonas Tanker Pool continued, the National Assembly’s Oversight Committee weighed the evidence against President Lasso. The culmination of its investigation was a draft report that concluded that the president should not be impeached. But on 6 May, the committee failed to garner enough votes to approve the report.

Trial moves forward

The impeachment question ended up on the National Assembly floor anyway, and a majority of lawmakers voted to move forward with the trial.

On 16 May, assembly-woman Viviana Veloz opened the impeachment trial against President Lasso by saying that the State Comptroller General’s office identified more than $6m in damages to the state as a result of the deal between Flopec and Amazonas Tanker Pool — an apparent reference to the difference between the earnings of Flopec’s vessels and the state company’s ultimate share of the pool earnings.

National Assembly Legislator Viviana Veloz speaks at an impeachment trial against Ecuadorian President Guillermo Lasso on 16 May. Lasso dissolved the assembly the next day. Photo: National Assembly

According to the National Assembly press service’s description of the proceedings, she said President Lasso and several government ministers were made aware of the situation, and yet the contract was renewed during the president’s administration. She presented a video statement by Estupinan, who said two additional vessel contracts with Amazonas Tanker Pool caused $13m in damage to the state of Ecuador.

She alleged that President Lasso never asked the Attorney General’s office to investigate the alleged corruption, which the president’s opponents described as embezzlement.

Making history?

“The National Assembly must make history,” she told fellow lawmakers as she called for impeachment, according to the assembly’s account of her comments.

“All of these facts point to political responsibility of the president of the republic, whom we are convinced not only knew of and permitted corruption but also was a part of it, violating the provisions of article 233 of the constitution.”

President Lasso fired back against what he described as baseless claims, insisting that the evidence of his innocence is irrefutable and that the politically-driven investigation was weakening Ecuador’s democracy.

He said events at issue took place between 2018 and 2020, before he became president, and no contracts or amendments were signed by his government.

And he said the State Comptroller General’s office did not recommend the termination of the Amazonas Tanker Pool contract.

“I accuse you!” President Lasso told the National Assembly, according to the government’s website. “I accuse you of abandoning your role as legislators. Now, you are the anti-legislators of this republic, because you do not create laws, but destroy them.”

Lasso used the muerte cruzada process to disolve congress the next day.