The Trump administration imposed new economic sanctions on Venezuela on Friday, modestly ratcheting up the pressure on the embattled government of President Nicolas Maduro for increasingly repressive policies, The New York Times reports.
The sanctions restrict trading of Venezuelan bonds sold by the government in the American financial markets to raise money. The effect could increase the likelihood of a Venezuelan default on its debts at the end of the year. The administration stopped short of prohibiting imports of Venezuelan crude oil to American refineries, which would almost certainly be a crippling step. American refiners have lobbied hard against sanctions against oil imports, arguing that they would raise fuel prices, slash profit margins and potentially cost oil company jobs along the Gulf Coast.
Financial and political analysts said the new sanctions would not represent a lethal blow to Maduro’s government. But many say its survival over the next year is in serious doubt, partly because of continuing problems raising money to pay interest on its onerous debts while paying for food imports.
“It certainly sends a message. But I would say in many ways it’s not going to be that impactful because the Venezuela government effectively already lacks market access and hasn’t been able to issue new debt for quite a while.” Risa Grais-Targow, the lead Venezuela analyst at Eurasia Group, a Washington-based political risk consulting firm, said of the new sanctions.
The new sanctions have broad loopholes, allowing for the financing of most commercial trade, including the export of American light crude oil to Venezuela for mixing with its heavy crude, and financing for humanitarian services to the Venezuelan people.
Petroleos de Venezuela, the national oil company responsible for most of Venezuela’s economic activity and foreign exchange, is impacted by the sanctions only in a limited way. Existing debts of the company, known as Pdvsa for short, can still be resold in the United States, but new purchases and trades will be limited.
Financing of import and export transactions of Pdvsa’s American affiliate, Citgo, which has several refineries in the Gulf of Mexico along with a network of pipelines and gasoline stations, will also be exempted from the new sanctions. However, even while Citgo can still sell debt, it cannot directly send profits back to the Venezuelan government.
“These measures are carefully calibrated, to deny the Maduro dictatorship a critical source of financing to maintain its illegitimate rule, protect the United States financial system from complicity in Venezuela’s corruption and in the impoverishment of the Venezuelan people, and allow for humanitarian assistance.” said Sarah Huckabee Sanders, the White House press secretary.
While limited, the move is the latest in a series of actions since Maduro’s government held elections for a Constituent Assembly this month to circumvent the powers of the democratically elected Congress and rewrite the Constitution. The administration has placed financial sanctions on 20 leaders and individuals close to the government, including Maduro himself.
President Trump has even suggested that the United States might consider military action in Venezuela. That possibility was strongly criticized in Latin America and the United States as a throwback to the days of Yankee imperialism. Still, top aides to Trump have been increasingly strident in their denunciations of Maduro’s government.
“We will not stand by as Venezuela crumbles,” Sanders said as she announced the new executive order applying sanctions.
Nikki Haley, the United States ambassador to the United Nations, aimed her criticism directly at Maduro.
“We will not stand for the dictatorship he’s trying to create, and we will continue to take decisive action until he takes steps to return Venezuela to the prosperous democracy it once was.” she said in a statement.
Aside from political turbulence, Venezuela is suffering one of the worst economic crises in modern Latin American history. Hunger is common, store shelves are empty and oil production, the country’s life blood, is in sharp decline. The government still has more than $9 billion in reserves, but those are quickly shrinking with $3.7 billion in loan payments due later this year. Venezuela has roughly $97 billion in foreign debt, strangling an economy that has been eroding for years, especially as oil prices have plummeted since 2014. The financial crisis is drawing the country closer to Russia, with the Russian oil company Rosneft supplying some financing to Pdvsa in exchange for exploration and production rights.
The Trump administration has been debating whether to ban imports of Venezuelan oil for months, and officials say that option is still open. The United States buys roughly half of Venezuela’s oil because many of its refineries were built to process heavy grades of crude that originate in Venezuela, Mexico and Canada. Few countries have refineries with ample capacity to refine Venezuela’s heavy oil.