Wider U.S. sanctions on Venezuela risk hitting both countries
complications for the Trump administration as it tries to focus on Iran and North Korea.
“It’s complicated,” said David L. Goldwyn, who was a top State Department energy envoy in the Obama administration. Tough sanctions could lead to a default on their bonds and a collapse of internal investment and oil production,” he added. “Other impacts could include civil unrest, refugee flows across their borders, and a cutoff of Venezuelan financial support to Cuba and Haiti that could lead to migration flows to the United States.”
There is also the potential for collateral damage to the United States.
Any trade embargo could raise gasoline prices, cost jobs in the oil patch and dampen profits for several major refiners. A decrease in Venezuelan exports could raise global oil prices, bolstering the economies of Russia and Iran just as Washington prepares to ratchet up sanctions on those countries.
In briefings, administration officials would not speculate on what would come next, but they emphasized a menu of options. Trump, in a statement last week, said “the United States will not stand by as Venezuela crumbles.”
The immediate concern is over Maduro’s plan to hold an election this weekend for a Constituent Assembly that would circumvent the opposition-controlled Congress and write a new constitution. The new assembly, which is devised to be dominated by groups that support the regime, would presumably consolidate more control in the hands of the president.
The escalating street violence and hunger in Venezuela are threatening to spread. Tens of thousands of Venezuelans have already fled the country, heightening social pressures. The country’s plummeting economy has added pressure on a region struggling with low commodity prices.
For now, the United States is treading cautiously in its approach to Venezuela.
As a first step, the administration this week froze assets of, and instituted a ban on travel visas for, 13 influential Venezuelans, including electoral, military and correctional officials. One of them is Simon Zerpa, vice president of finance at Petroleos de Venezuela, known as PDVSA, which could complicate relations between the state oil company and U.S. players in Venezuela that are already struggling to get paid for services. The move follows similar sanctions imposed by the Trump administration on Venezuela’s vice president, Tareck El Aissami, and eight members of its Supreme Court.
Maduro has repeatedly said that Trump’s past sanctions against his government are evidence of U.S. imperial- ism and that current threats will not be heeded. If Trump “has dared to say ‘no’ to the Constituent Assembly, we tell him ‘yes, yes, yes’ — the Constituent Assembly will go ahead — Constituent Assembly now more than ever,” Maduro said recently.
More consequential would be future sanctions to limit U.S. oil companies and service companies from operating in Venezuela or to limit the ability of the Venezuelan national oil company to engage in banking activities in the United States or trade with U.S. companies. That scenario would effectively end Venezuelan oil exports to the United States and prohibit PDVSA from importing the U.S. light oil used to dilute its heavy crude for transport through pipelines and processing.
Such moves, at least in the short term, could result in a collapse in production of the oil that Venezuela depends on to get the foreign currency it needs to buy food and to service its debt.
“It will put PDVSA on its knees and almost certainly lead to default,” said Francisco J. Monaldi, a Venezuelan oil expert at Rice University in Houston.
In the United States, a cutoff of Venezuelan oil imports would force Chevron, Valero Energy, Phillips 66 and other refiners to replace heavy crude with imports from places like Kuwait and Saudi Arabia, producing higher tanker costs.