Rising oil prices frustrate U.S. efforts to put squeeze on regime
The Trump administration’s hope that economic pressure will punish Venezuela’s socialist government shift toward authoritarianism is running into challenges, with sanctions lacking the bite sought by the White House amid a rise in global oil prices that has kept cash flowing to political elites in Caracas.
U.S. officials boast of more than $1 billion in seized or frozen assets from some of the top aides around Venezuelan President Nicolas Maduro, but analysts say Washington may need a more strategically modest approach that could even involve partnering with Cuba to more effectively deal with the Western Hemisphere’s most glaring failed state.
Vice President Mike Pence is in the midst of a tour of key Latin American capitals, with the question of how to deal with the economic, humanitarian and security challenges posed by Venezuela a prime topic of conversation.
U.S. officials say Mr. Trump’s “maximum pressure” campaign helped bring the isolated North Korean regime to the bargaining table, but that could prove more difficult with Caracas. Despite an imploding economy, Venezuela still boasts some of the world’s largest proven oil and gas reserves.
“There have been tough sanctions” against the Maduro government, Michael Shifter, president of the Washington think tank Inter-American Dialogue, said in an interview, “but we have not seen significant evidence to date to see that it has changed the behavior of the regime.”
Venezuelan Foreign Minister Jorge Arreaza slammed Mr. Pence’s efforts to seek allies in the campaign to isolate Venezuela, calling the U.S. efforts hypocritical when the Trump administration has come under widespread criticism for separating migrant children from their parents at the Mexican border.
“It is ironic and hypocritical that U.S. Vice President Mike Pence, whose racist government separates families and cages innocent children, intends to interfere in the affairs of our region,” Mr. Arreaza told reporters in Caracas.
A move to pressure Western Hemisphere neighbors to address Venezuela’s profound political and economic meltdown came earlier this month in the wake of Mr. Maduro’s election to another six-year term, which observers dismissed as a “sham vote.”
Secretary of State Mike Pompeo told delegates to the Organization of American States that “the full-scale dismantling of democracy and the heartbreaking humanitarian disaster in Venezuela” represents the hemisphere’s single greatest challenge.
Mr. Pompeo, alongside Mr. Pence and Carlos Trujillo, U.S. ambassador to the OAS, managed to cobble together enough votes to pass a resolution against Venezuela’s dictatorship. But the tally — 19 in favor, 11 abstentions and four against — highlighted the challenge to the regional pressure approach and the leverage that energy riches still give Venezuela.
The Trump administration’s ultimate goal is to suspend Venezuela from the 34-country alliance, a move requiring 24 votes. Latin American diplomats say privately that the number is unattainable because Venezuela supplies several small Caribbean countries with oil.
How much an expulsion would hurt is also an issue. A dismissal would suspend aid from the Inter-American Development Bank. But Cuba has been suspended since 1962, and its dictatorship is now in its seventh decade. Mr. Maduro has also threatened to unilaterally withdraw Venezuela if the U.S. secures the votes.
Christopher Sabatini, Venezuela analyst and professor of international policy at Columbia University, said the U.S. moves “have tightened the noose some” but that it is hard to see how it all adds up to political change in the near future.
“There are not a lot of good additional options right now,” Mr. Sabatini said. “Other than for other governments to step up — there are not many diplomatic tools we’re not already using.”
Nearly two decades of mismanagement of its state-controlled oil industry — which claims to have more reserves than Saudi Arabia — have taken a staggering toll on Venezuela, a member of OPEC. Hyperinflation has driven away scores of skilled energysector workers. Claims from creditors seeking retribution for unpaid bills have given the appearance of an industry near the boiling point.
Falling Venezuelan supply was a prime motivation behind a Saudi-led move at OPEC’s meeting this week to boost production and ease the pressure on global oil prices. But the Trump administration’s announcement Tuesday that it will press Iran’s oil customers to stop buying from Tehran by November has once against sent oil prices surging.
Despite the turmoil, Venezuela’s elite continue to live directly off oil revenue. Though plummeting, the revenue is still massive.
From January to April this year, Venezuelan crude production dropped to the lowest annual average level in more than three decades, as oil exports fell 28 percent to 1.19 million barrels per day.
Once a cash cow, Venezuela’s state-run oil company PDVSA still accounts for more than 90 percent of its export earnings. But PDVSA is nearly a month behind in shipping crude to customers from its main oil export port, where more than 80 tankers wait offshore.
Mr. Shifter warned that the U.S. must tread lightly when it comes to the politics of oil prices. Global oil prices in recent months have reached $60 a barrel for the first time in years because of strong demand.
“If oil prices continue to go up, it becomes a domestic political issue that the Trump administration does not want to deal with,” he said.
Despite the bilateral tensions, the U.S. stopped short of imposing an all-out embargo on Venezuela’s oil shipments. But
Venezuelan President Nicolas Maduro and some of his top aides have had more than $1 billion in assets seized or frozen by the U.S., but cash continues to flow to elites.