Ris­ing oil prices frus­trate U.S. ef­forts to put squeeze on regime

The Washington Times Weekly - - Geopolitic­s - BY DAN BOY­LAN

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.”

Boil­ing point

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.

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