The Trump administration has taken its regime change campaign in Venezuela to the next level, initiating a new set of sanctions that some analysts liken to a total economic embargo of the country.
On Monday, President Trump signed an executive order freezing all government assets and implementing a total ban on transactions with the government. It’s the latest in a multi-year effort that has seen a steady ratcheting up of the economic pressure. It began with sanctions on individuals, and ballooned into restrictions relating to access to U.S. financial markets, and then sanctions on oil sales.
Now any company – not just American companies – are barred from doing business with the Venezuelan government, according to Washington.
It’s a significant escalation of the regime change effort. U.S. national security adviser John Bolton delivered a bellicose speech in Lima on Tuesday, declaring “now is the time for action.” He also said that the measures will “work in Venezuela and it will work in Cuba,” which is an odd assertion given that a six-decade economic embargo of Cuba has failed by any measure. If anything, sanctions have proven to be an unreliable sledgehammer – whether in Iran, Iraq, Cuba or Venezuela, sanctions have a long track record of deepening human misery while also failing to achieve political objectives.
With that said, the move will likely increase the pressure on President Nicolas Maduro, even though he has withstood everything that Washington has thrown at him thus far.
At the same time, the new sanctions also undercut the diplomatic effort that Juan Guaidó has initiated with other Latin American governments in an effort to end the stalemate, and also the tepid negotiations that have taken place with the Maduro regime. Related: Hedge Funds Unexpectedly Set The Stage For An Oil Rally
But the Trump administration is going for broke. The New York Times described the move as “the last big card in its sanctions hand.” Last week, the U.S. Commerce Department released a post-Maduro agenda to overhaul Venezuela’s economy, which includes sweeping privatization.
“For immediate relief, the United States will ease sanctions, promote domestic and international trade credit, deploy technological advisers and engage international financial institutions to rebuild confidence in Venezuela’s new economic policies,” Commerce Secretary Wilbur Ross said in Brasilia in a meeting with infrastructure executives.
Multinational companies are eyeing the chance to jump in once Maduro is removed from power. “The opportunities are huge. We are looking at rebuilding a country from scratch,” said Ricardo Wernikoff, Oracle sales director for Latin America, according to Reuters.
Obviously, oil will be at the center of the U.S.-backed reconstruction effort. The U.S. wants to privatize and open up the oil sector, a far-reaching overhaul that would be radically different from anything that Venezuela has experienced in decades. It’s as much a political and ideological project as an economic one. “Reversing socialism will be done by facilitating private investment, rehabilitation of power generation and oil-bidding rounds,” Ross said at the meeting in Brazil last week.
These plans are likely why the Trump administration recently extended the waiver that it had granted to Chevron, allowing the American oil giant to continue operating in the country while just about everyone else has been frozen out.
Chevron could claim 34,000 bpd of production in Venezuela in the second quarter, although that understates its role. The company is pivotal to multiple projects that total roughly 200,000 bpd. Related: Heavy Oil Supply Crunch Cushions Canada From IMO 2020
But the problem for Chevron is that it’s far from clear whether the American-led regime change effort will succeed. Analysts are not convinced the sanctions will dislodge Maduro. “The White House is having a tough time enforcing Iran sanctions, after all. For Venezuela sanctions, even allies that share the U.S. position, such as the Europeans and Latin Americans, have not coordinated sanctions policy.” Benjamin Gedan, an Obama administration Latin America adviser and current adviser with the Wilson Center, told the Wall Street Journal.
Chevron disclosed some of the risks to its Venezuelan assets in a recent 10-Q filing with the Securities and Exchange Commission. “The operating environment in Venezuela has been deteriorating for some time,” Chevron stated.
The company said the “carrying value” of its investments in Venezuela was approximately $2.7 billion, but said the fluid situation poses serious risks. “Future events could result in the environment in Venezuela becoming more challenged, which could lead to increased business disruption and volatility in the associated financial results,” Chevron said.
“Challenged” seems like an understatement.
Venezuela’s oil production stood at 734,000 bpd in June, down only slightly from previous months. The new round of sanctions could heighten the economic pressure, but it remains to be seen whether the embargo will affect oil exports, which are already under existing sanctions.
By Nick Cunningham of Oilprice.com
More Top Reads From Oilprice.com:
- Permian Producers Underreport Fracking Activity
- Is This The Future Of Alaska’s Energy Sector?
- U.S. And China Face Off In Iranian Conflict
The truth of the matter is that US sanctions against Venezuela have failed so far miserably exactly as they failed against Iran.
China and Russia have vested interest in ensuring that Venezuela’s economy remains afloat as they both are owed billions of dollars in loans they extended to Venezuela against oil supplies. They also are determined to undermine US sanctions against Venezuela and also Iran.
While Russia is helping Venezuela to market its oil and get paid, China is helping to repair Venezuelan refineries and raise its oil production despite intrusive US sanctions against it.
The help and support both China and Russia are extending to Venezuela stand in stark contrast to the ugly face of capitalism and imperialism by which the United States is ogling Venezuela’s oil reserves, the world’s largest.
And yet, John Bolton, President Trump’s National Security Advisor, had the temerity and the coarseness to warn China and Russia not to help the legally elected Venezuelan President Maduro to which he got a well-deserved put-down from China telling Washington to stop bullying Venezuela and to let the Venezuelan people decide their own future.
With their plans for regime change in tatters, President Trump and John Bolton could do better to withdraw their puppet Juan Guaidó to the United States. The very public US backing of Guaidó has increased the legality of Maduro and the plausibility of his claim that the United States is waging an economic war on his country with the aim of stealing its oil wealth.
And despite the hardships and suffering, Venezuelans don’t welcome foreign-supported regime change. They are willing to rise up against the perceived threat of “Yankee imperialism”. After all, they are the descendants of Bolivar whose Bolivarian revolution liberated countries of South America from Spanish occupation and oppression.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London