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Washington is studying options for imposing sanctions against Venezuela’s energy sector as a way of pressuring the South American country’s government to step down. No decision has been made yet, however, two sources from the Trump administration told Reuters. It may never be made, given all the questions surrounding such a move.
For one thing, sanctions may well have the opposite effect and solidify Maduro’s power – the Venezuelan president is accusing the U.S. of working with the opposition to topple the government. For another, if the U.S. imposes sanctions, this will almost certainly lead to a humanitarian crisis, which nobody wants.
There are also practical considerations, centering on the fact that the U.S. imports oil from the Venezuela. In March, it accounted for 8 percent of total crude imports, third after Canada and Saudi Arabia. For Venezuela, the U.S. is the biggest buyer of its oil.
According to Reuters, the shape the sanctions could take range from a blanket ban on crude oil imports from Venezuela, which will quickly put Venezuela’s oil industry in a coma, to banning PDVSA from doing business in the U.S., and to only banning it from taking part in U.S. government tenders. The latter option is the softest.
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The U.S. has already imposed sanctions on certain individuals from the government of Nicolas Maduro, including his vice president, and eight justices from the Supreme Court. There are also grounds for wider ones: corruption and indirect human rights abuse, the White House officials told Reuters.
According to Adam Smith Institute fellow Tim Worstall, sanctions are a bad idea that will have an effect opposite to the one sought. Besides further strengthening Maduro, they will also fail to bring Venezuela’s oil industry to its knees: oil, he notes, is a fungible commodity, and when one export market closes, another can always be found.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.