What Trump’s sanctions will not be effective
In part, sanctions won’t perform because they aren’t targeting such an oil trade. While they’re not bans on exports of Venezuelan oil into U.S. consumers, U.S., the Trump administration has let Maduro to continue to be his government’s principal source of income.
The U.S. currently buys between 750,000 to 800,000 barrels of oil a day from Venezuela that is about 40% of the country’s daily output. Additional cash is derived from Venezuela’s sovereign debt on U.S. markets, which is currently restricted by sanctions.
As the availability of liquidity gets more difficult for the Maduro government, the risk of default on its foreign debt, which was 28.2 per cent of the GDP as of the close of 2016, has grown. The most crucial test will be at the end of the fourth quarter of the year, as US$3.8 billion of bond repayments are due.
However, in the event of the possibility of U.S. sanctions, including the possibility of an oil embargo, PDVSA is actively establishing relationships with potential buyers, including Russia as well as China.
In addition to both countries’ interest in getting low-cost oil, Russia is showing a greater involvement in the Venezuelan petroleum industry. Rosneft,e Russian oil giant, currently holds significant shares of five of the major Venezuelan oil-related projects.
The biggest winner from Trump’s sanctions against Venezuela will be Russia’s oil and gas industry. AP Photo/Ariana Cubillos
And PDVSA, the Venezuelan state oil firm, has offered Rosneft five more projects in the Orinoco River, the country’s largest oil-producing region, and a number of other lucrative projects in Lake Maracaibo.
Russia could also benefit significantly from the absence of the U.S. oil embargo. In December of 2016, as part of a loan amounting to $1.5 billion provided by Rosneft, PDVSA offered 49.9 percent of its shares in Citgo, which is its U.S. subsidiary that was excluded from American sanctions to secure the loan.
If Venezuela is in default on the loans, Rosneft can legally seize Citgo’s assets and allow it to be a Russia oil giant to acquire Citgo refineries within the U.S. On June 6, Six U.S. senators demanded for the Trump administration to determine if this would jeopardize national security and infringe U.S. sanctions on Russia.
This isn’t what Citgo was thinking of when it poured a lot of money into campaigning in Washington to stop the possibility of a Venezuelan oil embargo. The company also donated half a million dollars to the president’s inaugural celebration.
As tensions increase in the conflict between Washington and Caracas, Moscow continues to offer the cash Maduro’s dictatorship needs to remain on the right track. This is a blow to Washington’s sanctions. It is at a high cost to Venezuela, which is slowly losing control over its state-owned oil industry.
Helping those who are hungry
The government of Maduro, which is cash-strapped, has to make the difficult decision of how to fund its spending. It’s the Venezuelan people who are suffering the most.
Maduro has always opted to pay off the foreign debt rather than utilizing revenue to provide food for Venezuelans in the first place due to the fact that defaulting will stop the flow in foreign currencies.
The cash historically has fueled corruption in the country. Also, it fills the pockets of an increasing amount of Venezuelan officials who hold bonds issued by the government in order to earn high returns in dollars. In many countries, it’s not normal for public officials to purchase bonds of the government they represent.
Beyond the bureaucrats who profit from this crisis, the majority of people living in Venezuela are in a position where they are unable to consume food. According to estimates, on average, Venezuelans have lost 19 pounds every day since the start of the crisis.
Food queues have been a regular occurrence in Venezuela. In the country, the average loss of people has been 19 pounds over two years. AP Photo/Alejandro Cegarra
Hospitals aren’t able to pay for medical healthcare. Every day, more Venezuelans are dying of untreated ailments, especially babies under one month old, due to of the absence of vital medications.
