Sanctions: The Long Game

By Ricardo Vaz – Jul 12, 2023

Venezuelanalysis’ Ricardo Vaz argues that, though they have not triggered regime change, sanctions are generating long-term damage to Venezuelan sovereignty

In the past six years, US foreign policy towards Venezuela can be encapsulated in one word: sanctions. There have been other aspects to it, like the propping up of a self-proclaimed “interim government.” But economic coercive measures have been front and center, both in terms of their widespread use and their impact on the Venezuelan people.

The calls for sanctions relief have grown steadily in recent months, from multilateral organizations, some Democratic officials and even foreign policy experts. The first group points to the collective punishment of Venezuelan civilians, the second to the pressure on US borders from increased migration, and the third argues that the policies have “failed.”

It is worth laying out what this “failure” entails. US policies have certainly failed in their primary declared goal of triggering regime change and ousting the Bolivarian Revolution. But from a broader perspective, sanctions are generating some very significant long-term consequences that have begun to take shape in recent months.

Tailor-made licenses
Many political analysts will treat the US government as a combined salesman and policeman for US corporations. Given the revolving door and the brazen lobbying, not to mention past history, it is a very decent first approximation. But it is not totally accurate, even for a corporatocracy like the US empire.

The Venezuela sanctions policy was a prime example, with the Trump administration forcing corporations such as Chevron to wind down their activities in the Caribbean country. The pitch was simple: lose in the short term, but once the Maduro government was ousted, the enterprises would come back in much better conditions.

While Maduro was not ousted, Chevron did eventually return. In November 2022, after extensive lobbying, it received a US Treasury license that drew plenty of controversy over clauses that barred the company from paying taxes or royalties to the Venezuelan state.

That may have been more of a smokescreen, as those responsibilities belong to the joint ventures (where Chevron has minority stakes). But the US oil giant has slowly recouped some of the debt owned by Venezuela’s PDVSA, under a contract that has not been made public. It has also been granted control over sales and oilfield operations, with the Venezuelan government taking a “flexible” approach to regulations that demand that PDVSA handle those tasks exclusively. In a nutshell, business is being run on Chevron’s terms.

The Chevron license, drawn to limit the benefits for Venezuela while keeping the overall sanctions architecture in place, is set to become a precedent. Several other corporations are rumored to be requesting similar permissions.

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Extra-territorial reach
A few months before the Chevron license, Italy’s Eni and Spain’s Repsol were greenlighted by the US Treasury to strike oil-for-debt deals with PDVSA while the Biden administration looked to alleviate the energy crisis in Europe.

Despite the terms offering few benefits for the Venezuelan side, the Maduro government acquiesced as a goodwill gesture, and also used the opportunity to drain inventories of lower-quality diluted crude oil (DCO). PDVSA suspended the deal in August 2022 to renegotiate terms after several shipments. The crude cargoes have since resumed though the conditions are not known.

Another development took place in January when Washington authorized Trinidad & Tobago to engage in negotiations with Venezuela to import natural gas from the country’s significant offshore reserves in the Caribbean Sea. Trinidad is hoping to become an export hub to supply European markets, and its projects are set to greatly benefit another one of the “seven sisters,” Shell.

However, the US “imposed” the condition that Venezuela should not receive any cash payments as part of the deal. The Trinidadian government floated the possibility of paying in food shipments, Caracas blasted the “colonial” conditions, and negotiations are ongoing.

The first thing to point out is the absurd/outrageous fact that the US government gets to dictate terms in arrangements that involve no US entities whatsoever. But such is the overcompliance owed to the reach of its sanctions program. Trinidad, Shell, Eni and Repsol are less than willing to risk being blacklisted, and as such run any business proposals by Washington first.

Mortgaged future
Apart from primary and secondary sanctions targeting Venezuela’s oil industry, the Trump administration also seized CITGO, PDVSA’s US-based subsidiary, and placed it under opposition control. CITGO was a key cog as its refineries were both a destination for Venezuela’s extra-heavy crude and a source of much-needed fuel and diluents.

The refiner is in serious jeopardy following a series of actions from the former “interim government” that were officially classed as negligent but more strongly hint at collusion or a conflict of interests. As a result, CITGO is facing a court-ordered auction of its shares to satisfy international arbitration awards from half a dozen corporations, and more claimants wait in the wings.

The present CITGO board, an ad hoc holdover that formally answers to a parliament whose term expired in January 2021, is currently negotiating with creditors to try and reach out-of-court settlements. It claims to be working to save the company, but it is hard to see how it will operate with the country’s best interests at heart when it has no accountability toward any legitimate state body.

Moreover, it recently floated a proposal that Venezuela dedicate 200,000 daily exported barrels to create a fund to pay back creditors. In other words, set aside over a quarter of what is still a very diminished oil output to satisfy debts that ought to be highly questioned and challenged.

CITGO board chief Horacio Medina ludicrously argues that this amount of crude is currently being sold to China at a discount. But instead of demanding an end to the sanctions that force Venezuela to sell below market value, he would rather have the country receive no cash at all in an arrangement that would leave PDVSA on the hook for years. Needless to say, it would still require US approval.

It is not hard to understand the snowball consequences of such a setup. A diminished oil revenue in the present dire circumstances would leave the Maduro government and PDVSA in an even more difficult negotiating position, and thus more vulnerable to deals where Venezuela’s benefits are as minimized as possible.

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Lasting consequences
Non-stop regime-change efforts against Venezuela are often explained by simply pointing out Venezuela’s vast natural resources, beginning with oil, and how the US empire wants control over them. A deeper reasoning contends that Chávez’s socialist project represented a beacon of hope for the Global South, and Latin America in particular, an affront to US hegemony in its own “backyard.”

The two explanations are not mutually exclusive. Sanctions are in fact a way to kill the proverbial two birds with one stone. By imposing deals that heavily favor corporations, by mortgaging revenue way into the future, Washington is undermining Venezuela’s sovereignty with all the consequences it entails, both at the domestic and regional levels.

It is worth stating that, in spite of the tough circumstances, the Maduro government is still responsible for its actions and choices. It is not off the hook if it follows a given path due to wrong calculations or wrong priorities. For one, it has certainly been overzealous in fulfilling debt commitments under the very dubious assumption that financial markets reward this kind of honorable behavior.

Nevertheless, the hand it is dealt is incredibly constrained by a tight blockade that only offers respite in extremely unfair terms. And the government has to weigh this against its need to repair infrastructure, sustain social programs and ultimately compete in elections.

Sanctions have certainly failed to trigger regime change. But it is just as clear that they are not going away any time soon given their usefulness to extract sacrifices from Venezuela in favor of multinational corporations. Sanctions are not just designed to make it hard for the Venezuelan people to breathe. They also mean to cause long-term damage.

(Venezuelanalysis.com)