New sanctions will deny billions in revenue to Venezuela's state oil firm but could inflict serious economic hardship on the Venezuelan people.
UNITED NATIONS — The U.S. announced stiff financial sanctions against Venezuela’s state oil firm this week, part of a pressure campaign aimed at dislodging President Nicolas Maduro and replacing him with Interim President Juan Guaidó.
Those sanctions involve freezing $7 billion in U.S. assets belonging to Petróleos de Venezuela (PDVSA), and could deny Venezuela up to $11 billion in lost revenue over the coming year.
Targeting PDVSA is no accident. Leaders of the Venezuelan military hold major stakes in the firm, and for now the military remains one of Maduro’s staunchest backers.
“The United States is trying to convince the military that there is no future with Maduro and that they should switch their support to Guaidó.”
Juan Carlos Hidalgo is a policy analyst for Latin America at the Cato Institute.
“If PDVSA runs out of money, the military is going to be run out of the business that they’ve been running for a couple of years, and that’s going to make their life very difficult.
“This is a bold and risky strategy.”
Francisco Monaldi is a fellow in Latin American energy policy at Rice University’s Baker Institute.
“It is going to cause a significant hardship first to the Venezuelan government, but also to the Venezuelan people that are already suffering from the worst depression in the recorded history of Latin America.”
PDVSA is Venezuela’s largest employer and primary revenue source, meaning the U.S. sanctions could worsen unemployment, an already dire cash crunch and drive more Venezuelans to flee the country.
Venezuela is now searching for someone to buy the 500,000 barrels of oil it typically sends to American refineries each day, but that’s proving tricky since the country’s notoriously heavy oil can’t be processed anywhere.
And even if Venezuela does find a buyer, such as China, it’s hardly out of the woods.
“The question there is whether the Chinese will allow the cash to go back to Venezuela given that they owe $17 billion, and every barrel of oil that goes there is used to pay off that debt.”