Latin America

White House surprises agencies, industry with Venezuela sanctions; few details available

Bolton announces U.S. sanctions on Venezuela’s state-owned oil company

National security advisor John Bolton announced sanctions on Venezuela's state-owned oil company. "Today's measure totals $7 billion in assets blocked today. Plus, over $11 billion in lost export proceeds over the next year," said Bolton.
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National security advisor John Bolton announced sanctions on Venezuela's state-owned oil company. "Today's measure totals $7 billion in assets blocked today. Plus, over $11 billion in lost export proceeds over the next year," said Bolton.

Just hours before the Trump administration announced crippling oil sanctions against the Venezuela government, a high-ranking State Department official was still telling people involved in Latin American policymaking that oil sanctions weren’t coming anytime soon.

Such conversations were happening across the government as some top officials at the departments of State, Energy and Treasury and members of Congress felt blindsided by the sudden announcement from the White House Monday blocking almost all exports, imports and financial dealings with the Venezuelan oil sector, according to people familiar with administration discussions.

“The rollout was so convoluted because it wasn’t supposed to happen now,” said one person familiar with administration conversations. “It was supposed to happen further down the line.”

The announcement was reminiscent of past seemingly freewheeling decisions such as the withdrawal of troops from Syria. Unlike previous administrations, the Trump administration has become known for making policy without running the typical in-depth process where all agencies involved buy in.

While the White House has discussed the possibility of oil sanctions for months in interagency policy discussions, it was largely in general terms alerting officials that “all options were on the table.”

In those discussions, officials often pushed back strongly against the timing of the oil sanctions while acknowledging privately that they had no idea whether the administration would go through with the measure.

Even companies that run Gulf Coast oil refineries which processed Venezuelan oil, warned that gas prices would increase.

Since the sanctions have been announced, oil executives have been reaching out to the White House, Treasury Department and others to extract information about what they can and can’t do.

National security adviser John Bolton and Treasury Secretary Steven Mnuchin announced on Monday the strongest measures yet against the state-run oil company, PDVSA. The sanctions were aimed at destabilizing Venezuelan President Nicolás Maduro who has overseen the economic collapse of the once oil-rich nation that has let to an exodus of millions of Venezuelans.

The sanctions prevent any dealings by PDVSA with U.S. companies unless under special conditions. Mnuchin said any sales to the United States would go into a blocked account that would be inaccessible to the Venezuelan government. If Juan Guaidó, the National Assembly leader who is now the internationally recognized head of state, succeeds in forming a government, the money would go to him.

Venezuela’s oil sector accounts for as much as 70 percent of the Maduro government’s income. The new sanctions cut most of that off, blocking the majority of oil sales to the United States in stages.

The United States, joined by several other countries, formally recognized Guaidó as the head of state last week. National banks of those countries are refusing Maduro access to his country’s assets, and the PDVSA sanctions were part of that effort.

Policymakers fear the sanctions could be construed as a unilateral action taken by the United States against Venezuela that risks reviving lingering stereotypes that the United States continues to be an imperialist bully bent on punishing Latin American governments that don’t do its bidding. But it was also a more practical issue.

Some top officials outside the White House felt the decision was made without proper vetting of the potential consequences, including what happens if Maduro remains president.

Administration officials defended the sanctions timing. A senior administration official briefing reporters Thursday said it was important to act immediately to back Guaidó and not prop Maduro up with oil funds, which accounted for as much of 70 percent of government revenue.

“We wanted to immediately ensure that Maduro and his cronies would no longer be able to pilfer PDVSA, at least through the United States, and to ensure that the legitimate president of Venezuela had control of those assets to preserve for humanitarian aid and economic reconstruction of Venezuela,” the senior administration official said.

Yet those cut out of the decision-making process argue that the oil-sector sanctions were the strongest weapon the U.S. had against Maduro, and there won’t be another economic option if he remains in power.

“What’s next after they kill protesters?” What’s next after they kill Guaidó,” said a person familiar with the discussions and who is concerned that the administration no longer has a peaceful means to respond. “What’s to stop the Cuban government or whoever from killing him. What’s to stop people from killing Guaidó’s representative in the United States. What’s the next step? That is the big challenge.”

The administration has been following an “escalatory road map” that aides drew up for President Donald Trump in 2017 of available economic and individual sanctions. But many of those steps have largely been taken. They included tagging Maduro as a dictator, sanctions on individuals, and financial sector sanctions. The final step was oil sector sanctions.

The senior administration official said that people are underestimating “the political economic and diplomatic tool box that we have.”

“It is extensive. I will not reveal what further measures we can take, but rest assured,” the senior official said. “No one, and particularly Maduro himself, no one expected that we would sanction PDVSA. I would highly warn that we have a great deal of tools at our disposal that we’re ready to use.”

But critics of the decision point to the lack of details that have been released. For example, the administration said oil that is en route can still be refined in the U.S., but oil executives are asking what does that actually mean? Is en route literally oil already at sea. Is it oil that is at port in Venezuela. Is it oil that is being exerted from the ground right now?

People familiar with the discussions said some are concerned that governments who joined the U.S. in recognizing Guaidó may rethink their support of the United States strategy now. They said the administration should have waited until either Maduro retaliated or coordinated something with the international community to at least give the impression of a multilateral action.

“So it doesn’t have this clear sting that this is a U.S. action that plays into this whole narrative that is coming out unfortunately of a U.S.-backed coup, which this isn’t” the person said. “This is very much a fight of a dictator against democracy.”

Mark Feierstein, the National Security Council’s senior director for Western Hemisphere affairs under President Obama, said the sanctions were done appropriately.

“Life is messy. And foreign policy is messy.”

Franco Ordoñez is a White House correspondent for the McClatchy Washington Bureau with a focus on immigration and foreign affairs. He previously covered Latin American affairs for the Miami Herald and El Nuevo Herald. He moved to Washington in 2011 after six years at the Charlotte Observer covering immigration and working on investigative projects for The Charlotte Observer.
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