Equipo Nizkor - U.S. Targets Venezuela With Tough Oil Sanctions During Crisis of Power.

The Trump administration imposed sanctions against Venezuela’s state-owned oil company on Monday, seeking to cripple the government of embattled President Nicolás Maduro by cutting off its main source of cash.

The move marked the first punitive step by the United States to force Mr. Maduro to give up power since the opposition leader, Juan Guaidó, declared himself interim president last week after years of accusations of corruption in Venezuela at the expense of its people.

The sanctions prohibit most American businesses from engaging in transactions with the oil company, Petróleos de Venezuela, S.A., or Pdvsa. Administration officials said the financial penalties are expected to block $7 billion in assets and result in $11 billion in export losses over the next year for Venezuela’s government, starving it from its most important source of revenue and foreign currency.

Last week, the Trump administration recognized Mr. Guaidó, the 35-year-old leader of the National Assembly, as his supporters took to the streets to demand new elections. Mr. Maduro has cut ties to the United States and has demanded that all American diplomats leave the country.

Steven Mnuchin, the Treasury secretary, said Pdvsa had “long been a vehicle for embezzlement” among top Venezuelan officials and politically connected businessmen.

“The United States is holding accountable those responsible for Venezuela’s tragic decline,” Mr. Mnuchin said at the White House. He said the Trump administration would pursue all diplomatic and economic avenues to support Mr. Guaidó and the National Assembly, “and the Venezuelan people’s efforts to restore their democracy.”

In Caracas, the Venezuelan capital, Mr. Maduro immediately denounced the sanctions as “unilateral, illegal, immoral and criminal.”

“You will have blood on your hands, President Trump,” Mr. Maduro said during a ceremony honoring Venezuelan diplomats who recently returned home from the United States.

Mr. Maduro said he had ordered Pdvsa to pursue legal action to retain its assets.

In an interview Monday before the sanctions were announced, Mr. Guaidó said his nascent government was making every effort it could to get control of Venezuela’s international assets — and mainly the state oil company.

“They have the bureaucracy of this country kidnapped, they direct this bureaucracy,” he said, referring to Mr. Maduro and his control of Pdvsa. Mr. Guaidó said the National Assembly estimated that $30 billion had gone missing from the oil company in recent years.

“Because of this corruption and bad management of public funds, our first step has been to protect the assets of the country,” he said.

Sanctions on Pdvsa potentially put at risk as much as a half-million barrels of oil that the United States imports from Venezuela, representing roughly 3 percent of American demand. The United States also exports roughly 100,000 barrels of light oil to Venezuela daily; it is used for blending so heavy oil can be transported through pipelines to refineries and export terminals.

Purchases of Venezuelan oil by American companies would be released once Pdvsa is controlled by a government led by Mr. Guaidó, officials said.

Generally, American citizens will be barred from engaging in transactions with the company, although the Treasury Department said it would issue licenses to permit certain transactions and activities within specific time periods.

Mr. Mnuchin said refineries in the United States could continue to process the oil, and Venezuelan oil that is already at sea could continue to its destination. Additionally, he said, the Treasury Department has issued licenses to some European and Caribbean countries so they can make a proper transition as the sanctions take effect.

Pdvsa’s American subsidiary Citgo, which operates three refineries, sends Venezuela gasoline and other refined petroleum products. Under the sanctions, Citgo will be allowed to continue operating, and any money it would send to Pdvsa will go into a designated account, Mr. Mnuchin said.

Independent analysts were trying to understand the sanctions and whether there were loopholes.

Risa Grais-Targow, an analyst of Latin American affairs at Eurasia Group, said it appeared that Pdvsa could no longer export oil to American refineries. That would force the company to sell to Asian markets at a steep discount, she said.

“It looks like a de facto embargo because Venezuela will not sell to the U.S. if it cannot collect the revenues,” she said.

Russ Dallen, the managing partner of Caracas Capital Markets, who specializes in the oil industry, said the United States could put money owed to Pdvsa in an account controlled by the National Assembly.

Both Russia and China receive large oil shipments from Venezuela as payments of debt held by the global powers. They do not pay for the oil in cash.

That has meant the half-million barrels sent to the United States daily has been a critical source of revenue and foreign currency for Mr. Maduro’s government.

“U.S. oil exports are where Venezuela gets its cash flow,” Mr. Dallen said.

Any problems in that cash flow could jeopardize Citgo.

In August, an American judge declared that Crystallex, a Canadian gold company whose assets were seized in a 2008 nationalization move by Hugo Chávez, the Venezuelan president at the time, could seize Citgo assets as part of a repayment scheme. In an effort to keep control of the refinery operations, Mr. Maduro’s government has used what little money it still has to pay off part of the $1.4 billion judgment.

If Venezuela stops payments, Mr. Maduro could lose control of Citgo, Mr. Dallen said.

Mr. Maduro seemed aware of what was at stake. “With this measure they’re setting out to steal the Citgo company from all Venezuelans,” he said at the diplomatic ceremony in Caracas. “No, Donald Trump. No, no, no.”

Francisco J. Monaldi, a Venezuelan oil expert at Rice University in Texas, compared the sanctions to a “nuclear bomb.”

But he said the moves appeared aimed not at crippling the Venezuelan oil company, but blocking Mr. Maduro’s access to the revenue.

For example, the sanctions included exceptions to allow the American oil company Chevron, along with Halliburton and Schlumberger, two large oil services providers, to continue working in Venezuela.

Mr. Mnuchin said he did not expect the sanctions to affect American gas prices. “There has been excess oil,” he said. “Many of our friends in the Middle East will be happy to make up the supply.”

The Trump administration has been urging fellow members of the Organization of American States to recognize Mr. Guaidó as Venezuela’s president, and has promised $20 million in food and medical aid to ease economic pain for the country’s citizens. That money would presumably only go to Mr. Guaidó’s government.

The Venezuelan economy has collapsed under the policies by Mr. Maduro’s leftist, authoritarian government, and three million Venezuelans have fled their homeland. Colombia alone has taken in at least one million refugees.

Senator Robert Menendez, a New Jersey Democrat on the Senate Foreign Relations Committee, raised concerns that the oil sanctions could further hurt the Venezuelan people.

“I strongly back efforts by the United States to use economic and political pressure to support the restoration of democracy in Venezuela,” Mr. Menendez said. “However, given the potential implications of this announcement for the well-being of the Venezuelan people, the U.S. should also pair sanctions with expanded efforts to peacefully address Venezuela’s humanitarian crisis.”

In a statement, Secretary of State Mike Pompeo said the sanctions “do not target the innocent people of Venezuela” and will allow for humanitarian aid to flow. He said medical assistance was “desperately needed after years of economic destruction under Maduro’s rule.”

Administration officials indicated that Mr. Trump was still not ruling out military intervention in his efforts to pressure Mr. Maduro to step down. “The president has made it very clear on this matter that all options are on the table,” John R. Bolton, the national security adviser, told reporters while clutching a yellow notepad with a cryptic phrase scrawled on top: “5,000 troops to Colombia.”

Senator Marco Rubio, Republican of Florida and a chief proponent of the Trump administration’s hard-line policies on Venezuela, said the oil revenue could be diverted to a government once it is clear that Mr. Maduro cannot get access to the money.

“The Maduro crime family has used Pdvsa to buy and keep the support of many military leaders,” Mr. Rubio said in a statement. “The oil belongs to the Venezuelan people, and therefore the money Pdvsa earns from its export will now be returned to the people through their legitimate constitutional government.”

In an interview with The New York Times last Friday, Mr. Rubio said the United States could impose an oil embargo soon to pressure Mr. Maduro to acquiesce to Mr. Guaidó and the call for new elections.

“That money doesn’t belong to Maduro,” he said. “It belongs to the legitimate government.”

On Monday evening, the new Mexican ambassador to the United States, Martha Bárcena, reiterated Mexico’s neutral position in a statement. Among Latin American nations, Mexico has been the most notable holdout on recognizing the government of Mr. Guaidó.

“We think a third way of a peaceful solution can be found,” she said. “Mexico has offered and is willing to help to find a solution if both parties agree on that. It is up to the Venezuelan people to solve the situation in Venezuela.”

28ene19

U.S. Targets Venezuela With Tough Oil Sanctions During Crisis of Power

[Source: By Edward Wong and Nicholas Casey, The New York Times, Washington, 28Jan19]

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