How badly could oil sanctions hit Venezuela?

In 2016, Venezuela made about US$16 billion from its oil exports, basically from five markets: the United States, China, India, Central America and some Caribbean countries.

The last two don’t generate much income: we sell them oil at huge discounts through the Petrocaribe scheme, which allows payments in kind and provides generous financing. Likewise, the oil sent to China does not generate cash flow, since the value of these oil cargoes only serves to pay down the huge debt Venezuela owes them, estimated at around US$65 billion.

For the most part, Venezuela gets cash to finance its expenditures only from oil that goes to the United States and India.

Venezuela became a major supplier to the Indian market after the European Union and the United States imposed sanctions on the Iranian oil sector. India, which imports more than 4 million barrels per day (mbd), has replaced Iranian oil in part with Venezuelan oil: they get 300,000 barrels a day from Venezuela.

The United States, despite Venezuela’s strident rhetoric, remains PDVSA’s biggest customer and receives a daily average of 750,000 barrels. In 2016, from that export volume, Venezuela made about US$10 billion, more than 62% of its total income from oil exports for the year.

For the most part, Venezuela gets cash to finance its expenditures only from oil that goes to the United States and India.

The outlook for 2017 shows that Venezuela will become even more dependent on the US market, as its oil production continues to decline, reducing the exportable surplus. If we assume —in a no-sanctions scenario— that exports to the US remain stable, total oil export revenue in 2017 would be US$14.5 billion, of which the US market would be US$11 billion.

Since oil is pretty much Venezuela’s only export product, we can safely say that about three-quarters of Venezuela’s foreign exchange comes from its oil to the United States. It’s what we live on.

Latest figures from the U.S. Energy Information Administration (EIA) show that the United States imports about 10 mbd of crude oil and oil products. These imports have declined sharply recently due to the US oil production boom and its stagnant demand. Of those 10 mdb, Canada accounts for approximately 42%, by far the most important source of oil for American economy. Saudi Arabia, in second place, supplies 13% and Venezuela ranks third with 7%. Then comes Mexico with 6% of the total, and after that Iraq and Colombia, each with 4%. About 13 countries ship more than 100,000 barrels per day of crude oil and oil products to the US market.

Should the import ban be imposed, the US would have to replace these 750,000 barrels per day by going to the international market or by using its Strategic Petroleum Reserve (SPR).

A reduction of such magnitude for the SPR is unprecedented. However, the US government did propose a reduction in the SPR of 270 million barrels in its 2018 budget.

About three-quarters of Venezuela’s foreign exchange comes from its oil to the United States.

The SPR would be able then to replace only a portion of Venezuelan crude, and most of the responsibility for finding new supply would fall on the importing companies. There are eight companies that import Venezuelan oil to the US: Valero (which purchases 26% of Venezuela’s exports to the US), Chevron (14% of the total), Phillips 66 (13%), PBF Energy, Motiva (a Saudi Aramco subsidiary), Lyondell, Marathon, and —of course— Citgo, the PDVSA subsidiary, which purchases 33% of Venezuela’s oil exports to the United States.

Relative importance of Venezuelan oil supply to these companies’ total import volumes varies. With Valero, for example, Venezuela accounts for 21% of its imports and is its most important source, followed by Saudi Arabia with 16%, Mexico with 14% and Russia with 11%. In contrast, Phillips 66, the third largest US importer of Venezuelan oil, is much less dependent on Venezuela, with Canada being its largest source of oil with 27% of its total imports.

While only Citgo and Valero need Venezuela to supply more than 20% of their import volume, a disruption in oil supplies would hit them hard, as it would force them to almost immediately replace Venezuela’s crude oil and derivatives, which their infrastructure and systems are specifically designed to process.

Once these companies can no longer buy oil from Venezuela and they move on to establish trade relations with other suppliers, it will be difficult for the nation to recover those buyers. The effect of sanctions to the current Venezuelan government could also damage its replacement.

In a ban escenario, Venezuela would have to find alternative markets quickly, due to the huge debt payments scheduled for 2016. The most logical destination for Venezuelan oil would be China and India.

About 13 countries ship more than 100,000 barrels per day of crude oil and oil products to the US market.

Why? First, because of the size of these two economies and their ability to incorporate greater supply with relative ease. China imports about 8.5 mbd, while India buys about 4 mbd from world oil markets. If Venezuela were to divert the 750,000 b/d it sends to the United States to these two economies, it’d be logical to place the greater part in the Indian market, since China would employ any additional Venezuelan oil to the debt.

But is this viable? Remember, India only sought Venezuela as a supplier when sanctions were imposed on the Iranian oil industry. The sanctions have been removed —following the signing of the nuclear agreement— and Iran is regaining its previous share in the Indian market, where it enjoys the significant advantage of geographical proximity. India would likely take only part of the 750,000 barrels, with the rest going to China. No cash revenue.

A second reason is the fact that these two countries are already importing large volumes of Venezuelan oil and the logistics of supply are well understood by all parties. This is not trivial, since Venezuela’s heavy and extra-heavy oil requires special refining infrastructure already in place.

Third, China has huge storage capacity that would be crucial if its economy does not absorb the incremental supply immediately. This country has more than 2,000 tanks of commercial and strategic reserves that add up to an unofficially estimated total capacity of 900 million barrels. The idle capacity of these tanks is estimated at 300 million barrels, enough to store a significant portion of Venezuelan oil diverted from the US.

While only Citgo and Valero need Venezuela to supply more than 20% of their import volume, a disruption in oil supplies would hit them hard.

However, these options exist only if the sanctions are limited to the US import ban. If, as has been reported, they expand to include financial penalties for the Venezuelan oil sector that, for example, prohibit PDVSA from making transactions in US dollars or penalize US banks that carry out transactions with PDVSA in dollars, Venezuela would be forced to look for intermediary banks outside the United States for the trade with Asia. It wouldn’t be simple since, as Reuters reports, the banks most capable to carry out these tasks outside the US are in Europe, and the European Union would surely follow the US in imposing sanctions.

Another wrinkle: in addition to exporting oil to the United States, Venezuela also imports products from the U.S. These imports are mainly used to dilute heavy crude from the Orinoco Belt and reach an average just below 100 thousand barrels per day. In case of a ban on trade and financial relations, Venezuela would be forced to buy diluents from other suppliers, probably at greater cost and without being able to use dollars for the transactions.

The effects of these measures would be devastating for the Venezuelan economy, and would go far beyond their declared objective of punishing the Maduro government. The measures would make it impossible to continue the already heavily diminished imports of food and medicines and would seriously risk the government’s ability to pay off debt, which, as we’ve seen, has become its main macroeconomic objective. The country would lose —perhaps forever— its best buyers and would be forced to sell its only export product in markets with lower yields for longer than the duration of the sanctions.

In short: yes, it would be a huge blow to the economic stability of this government —though, as Moises Naim argues, perhaps not to its political stability. Venezuelans would see their lives worsen even further and the future of the country would be even more uncertain.

Steep price that we’ll be paying long after chavismo is gone.

62 COMMENTS

  1. Indeed a devastating blow for the country. One thing I don’t agree with is the following assumption:

    “…it’d be logical to place the greater part in the Indian market, since China would employ any additional Venezuelan oil to the debt.”

    Not so sure about that. Most likely the govt. can broker a deal with the Chinese so that they receive cash for the new supply. Chinese are not stupid. Not doing so would put at risk their entire supply altogether and the existing JV agreements they have with PDVSA. Moreover, it is silly to think that the Chinese loans are akin to bank loans. We have seen this already in many occasions in the past. Problem paying down the debt? Renegotiate, grace periods, maturity extension, etc (as they have done so already). There is a strategic goal to be achieved in the long term (for the Chinese). This is not about counting pennies to see whether a borrower paid back or not. It is not bank financing.

    On another note, I find it interesting how many readers here supported (and still do) a PDVSA default but not an oil ban from the US…As if the consequences of the former were going to be very light. Actually, a default might be equally as bad, or worse, for the country because some of the assets that might be seized by creditors might never be recovered by the country. Once they are gone, they are gone. Unlike the author, I don’t see a potential loss of demand as irreparable. I think it is much more easier to recover buyers than having to start buying or building refineries from scratch.

    • I believe that Venny is correct in regards to a default.
      Default is inevitable even without US sanctions. The bankers and financial institutions that hold this debt have much more political influence than the average person. In this regard I believe that the MUD needs to appoint a transitional government AND release an economic blueprint to restore the Venezuelan economy. If the bankers believe that if the MUD is in power it will allow them to recover their money, international intervention (US) is much more likely. Perhaps this was some of the motivation for Maduro to empty the treasury to service the outstanding bonds.
      Does anyone truly believe that $10 Billion is still being held in foreign reserves? When the regime was trying to peddle a $5 Billion bond at an 80% discount?
      A Venezuelan default will trigger a domino effect on any Venezuelan assets that investors can access.
      This may include Venezuelan oil tankers, airplanes and certainly Citgo that has already been used for collateral.
      The market for Venezuelan oil is limited. Increased costs of light crude imports to dilute the Venezuelan heavy crude will reduce the realized profit after lift costs further. Venezuela receives about $10 less per barrel than WTI.
      The neglect that the oil infrastructure has suffered will continue to result in reduced production. Service companies remain unpaid and have no reason to return.
      The Maduro regime has been the equivalent of watching a slow motion train wreck. The only thing to hope for is that the train will jump the track, (resignation), before the train goes over the cliff of the new constitution.

    • India and China would then become evil, like Goldman Sachs, supporting the Maduro regime! The new AN should call for an investigation into India and China!

      Otherwise, a very clear and informative article covering a lot of ground on imports and exports and the likely ramifications of sanctions. Known unknowns in all this, are the regime’s plans (constituyente or not). They may plan to ration food only to those who have their carnet de la patria or whatever, which would leave the majority of the population starving or lying.

      The sanctions are not going to be the determinant of the fate of Venezuela.

  2. Do it. What’s worse, another few months of inflation and lack of food and medicine, or twenty more years of Maduro and crew sucking the life out of the country? And I feel I’m perfectly qualified to ask for strict sanctions as I live and work in the country and have done so for many years.

  3. I’ve often wondered if part of the induced turmoil by this government included an element of rattling the oil markets to get the price of oil up and increase the revenues. Maduro government could see the constitutional assemble and oil price increase as a “win win,” gambling that no one will cut off the Venezuela people.

  4. Naims argument is that oil sanctions that simply rely on the ban on venezuelan imports are perhaps a tad primitive and are bound to allow the regime to concoct a narrative that might help it to create a backlash against the measure ……inside Venezuela and abroad (specially among the already suceptible left wing sympathysers ) blaming the US for a worsening situation which is probably going to happen any way the way things are going. He suggests instead to go for measures that are more subtle or carry a different rationale , measures of a financial type , for example if Pdvsa is currently ‘selling’ ( actually giving away) 30 kbd of refined products and 45 kbd to Cuba , create barriers to the sale from the US of the same volumes now being sold to Venezuela, with the argument that Venezuela should be able to make up for those ‘lost’ sales by telling Cuba to actually pay for those Venezuelan exports or by selling them to other paying customers ……

    Another possibility is to impose a tax on US exports of crude oil and oil products to Venezuela and make it available for use in the creation of a humanitarian channel to the people of Venezuela to be handed to the Church or some trustworthy NGO.

    On the financial side dozens of possible measures suggests themselves that make the creation of the narrative more diffficult , for example administratively banning US oil service companies key to Pdvsa operations from rendering their services to Pdvsa .

  5. Thanks for explaining the dependency of Venezuelan oil to the US, despite the rhetoric we hear from Miraflores we’re linked to the economy of the giant to the north for exports, imports and finance. Cutting off entirely Venezuelan oil imports is perhaps far too radical for both parties involved, especially because it would hurt regular Venezuelans even more and from what you say would disrupt the oil economy in the US. Other type of targeted sanctions might be more effective. The Iran example in terms of oil sanctions is useful but that nation is part of a very different geopolitical sphere than Venezuela. At any rate, the US needs to take stroger action toward Venezuela; go after the bank accounts of gov’t official in the US and elsewhere, block acces to the money abroad, impose travel bans on officials…

  6. The Sanctions playbook is like this:
    Sanctions are imposed–> economy worsen–>people rise up–> regime falls

    The problem here is that sanctions will not work unless you want to starve all Venezuela for 8 months to get rid of Maduro. People have been on the streets already for more than 100 days and counting only to get their ass kick every time.

    But more importantly, sanctions won’t solve the bigger problem of “The day after Maduro”

    So Maduro leaves then what?!, are we going to trust the Military, which is very likely composed of brain washed Chavista inspired rank and file? Remember those guys enlisted during the Chavez fervor.

    After a close look to this problem, we are going to need foreign help no matter what to turn Venezuela back to a solid Democracy.
    And for that our best partner is obviously the USA.

    Here is a very relevant article from the New York Times about Sanctions, it is for Russia but also about Sanctions in general.
    The TLDR is: Sanctions are overated and rarely ever work except in particular circumstances.
    https://www.nytimes.com/2017/07/25/business/economy/economic-sanctions-russia-congress.html

    • “…Sanctions are imposed–> economy worsen–>people rise up–> regime falls”

      is that what happened in Iran and Cuba?

      • Not even close, so there you have it, more examples that sanctions are overrated.
        Forced intervention is what ultimately will work in this case, we will need a temporary occupation anyhow while we rebuild the armed forces from the ground.

        • “we will need a temporary occupation anyhow while we rebuild the armed forces from the ground” <<<< Who would be the occupying force?? Uncle Sam won't, you can bet your bottom dollar on that. And rebuilding the armed forces will take years and years. It's irritating reading this BS on this forum.

          • Wow the situation in Venezuela can’t even compare to Irak in terms of complexity, logistics and resources needed.
            We just need a few months of military support paid for the Venezuelan government.

            Or are you expecting the Honorable and Democratic Venezuelan Military to support a no Chavizta regime?
            C’mon lets get real.

          • The invasion and toppling of Saddam went quite well actually. It was the occupation that was FUBAR.

            Afghanistan? Hardly a valid comparison as the US was busy turning rubble into, well, rubble.

      • “is that what happened in Iran and Cuba?”

        Iran had reserves and an infrastructure to become self-reliant in spite of the sanctions.

        Cuba was left alone since the missile crisis, when USA struck a deal with the URSS to never, EVER do anything to disturb the castro’s regime.

        ““…Sanctions are imposed–> economy worsen–>people rise up–> regime falls””

        No, the formula is “Sanctions are imposed -> Enchufados’ accounts get offed -> Regime can’t keep up with the repression -> Regime falls”

      • VT, cultural & religious differences don’t make Iran a valid comparison in my view. And while Cuba should make a valid comparison, there are still glaring differences today as compared to 60 years ago in such areas as communication, wealth, and the population’s experience with democracy……the Cuban population generally not being familiar with any of the three and those that were either fled or were purged by Castro.

        My fear is that with each passing generation raised under this system, it will be even harder to inspire revolt. Today really is zero hour.

        • https://medium.com/incerto/on-neo-cons-and-their-mental-defects-d12685585b11

          Read for some background on interventionism. Interventionistas should refrain from messing with systems they don’t understand. Otherwise, it will lead to second order effects. Lybia, Afghanistan and Iraq are clear examples. It doesn’t have anything to do with the culture of those countries or whether they had reserves or not to withstand an embargo.

          Decoupling the removal of Saddam Hussein from what happened in Irak after is not only naive but irrational. And let’s not even talk about the whole WMD phony evidence.

          • We’re discussing US military intervention to force Maduro from power, not a US occupation thereafter
            Venezuela is quite capable of installing a working democracy with clear separation of powers and clear separation of church and state,because that’s what the country had before it tried the current “project”.

            Iraq, on the other hand, was coming off centuries of tribal rule, colonialism, and decades under a ruthless dictator. What’s naive and irrational is to assume that US-style institutions and beliefs can be forced on a non-western culture, hence my original assertion that the two countries are not comparable.

            And I’m correct that the military overthrow of Saddam was almost flawless. It was the zero tolerance of Baathists (the only people who knew anything about running the country) in the post Saddam era that resulted in the fuckup.

            WMD = strawman as does bringing neoconservatism into the Venezuelan equation

          • And what I took from the link you posted by the guy ranting about neocons fucking up interventions, is that I’m perfectly within my rights to call for stiff US sanctions because “I’ve got skin in the game”.

            Heh!

  7. Sanctions can contribute to a govts fall or to a change in its behaviour or to its losing ,popularity with its people , not necessarily at one go but over time ……at some critical juncture the cummulative effect of sanctions can bring a govt down , , but essentially what sanctions do is make life more difficult for the sanctioned regime ……, make it exact a price for its oppresive or unlawful conduct………, and thats perfectly legitimate and natural …..(the idea that unless you get the most perfect result an effort is not to be attempted is childish ) .

    The logistics and costs of sending oil to india and china ( where your price has to compete with that of the very cheap, much closer oil from Iran or the middle east ) hurt the regimes oil revenues even if the govt can convince the Chinese not to allot all of the price of the sold oil to serve the existing debt.

    Im with Moises in that sanctions have to be carefully targeted to produce the greatest impact with the least risk of any harm to your own interests……, to use a bit of imagination in crafting them !!

  8. I think what you guys are leaving out of the equation is the huge amount of money being spent to BUY military loyality.

    I’ve lived here long enough to know that what garners loyalty and support from the average Venezuelan is the perception of power. That power normally comes from both the promise, and the completion of the promise, to pay what you say you’re going to pay and when you say you’ll pay. The day the excuses start for not paying is the day you’re viewed as weak and the day they begin looking for other options.

    Shut down the money from PDVSA and Maduro folds like cheap suit.

  9. What about Food and Medicines as payments for Oil Shipments.. This means the benefits goes directly to an already suffering people. And they can’t skim off the top and the corruption will be limited… Not only would it not hurt the Venezuelan people, it would help them by getting them the basic necessities that Maduro denies them.

  10. “Sanctions are bad for the people because there won’t be any money to import food and medicines”

    That’s what somebody who obviously doesn’t know how chavista economy works would say, as they’re ignoring the fact that ALL OIL MONEY IS ALREADY STOLEN BY THE ENCHUFADOS.

  11. It is possible that sanctions could benefit the people.
    Facing mass starvation the regime may have no choice but to allow humanitarian aid into the country.
    Ideally the people eat and the military does not get paid. Strengthening the people and weakening the regime.
    If the military continues stealing and diverting food when it comes in as aid, the public outcry will be much louder than the current backroom deals of over inflated contracts and bribes.
    I still have a hope that the constituent will be cancelled. Maduro can not withstand the disgrace of nobody going to the polls.
    Social media makes it impossible for the regime to hide the truth.

    • John, I hope you are right:

      “Maduro can not withstand the disgrace of nobody going to the polls.”

      However, they have to show their carnet de la patria (the mark of the beast) to people in the “red tent” to show they voted. Then they have to do the 1 to 10, where public employees have to find 10 other people to vote for the Constituyente.

      I hope people will have a conscious and not vote. If nobody shows up and this is a complete embarrassment, game over.

      However you will have some who are just cowards and dont stand up for anything. And others are just monkeys and can get 10 other monkeys to vote, maybe bribe them with a box of CLAP.

      If you are not religious, now is the the time to be. As Vladamir Villegas said: we are on the verge of a miracle or a massacre.

  12. You assume that the government will continue to pay if these sanctions are imposed. The costs of these proposed sanctions is basically the same as that of a default, so once the US market is inaccesible, why pay?
    Second, you China has lent to Venezuela some $65bb, Venezuela does not owe China 65bn, that would imply zero amortizations over the last 10 years. I estimate the outstanding debt at around $20bn.
    As venny trader rightly says, not all exports to China are to pay back the debt, as part of the restructuring agreed in Q2 2016, most of the exports to China are cash generating, while a small part goes to pay interest, this is being reported as a two-year grace period, whiteout it the government would have run out of cash by now.
    You don’t take a stance on the likelihood of these sanctions, I see them as very unlikely, us oil companies have a strong lobbying power, the EU would not agree on this kind of sanctions at all, they’d only follow with sanctions to individuals, that’s what they said recently, Colombia and Brazil wouldn’t like it either, as it is likely to result in a refugee crisis, and the US Congress has not gotten much done anyway since January: repal and replace: nada, infrastructure investment: nada, tax reform: nada, not to mention Trump’s tariffs threats.

    • If the ANC is installed, as probable, and if pragmatic Chavismo/their military cannot impose their will and fracture the military, then U.S. economic/financial sanctions will be imposed on Venezuela, since personal Venezuelan transgressor sanctions are not powerful enough to tumble the Regime, and since economic sanctions must be tried/are more preferable to the alternative of having to remove the Castro-Cuban Narco Criminal Regime by force at a later date (it’s about Hemispheric security– communism/subversion/terrorism–luckily, the head of U.S. Homeland Security was previously the head of the U.S. Southern Command).

  13. Carlos and Ramon, Many thanks for such an educative article! Perhaps, I can not form yet an own opinion if a full ban on oil exports from Venezuela is a good or bad thing in the long term, one terrible fact got my attention:
    how highly dependent on one single foreign country are we Venezuelans to simply satisfy our most basic human needs!
    After 19 years of “anti-imperialist” rethoric!
    Economically, at least, we are such a failure. It is sad.

  14. An excellent post as regards the facts, not necessarily correct in its interpretation of the facts. The money received from the U.S. by Maduro is largely going to pay Bond debts. To whom? To the bond holders who are in a good proportion Maduro’s cronies and the parasitic Venezuelan speculators. It is not going into buying food for Venezuelans. Venezuela is sending some 300,000 barrels per day to countries that do not pay us in cash: Cuba, PetroCaribe, ALBA. What about cutting these illegal supplies in order to get some cash?
    The whole argument against the sanctions is that Venezuelans will go hungry. They have been going hungry for the last 5-6 years. Will they be going hungrier now? The argument implies that this will be a long term measure. I see it as a measure with a rapid impact, designed to accelerate the ousting of the Maduro gang. It is a matter of weeks or months. Not years.
    Arria has suggested that the U.S. payment money should go into an account in which the National Assembly has a saying, to be used in food acquisition. This could be a way, although the regime will not accept it.
    I have suggested that the U.S. and the regional governments could structure a massive food and medicine program to deliver to Venezuela through the Red Cross for the period the sanctions are on. Will Maduro be brave enough to stop it at the borders. What will Venezuelans do if that is the case? What will the outside world think and do if this is the case?
    There are all kinds of reasons NOT to act. But act we must. Babies will not be conceived unless the thrust is effective.

    • Great balanced post Gustavo. According to historical data though the Venezuela situation meets some but not all the check points that predicts Sanctions could be effective. My fear is that it can give more time to the regime, yet never achieve the intended goal. This is why I’d rather go with forced intervention once and for all. If Intervention is not possible then the Sanctions applied intelligently might bring the regime down, but in the best case it solves half of the problem. We would still need in the transition some interim armed forces and here is why.
      Have you ever thought about what happen the day after Maduro leaves, would you trust an Armed Forces loyal to Maduro-Chavismo, that did nothing to apply the constitution and respect the will of the people?
      What would be the point of all this struggle if a year after Maduro there is another coup from another military caudillo ?

      • If it’s a murderous right-wing like Pinochet, sorry to say, so be it.

        And I hope they come for my sister-in-law first, who sold her soul for a new roof for her dump of a house.

        Instead of actually ever getting a job and paying for it herself.

  15. ‘Nobody knew sanctions could be so complicated.’?

    Thank you for the informative post.

    My question is: does the US Congress have to approve an embargo that interferes with US business, of the kinds discussed here?

    It just seems to me given the general pattern of saying much and doing nothing, the Trump administration is just playing with people’s hopes and their lack of information and without any thought to the practicalities.

        • We call Maria’s comment a misdirection in Canada. But it does resemble the move in fake wrestling that you mention: no substance.

          Why don’t you Mr Rubio, and Maria, come down from the peanut gallery and tell me something I don’t know: does Congress have to approve sanctions against Venezuela that interfere with US private business?

          • Her comment wasn’t a misdirection at all. It was merely pointing out that while you whine and wring your hands constantly about what Trump might or might not do, you sit silently while Canada’s government does squat to help.

            I don’t know if Congress has to approve sanctions, but I suspect not. I suspect such actions are within the executive branch’s powers, unlike starting a war which requires conservative presidents to request permission from Congress.

            I’m sure google can clear this up.

  16. We have three sides to this argument:

    1) An embargo will have no effect because VZ will find alternate buyers.

    2) An embargo will be devastating to VZ and hasten regime change.

    3) An embargo will be devastating to VZ but not hasten regime change, only adding to the people’s misery.

    So arguments one and two don’t worsen matters for the VZ people, right?
    Only argument 3 does that.

    So an embargo has a 66% chance of being a good thing.

    • …Or we can look at the historical facts.

      “Mr. Hufbauer and his colleagues studied more than 200 cases of economic sanctions imposed since the Allied blockade of Germany in World War I. One critical conclusion: BETTER KEEP THE GOALS MODEST.

      When sanctions “have modest objectives and are aimed at countries that are not terribly powerful but have tasted a little flavor of democracy and have close economic connections to the sanctioning coalition,” Mr. Hufbauer told me, they succeed in changing countries’ behavior about half the time.

      But when the goal is ambitious, the economic ties not overwhelming, the target country powerful, and the target government autocratic — think Russia, Ukraine, hacking — their track record is not particularly good. “A very small fraction of those end in success,” he added.”

      https://www.nytimes.com/2017/07/25/business/economy/economic-sanctions-russia-congress.html

      • But in this case, the economic ties are overwhelming. And VZ isn’t powerful, in any form, neither militarily, economically, or anything.

        Arepas don’t count.

        Your argument is MY argument.

        But I dismiss these kinds of “studies,” because while of course you have to study past history to learn from and predict, each case is uniquely different. Too many variables at play.

        Further, you’re citing a study of past situations as an argument against the current possibilities of a VZ embargo/sanctions, and ignoring the facts on the ground in VZ now.

        Not good enough an argument against an embargo. You gotta do better.

  17. News on sanctions, and possible oil embargo by Fitzpatrick. For now, just sanctions. More speficically on Terek.

    • The important part to Venezuela should be esta plata debe regresar a Venezuela. Like I surmised months ago. Sheesh.

  18. The US embargo has to be implemented, now. The Narco-Kleptocracy already steals most of the oil proceeds anyway. The food/medicine situation cannot get much worse, especially if the USA, the MUD and ‘el pueblo’ organized a special effort to donate and safely deliver additional medicines and food for several weeks, while the criminal narco-regime falls.

    Yes, open humanitarian channels a lo arrecho, with mass surveillance, while publicizing a major humanitarian aid initiative from the USA and others: Trump needs to say: “For the good of Venezuela, we have temporarily suspended oil imports and gasoline exports to their dictatorial, drug-trafficking Chavista government, which continues to abuse human rights, and insists on remaining in power forever. The Venezuelan people and the international community clearly demand fair general elections. Until then, expect no business from the USA. We shall not continue to feed such a criminal regime. Meanwhile, we will be shipping large donations of food and medicine for the Venezuelan people, which must arrive at the correct destinations promptly and safely. Many of our friends for freedom worldwide will join us in this effort. ”

    Then put pressure on India to do the same, plus many other countries to support the Humanitarian Aid push. And work with China/Russia so that they don’t bail them out, buying additional oil. (Even when I suspect the bribes and Kickbacks/per Kleptozuelan barrel they get are enormous.)

    Without the cash Chavismo needs to bribe the military, and many other leeches, the genocidal narco-regime would quickly fall. Choked. Insurgencies and deflections everywhere. People getting even angrier.

    But if the international community does nothing, with a wicked ‘constituyente’ in place, with the continued support of the armed forces, Diosdado/Tarek/Padrino/Reverol/Rodriguez and Masburro could stay in power at least until the October 2018 elections. They clearly don’t care about street protests, strikes or what the international community is saying. The USA and the world must ACT now, and Choke Chavismo to death.

  19. What is the timeframe and estimated costs of reconfiguring the refineries? If too high, sanctions seem unlikely assuming they have to revert to present configuration when Keystone XL is completed.

    My guess is that US companies will not be allowed to buy directly from Venezuela but it will remain legal to get supplied from a middleman. I have no idea what a transaction fee for this sort of thing would be, but 10-25% less money for the regime sounds good and if/when another government comes to office the supply lines remain open and Venezuela is not screwed further into the future.

  20. What can sanctions do that a general strike cannot do? Who controls the former? Who controls the latter? What transition to a democracy in the last century did not involve general strike action? Therefore, which is the right course of action, and which is redundant/ counterproductive right now?

    • What can sanctions do that a general strike cannot do? Surely you jest.

      Restricting the flow of dollars to the regime via sanctioning their oil sales is a swift kick to the nuts. A general strike disrupts commerce but is more of an inconvience to the general public than to the government. It’s not like there’s a huge dropoff in tax revenues because they hardly enforce tax collection as it is.

      Also, does anyone really think that the PDVSA of today is what it was when they paralyzed the country against Chavez? The company is mostly political appointments (one reason production continues to plunge) and few of them will risk their jobs to strike. And most of the major industries of the country have been expropiated and therefore the employees subject to termination threats if they strike.

      Toss in guys like Godgiven Hair saying stuff like, “a business closed is a business expropiated”, and you get a sense of why I believe strict sanctions targeted at the regime’s wallet are likely to be more productive than general strikes.

  21. The United States demands that all oil payments to Venezuela be made to an escrow account controlled with full transparency by the good offices of the OAS. Funds will only be delivered to Venezuela in accordance to directions received from the AN.

  22. Breaking News from Miami Herald: critic of Marco Rubio is sobbing that Trump has ousourced foreign policy in Venezuela to Rubio. Furthermore, Rubio could be up for an embargo. Remember that he represents Florida, a politically important state every election where there is an ever growing Venezuelan vote, and the Cubans are in solidarity with them. Rubio does NOT represent Louisiana or Texas.

    http://www.miamiherald.com/news/local/news-columns-blogs/andres-oppenheimer/article164065057.html

  23. Just reading an article that says the VP has had assets seized in the US on the order of $500,000,000. As the article says, if he was willing to risk that much in the US, how much does he have hidden elsewhere? And that’s just one chavista.

    • When the kitty is in excess of $2,000,000,000,000 , individuals can dip their hands in to the tune of millions. That is why a one-eyed lieutenant, from a lower middle class CCS neighborhood can have -reportedly- billions, living in oriental luxury, privately jetting his horses to events around the world, poingtinly residing in an exclusive Florida location…..It appears the “intergalactic” had entrusted him with his daughters well being (reportedly one of the princess has high nine figure accounts in a bank in Andorra -which was a preferred way of laundering through complex financial products -and some as simple as a “diplomatic” briefcase full of cash).

      That is also why some lowly obscure bureaucrat from a province, who was made minister of transportation and public works, can have a mother in law with $43M stashed in Swiss banks( apparently seized a couple of weeks ago).

      Arguably, profit margins from drug trafficking are not as high as being awarded “divisas”, but for the entrepreneurial minded and with contacts in the military/GN, both add to a huge bag. Which brings us to Godgiven, Narcoreverol, VP and many others… themselves from lower middle class roots, can be in just a few years and without any industry of work that can be spoken for, truly, filthy rich.

      Was Grenada or even Panama as clear and present risk to the Western Hemisphere as Venezuela was/is?

Leave a Reply