Photo: MercoPress, retrieved.
Every time a new sanction against some chavistas and their assets surfaces, I can’t help but smile. I even carry a little sparkle in my eyes when I help spread the word.
But the day the Trump administration imposed sanctions on PDVSA, I didn’t have time to celebrate. I panicked and ran to the nearest gas station to fill my tank while I texted my husband, who was buying non-perishables in the grocery store.
I understand the basic rationale behind the strategy: given that PDVSA is Maduro’s government’s life support system, if you unplug it, it might spark a deeply needed political and economic transition.
But there’s no such thing as a free lunch, and I’m worried about the bill the already vulnerable Venezuelans might have to pay. By the end of 2018, the food basket cost was close to 70 times a minimum wage. Inflation rose 3.5% daily in January 2019. In November 2018, Caritas Venezuela reported that 57% of the kids the organization monitored in 46 poor parishes suffered some level of malnutrition. Chronic disease patients already face over 80% shortage of medicines. So I’m scared about the future of so many Venezuelans at those levels of vulnerability, under the newest sanctions. Because no matter if you are #TeamMaduro or #TeamGuaidó, the governing party is still PSUV, and if a government that made most of the country depend on its shitty services can’t provide any more, you imagine the suffering to come.
But the day the Trump administration imposed sanctions on PDVSA, I didn’t have time to celebrate. I panicked and ran to the nearest gas station to fill my tank.
In November 2018, the U.S. imported 563,000 barrels per day (BD) from Venezuela, coming to 49.5% of Venezuela’s total crude oil exports (according to OPEC’s secondary sources.) For the first three weeks of 2019, U.S. imports from Venezuela averaged 608,000 BD. However, the real concern is not whether Venezuela will find new buyers for the oil previously sold to the U.S., but if Venezuela will be able to keep on producing at all.
Much of Venezuela’s oil reserves are heavy crude oil, which needs to be diluted. That’s why it had to import around 90,000 BD of naphtha from the U.S. in 2018. Venezuela could look for other providers of diluents, but the costs would skyrocket. In practical terms: without imported diluents, PDVSA is forced to use the little production of light crude the country has for mixing with its extra heavy oil. Moreover, PDVSA sources told S&P Global Platts it won’t be able to produce around 300,000 BD of diluted crude oil (DCO) without naphtha. This would put Venezuela’s production levels under the one-million barrel mark.
And if this weren’t bad enough, according to Caracas Chronicles Venezuelan Energy Brief, since it generally takes three months between a scheduled oil sale and the corresponding cash settlement, “PDVSA is at risk of losing access to the past three months of invoices, if the U.S. Treasury Department enforces General License 7 retrospectively and seizes receivables outstanding.”
What does this mean for the Venezuelan citizen?
According to Reuters, Venezuela might run out of gasoline and diesel at any moment.
In the first ten months of 2018, the U.S. sold Venezuela an average of 122,500 BD of gasoline, diesel, partially refined oil and derivatives that complete a third of Venezuela’s domestic supply; in December 2018, Venezuela planned to import 300,000 BD of refined products to ease domestic fuel shortages. If oil production drops drastically and PDVSA can’t supply cash or other goods to swap for oil, a drop in the supply of gasoline and other oil derivatives will affect private and public means of transportation and the distribution of goods. The thermoelectric power plants will be affected too: they represent little over 51% of the installed capacities of the National Electric System, and are currently working at 18% of their installed capacities. To give you context, 2018 was a year full of colas to get gas and five apagones per hour, and PDVSA’s supply of fuel was only 17% below internal demand.
I don’t think these actions will be enough to stop the inevitable collapse of oil revenues, but it might slow it down and prolong the already agonizing Maduro government.
Given that oil exports are responsible for way over 90% of the dollars flowing into Venezuela, the imports of CLAP boxes, for example, will come to a halt. And while the products sucked and the corruption scheme reached epic proportions, many today depend on those boxes. According to preliminary results of the Life Conditions Survey (ENCOVI) of 2018, 94% of those surveyed don’t make enough money to fulfill their basic needs, while an estimated 7.3 million Venezuelan homes receive CLAP boxes (on an irregular basis.)
There are many rumors as to what the Maduro government and PDVSA authorities are doing to overcome the sanctions: finding new diluent sellers, finding new buyers for the oil previously sold to the U.S., telling customers to deposit oil sales proceeds in bank accounts in Russia and other patadas de ahogado. I don’t think these actions will be enough to stop the inevitable collapse of oil revenues, but it might slow it down and prolong the already agonizing Maduro government. And if cese de la usurpación, gobierno de transición y elecciones libres never happen, the depth of the economic crisis will grow exponentially.
Some might say I’m overreacting because PDVSA’s customers will now transfer funds to a bank account of the Guaidó team, but we don’t know if that’s actually so. Can the Guaidó administration use that money to effectively offer goods and services or will it be stuck outside Venezuelan borders, like the humanitarian aid?
Don’t get me wrong: I’m all for the transition, better sooner than later. However, the #VamosBien could take a while before becoming #LoLogramos, and I can’t help but think that the sanctions against PDVSA could truly become sanctions for everyone.
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