The Sanctions of August 5th, 2019

Chavismo surrenders to the Cuban blockade narrative, the opposition tries to sell it as a way to pressure the regime and the population is scared. What’s this new Executive Order, really?

Photo: Reuters retrieved

What does Donald Trump’s Executive Order from August 5th say, exactly?

First, it’s forbidden to sell, export or transport any asset of the Venezuelan government that’s in U.S. soil, or under control of an American entity or individual. According to the attorney general appointed by the National Assembly, José Ignacio Hernández, this means a protection to Citgo, currently under litigation caused by the expropriation of Crystallex’s assets in Venezuela —the very ruling favoring Crystallex dictates that the American government can grant special measures to protect Citgo’s assets, if necessary. It seems, then, that Citgo stocks are safe… for now. 

Second, it establishes the possibility of sanctioning every person who has assisted, sponsored or provided financial, material or technical aid to individuals sanctioned by the OFAC in this context, with a general blockade of assets. That means people who have provided services to Cilia Flores, Tareck el Aissami or anyone on their infamous list, could be sanctioned with a resolution from the Treasury Department. 

The prohibition includes transferring funds and providing services to the Venezuelan government and people on the list, and vice versa. In other words, no more business with Venezuela or with people close to Maduro’s regime.  

What’s excluded from the Order?

Transactions regarding food, clothing and medicine destined to alleviate “human suffering.” Also excluded are the licenses that the U.S. has granted to several businesses closely related to the Venezuelan government, like those granted to the Chevron Corporation, Halliburton, Schlumberger Limited, Baker Hughes, and Weatherford International PLC, so they can continue operating, particularly with PDVSA. 

What’s the difference with the U.S. sanctions already in place against Maduro’s regime and other countries?

It goes deeper than previous sanctions, mostly placed on individuals and certain institutions of the Venezuelan State controlled by the regime. This isn’t, however, an embargo on the Venezuelan economy as a whole. 

How will this affect the Venezuelan population?

The international financial system will be more apprehensive when it comes to transactions involving Venezuela (more so than it already is,) and this will touch Venezuelan companies and banking. The regime will see a decrease in its ability to move money, oil and minerals, and to import things (even though sanctions exclude food and medicine,) since the financial system gets more narrow. 

The most likely effect, then, is more inflation and more shortages, a more precarious economy, as economist Asdrúbal Oliveros warns, even more informal and opaque. We have no reason to believe that these sanctions won’t make Venezuelans’ lives harder than they already are. 

What other consequences will it bring?

Russia, Cuba, Turkey and other actors backing Maduro will keep finding ways to do so. Since the economic sanctions on Cuba and Iran haven’t meant the end of those dictatorships, historical and geographical differences aside, the media, scholars and many governments that aren’t keen on Maduro are forced to denounce this as a terrible idea that will only bring more suffering to the people and will allow the regime to play the martyr, a role in which it can resist for many more years. It’s unlikely that Europe and Canada, having investments in Cuba and trying to get around the Iran blockade, will join the U.S. in this escalation through sanctions. The international coalition, not prone to unanimity, has one more reason to be divided and weakened. 

The regime has an excuse to drop out of the negotiation process in Barbados, which hasn’t advanced that much either, or at least to demand more than it already has. The radical opposition, not represented in Barbados (but still exerting some influence,) has more reason to push for the end of a dialogue they never believed in to begin with; Guaidó and his internal allies have to work extremely hard now, to fight the idea that this isn’t a blockade against the whole nation, an idea that will probably be used by the regime’s propaganda and repression apparatuses. 

Chavismo will be galvanized in appearance. But we must consider the possibility of sectors inside civilian and military chavismo, that see Maduro in power as a threat to their interests, as Caracas Chronicles’ Political Risk Report has mentioned, insisting on Maduro’s removal as long as they can get out of the net. If they can carry out this plan despite resistance from Tareck El Aissami and Diosdado Cabello, is yet to be seen. We also have to consider the possibility that this is a joint effort by the National Assembly and the White House, to raise the stakes in the Barbados’ negotiations. 

We’ll find out soon enough.