MIAMI - The Trump administration is preparing to dramatically ramp up its sanctions over the next 30 days against what it considers the illegitimate “mafia” government of Nicolas Maduro, according to U.S. officials.
The escalation could resemble current “maximum pressure” campaign against Iran, including “secondary sanctions” targeting foreign companies and governments with economic ties to the Maduro government, officials say.
“The fact of the matter is that the United States is prepared to do much more,” James, ‘Jimmy’ Story, the head of the Venezuela Affairs Unit at the U.S. embassy in Colombia, told a public forum in Miami hosted by the Americas Society/Council of the Americas (AS-COA) on Thursday evening.
“If you look at the sanctions regime we have with Iran and you compare it to that which we have with Venezuela, there’s room to go,” he added.
US secondary sanctions are designed to force banks around the world to halt transactions with rogue regimes or risk losing access to the US financial system, and can also be used to target specific industries such as energy, banking and shipping, which are crucial to Venezuela’s large oil and gas sector.
U.S. State Department officials have insisted in recent weeks that far from running out of sanctions options in the case of Venezuela, there are numerous options still available to them. Venezuela has so far avoided the kind of economic punishment reserved for the U.S’s worst enemies, such as Iran, Cuba and North Korea, including a trade embargo, travel restrictions and actions against foreign companies which have business in the United States.
Asked to predict what the new phase in sanctions policy might look like, Story said: “I’d go over to looking at the sanctions policy with Iran. You have secondary sanctions, you have deeper sanctions, you have much broader sanctions, sanctions that do have secondary impact as well.” He added that the sanctions could also seek to block members of the Maduro regime from travelling. “That pain needs to be felt throughout the organization. Nobody should get a pass for being a member of a repressive regime,” he added.
The new phase of intensified sanctions comes on the back of a successful tour of Europe, Canada and the United States by interim Venezuelan President Juan Guaido, culminating in his attendance at the State of the Union on Tuesday, where he received a standing ovation. Trump highlighted Venezuela early in his speech, hailing the presence of Guaido and vowing that “Maduro’s grip of tyranny will be smashed and broken.”
The next day Guaido was Trump’s guest at the White House. It was the first time the two have met since Guaido assumed his role as interim president in January 2019 and wasn’t just a symbolic photo opportunity, official say.
“Spending 45-minutes in the Oval Office is not for show,” said Story.
Guaido also met separately in Washington with Secretary of State Mike Pompeo and Vice President Mike Pence, who has been helping coordinate Venezuela policy for the White House, as well as the head of the US Agency for International Development (USAID) and the Inter-American Development Bank (IDB).
Among those ideas being discussed apparently is a global humanitarian summit, proposed by Guaido, to raise donor funds to reconstruct Venezuela after democracy is restored. However, the current focus of international focus on Venezuela remains how to get rid of Maduro.
Maduro hit back in a speech deriding Trump and Guaido. "He's there, with his puppet on a string, with his defeats. We're here working, with our badge of patriots," he said.
On Friday, the State Department targeted the Venezuelan state-owned airline CONVIASA with sanctions to block any U.S. persons from making transaction with the company, including chartering, contracting, refueling, or purchasing its planes. “Instead of acting as a bridge between peoples, this airline is being used to ferry Maduro and his inner circle to confer with dictators, authoritarian regimes, and other criminals around the world,” the State Department said.
U.S. officials say the existing sanctions have been successful, but more needs to be done to loosen Maduro’s grip on power. Story quoted published reports that “Jay-Z has more money in the bank than the Venezuelan Central Bank does right now", noting that the oil-rich South American nation with 26 million inhabitants has less than $800 million in cash reserves, compared to billionaire such as the famous rapper and record executive who is married to singer Beyoncé.
Venezuelan oil exports have also fallen to their lowest point in 34 years, and hyper-inflation calculated at more than one million percent last year has devastated the economy, though much of that is attributed to government corruption and incompetence. Since 2013, the size of the country’s economy has contracted by 70 percent, from $280 billion dollars to $57 billion, in one of the most drastic financial collapses in recent world history, and one of the few that was not caused by armed conflicts or natural disasters, according to the International Monetary Fund (IMF).
“What is happening in Venezuela economically is beyond devastation ... We haven’t seen that in any country in the region, even in countries like Argentina, Peru or Brazil that went through hyper-inflation in the past,” said Jose E. Gonzales, managing partner with GCG Advisors, a New York-based financial advisory firm.
The country’s gross annual production (GDP) per capita has fallen from $15,000 dollars in 2013 to $2,000 in 2019, Gonzalez told the AS-COA forum.
Critics of U.S. policy say that while U.S. sanctions have starved the Maduro regime of cash, it has managed to find financial loopholes thanks to the support of China, Russia, and Turkey, which continue to receive lucrative oil and gold exports from Venezuela.
Russian Foreign Minister Sergei Lavrov visited Caracas on Friday, where the Russian Foreign Ministry said he planned to discuss “practical steps to deepen cooperation between the two countries in areas such as energy, mining, transport, agriculture, medicine, pharmaceuticals and military-technical cooperation.”
Still unknown is whether the U.S. will seek to extend its sanctions to Russia, China and Turkey. The Russians have so far largely ignored the risk of sanctions and Rosneft has become Venezuela’s main shipper of crude, which goes predominantly to refineries in India and China.
The Trump administration is weighing whether to sanction Russia’s biggest oil producer, Rosneft, for maintaining ties with Maduro, though officials are wary that such a move could disrupt global oil markets and causing a spike in gas prices, according to Russ Dallen, head of Venezuelan investment bank Caracas Capital Markets, who closely monitors oil markets. “As Rosneft has been helping Venezuela skirt the full impact of U.S. sanctions -- all the while profiting handsomely from those activities -- it is only logical that the U.S. increase the cost to the Russians of continuing to assist the Maduro regime,” said Dallen.
Trump has been notoriously loath to act against Russian interests, but U.S. officials are signaling that could soon change. The U.S. will look “very closely” at potential actions against Rosneft and will “likely take action in the near future on that issue,” National Security Adviser Robert O’Brien said Wednesday at an event hosted by Meridian International Center, a diplomatic and global leadership non-profit institution.
U.S. officials are also seeking stronger support for sanctions from European nations, who have voiced strong support for Guaido, but have not always lived up to expectations. A number of top Venezuelan military officers and corrupt figures in Maduro’s inner circle are alleged to have relatives living comfortably in Spain off embezzled public funds.
“Our message to those nations is that increased and strengthened travel and financial sanctions on key figures in and around the Maduro regime will accelerate their abandonment of the regime and help to end it,” U.S. Special Representative for Venezuela, Elliott Abrams, told reporters this week. “As several administration officials have noted, the Russians may soon find that their continued support of Maduro will no longer be cost-free,” he added.
U.S. officials say they hope the pressure on Maduro will lead to his departure – forced or voluntary - opening the way for free and fair elections.
But it remains highly unclear how that point might be reached. U.S. officials believe fissures in the regime will eventually lead to Maduro being cast off by those around him. But neither Guaido nor the Trump administration currently appear to be willing to negotiate with Maduro, at least not publicly.
“They have no intention of losing an election, but we have to get them to a place where they will accept an election,” said Story.
Some U.S. allies say that’s easier said than done and will likely require more flexibility – and international cooperation - than the Trump administration has been willing to accept.
“We believe at our core that Nicolas Maduro is illegitimate, and that Juan Guaido is legitimate. Simply repeating that will not make it happen,” Michael Grant, Canada’s Global Affairs minister for the Americas, told the AS-COA forum. “I don’t think it’s going to happen through a big bang. It’s going to take some compromise,” he said.
That would likely need to include having a dialogue with China, Russia and Cuba. “We do need to talk to others to find real mechanisms to move forward,” said Grant. “Let’s be realistic about our chances of success, but at the same time it has to be done.”