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Venezuela, U.S. Sanctions and the Downward Spiral

MIN READJul 28, 2017 | 09:00 GMT

Opposition activists celebrate outside polling stations after taking part in an opposition-organized vote to measure public support for Venezuelan President Nicolas Maduro's plan to rewrite the constitution in Ruices, eastern Caracas on July 16, 2017. Authorities have refused to greenlight the vote that has been presented as an act of civil disobedience and supporters of Maduro are boycotting it. Protests against Maduro since April 1 have brought thousands to the streets demanding elections, but has also left 96 people dead, according to an official toll. / AFP PHOTO / FEDERICO PARRA (Photo credit should read FEDERICO PARRA/AFP/Getty Images)

(FEDERICO PARRA/AFP/Getty Images)

Venezuela's political and economic crises may soon go from bad to drastically worse. Within weeks, the U.S. government could implement sanctions against Venezuela's vital oil sector to prevent the government in Caracas from formally starting down the path to a one-party state. In their most severe form, the sanctions would wreck Venezuela's ability to export oil to the United States by denying the state oil company Petroleos de Venezuela (PDVSA) access to the U.S. financial system. And U.S. companies would also be barred from doing business with the PDVSA. That would lead to a quick and steep drop in Venezuela's already declining oil production. In turn, imports would contract sharply and inflation would skyrocket, spurring the mass migration of millions of Venezuelans. But the United States could also resort to lesser sanctions limited at targeting individuals in the Venezuelan government. Either way, the unrest in Venezuela will continue....

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