As Venezuela's economy worsens and the United States increases pressure on the country's leaders, the government there will cling to power at all costs. This slide into authoritarian rule concerns the U.S. government, though it is a relatively low foreign policy priority for Washington. Venezuela's May 20 presidential election will increase the likelihood of heavier U.S. sanctions against the country. Washington may move to specifically sanction the Venezuelan energy sector, which would dramatically destabilize the economy and complicate the government's ability to remain in power.
Venezuela has moved forward with holding its May 20 presidential election, even though the United States, the European Union and most of Latin America have announced that they consider the election illegitimate because of the Venezuelan government's increasingly authoritarian behavior. In December 2017, President Nicolas Maduro's ruling United Socialist Party of Venezuela barred the opposition coalition Democratic Unity Roundtable from running in the election. With less competition, Maduro is all but guaranteed to remain in office, even though his party's popularity has waned since the last election in 2013.
Why It Matters
Venezuela is in the midst of a national crisis. The 2014 decline in global oil prices exposed fundamental flaws in the country's government, including overspending and corruption. The country's economy went into freefall, and in recent years inflation has skyrocketed while citizens struggle to acquire basic food and necessities. In order to maintain its control over the foundering country and its dissatisfied populace, Maduro's administration has been claiming more and more power and engaging in increasingly brutal crackdowns.
A rapid economic plunge from U.S. sanctions could cause mass, violent protests by dissatisfied citizens or a military coup attempt by fed-up officers.
These tactics have earned the Venezuelan government unwelcome attention from larger global powers, such as the United States and the European Union, who have been making political efforts to curb human rights abuses and slow the country's slide into authoritarian rule. Until recently, the United States has been reluctant to apply particularly toothsome sanctions to Venezuela, like ones targeting the country's energy sector, given its more pressing foreign policy concerns regarding Iran and North Korea. However, the departure of White House officials who opposed sanctions against Venezuela's energy sector, such as former Secretary of State Rex Tillerson, has given way to the rise of officials such as National Security Advisor John Bolton, who are more willing to resort to sanctions to alter other states' behaviors. So, Washington will likely begin seriously considering much heavier sanctions against Venezuela after the May 20 vote, which it considers illegal.
What Happens Next?
If Maduro gets elected to another six-year presidential term, the White House will amp up discussion about how to respond to the vote. One quick and powerful action would be to issue sanctions against Venezuela's delicate state-owned oil and natural gas company Petroleos de Venezuela (PDVSA), since the country's meager economy still relies on oil revenue. Venezuela's elites — with the help of military intelligence — have so far been able to quell political unrest because the country's slide into crisis has been slow. But a quicker economic plunge from U.S. sanctions could cause mass, violent protests by dissatisfied citizens or a military coup attempt by fed-up officers.
What Would Energy Sanctions Mean For Venezuela?
The ultimate impact of U.S. sanctions on Venezuela's energy sector will depend on the details of the restrictions. A U.S. ban on importing oil from Venezuela would be damaging, while prohibiting U.S. companies from doing any business with PDVSA would be even more disruptive. Venezuela may be selling less oil to the United States recently, but it relies heavily on machinery and resource imports from U.S. companies to produce its oil.
The United States is increasingly willing to resort to sanctions to alter other states' behaviors.
Sanctions could take several months to impact oil operations, as the U.S. Treasury Department will likely give businesses operating in the country a few months to wind down operations, but PDVSA would suffer dramatically from all of the disruptions. The company is already involved in a legal dispute over a $2 billion arbitration payment it owes to the U.S. company ConocoPhillips, which is currently in the process of seizing Venezuelan assets in the Caribbean, such as oil terminals and crude cargoes. Sanctions would just make PDVSA's outlook grimmer, driving down Venezuelan oil production and raising the risk of violent protest and military challenges to the Maduro government. The growing unrest would also drive even more Venezuelans abroad, challenging the ability of regional governments to handle the influx of migrants.