President Trump Friday signed an executive order
imposing sweeping financial sanctions on Venezuela in a move meant to
ratchet up pressure on the country's president, Nicolas Maduro, as he
tries to prevent a debt default.
The new sanctions prohibit
financial institutions from providing new money to the Caracas
government or state oil company PDVSA. It would also restrict PDVSA's
U.S. subsidiary, Citgo, from sending dividends back to Venezuela as well
as ban trading in two bonds the government recently issued to
circumvent its increasing isolation from western financial markets.
"These measures are carefully calibrated to deny the
Maduro dictatorship a critical source of financing to maintain its
illegitimate rule, protect the United States financial system from
complicity in Venezuela's corruption and in the impoverishment of the
Venezuelan people, and allow for humanitarian assistance," the White
House said in a statement.
A senior Trump administration official said
additional sanctions would be imposed if Maduro doesn't reverse course
and meet opposition demands that he roll back plans to rewrite the
constitution, free dozens of political prisoners and hold fair and
transparent elections.
In a call to brief reporters on the measures, the
official said the United States has significant influence over
Venezuela's economy but does not want to wield it in an irresponsible
manner that could further burden the already-struggling Venezuelan
people.
Reflecting those concerns and a strong lobby effort
by the U.S. oil industry, Friday's action stopped short of cutting off
U.S. imports of Venezuelan oil that are crucial both to Venezuela's
economy and to Gulf refiners.
The sanctions follow through on Trump's threat last
month that he would take strong economic actions if Maduro's
increasingly authoritarian government went ahead with plans to create a
constitutional assembly that is made up wholly of government loyalists.
The opposition boycotted the vote to elect the body's 545 delegates.
Since the assembly was seated, it has voted by
acclamation to oust the nation's outspoken chief prosecutor, take
lawmaking powers from the opposition-controlled congress and create a
"truth commission" that many fear will be used to target the
government's political opponents. Several prominent opposition mayors
have also been removed or ordered arrested by the government-stacked
supreme court.
U.S. Vice President Mike Pence signaled the move
earlier Friday, tweeting that the U.S. "will not stand by as Venezuela
crumbles."
"The birthright of the Venezuelan people has always
been and will always be libertad," he wrote, using the Spanish word for
"freedom."
The sanctions are likely to worsen a crisis that has
already seen Venezuela's oil-dependent economy shrink by about 35
percent since 2014 — more than the U.S. economy did during the Great
Depression.
Maduro, who is among some 30 senior officials already
barred from the United States, seemed almost resigned to the
possibility. He warned this week that the Trump administration was
readying a "commercial, oil and financial blockade" in the mold of the
one that has punished Cuba for decades. He said it would be meant to
pave the way for a U.S. military intervention.
"The economic measures the U.S. government is
preparing will worsen Venezuela's economic situation," he told foreign
journalists Tuesday, vowing to protect the population from the worst
effects of any sanctions.
There was no immediate government reaction Friday even as some leaders of the opposition expressed satisfaction.
"Venezuela's increasing economic and political
isolation has a sole culprit: Nicolas Maduro," recently ousted
Caracas-area Mayor Ramon Muchacho said in a tweet from exile in Miami.
David Smilde, a Tulane University sociologist who has
spent decades researching Venezuela, said blanket sanctions that cut
off the government's cash flow and hurt the population are likely to
strengthen Maduro in the short-term.
"It will bolster his discourse that Venezuela is the
target of an economic war," said Smilde, who supports Friday's more
limited sanctions targeting future indebtedness.
But with Venezuela's streets calmer than they have
been for months, and the opposition reeling from its failure to prevent
the constitutional assembly from going forward, action from an
increasingly concerned international community represents the best
chance of reining in Maduro, he added.
Maduro is already struggling to combat widespread
shortages and triple-digit inflation as oil production has tumbled to
its lowest level in more than two decades. Any economic sanctions,
however mild, increase the risk of a default on Venezuela's ballooning
debt.
The government and PDVSA have about $4 billion in
debt payments coming due before the end of the year but only $9.7
billion in international reserves on hand, the vast majority consisting
of gold ingots that are hard to trade immediately for cash.
Venezuela has taken desperate steps to remain current
on its debt throughout the economic crisis, and the president has
blamed his enemies for spreading rumors about any impending default.