Over the past weeks, the Trump Administration has tightened the noose around Nicolas Maduro’s regime, increasing pressure on the country sitting on top of the world’s largest oil reserves. Venezuela is already reeling from a years-long economic disaster that has slashed its crude oil production in recent years. This year, the country found itself with two other major global crises to manage—the coronavirus pandemic and the tumbling and highly volatile oil market with oil prices so low that they can’t cover the costs of pumping Venezuela’s heavy crude out of the ground.
Maduro’s regime, which has managed to cling to power more than a year after the U.S. stepped up sanctions to ban Venezuelan oil exports to the United States, now has to cope not only with the three crises but also with additional pressure from the Trump Administration.
Disaster for the ordinary people in Venezuela is only set to increase. Still, some analysts argue that further pressure on Maduro could only serve to unite the ranks of the regime, which controls the military and the arms during a global pandemic.
“This is government that holds itself up because it control all arms, and especially during a pandemic, having a monopoly on violence is indispensable,” Phil Gunson, a Caracas-based analyst at the International Crisis Group, told Bloomberg.
The U.S. is not backing down from the harsh sanctions on Venezuela, resisting calls from around the world, and from U.S. Democratic lawmakers for sanctions relief in times of pandemic.
The U.S. Administration says that sanctions do not apply to humanitarian aid and medicines and has stepped up pressure on Venezuela’s Maduro in recent weeks.
Two weeks ago, Maduro was charged in a Southern District of New York federal indictment for narco-terrorism, conspiracy to import cocaine, possession of machine guns and destructive devices, and conspiracy to possess machine guns and destructive devices. The U.S. Department of State is also offering a reward of up to US$15 million for information leading to the arrest and/or conviction of Maduro.
A week ago, the U.S. Department of State proposed a so-called ‘Democratic Transition Framework for Venezuela’, offering to ease sanctions in exchange for Maduro’s regime and supporters of opposition leader Juan Guaidó—recognized as Venezuela’s legitimate president by the U.S. and 50 other countries—forming a power-sharing government until fair elections are held.
“Economic pressure will continue until Maduro accepts a genuine democratic transition,” U.S. Secretary of State Mike Pompeo said upon announcing the proposal.
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Venezuela’s Foreign Minister Jorge Arreaza rejected the U.S. proposal, saying that the government reiterates it does not accept and will not accept any tutelage from any foreign government.
The U.S. also pressured Venezuela’s oil exports over the past two months, slapping sanctions on two subsidiaries of Russia’s oil giant Rosneft for trading Venezuelan oil. Last week, Rosneft ditched all its oil operations and assets in Venezuela, transferring them to a wholly state-owned oil company named Roszarubezhneft.
The loss of trading partners due to additional U.S. sanctions, the colossal global demand destruction, and the coronavirus pandemic for which an economy in collapse such as Venezuela’s is unprepared, add to the endemic lack of funds to support the country’s oil production.
Oil production in the Latin American country has slumped over the past three years due to the dire economic situation and the increasing U.S. sanctions on its exports and companies selling Venezuela’s oil.
Earlier this year, Venezuela managed to achieve a slight increase in its crude oil output, only for the coronavirus pandemic to spread and cause significant demand destruction worldwide, putting more pressure on Maduro’s regime.
In March, Venezuela’s total exports of crude oil and fuel plunged by 26 percent month on month to just below 800,000 bpd—the second-lowest crude and fuel export volumes since the U.S. launched its pressure campaign on Maduro in January last year, according to data from Refinitiv Eikon and state oil firm PDVSA cited by Reuters.
The U.S. is banking on putting additional pressure on Venezuela while its economy and society are battered from all sides, hoping to oust Maduro this time. Yet, analysts warn that this could only serve to close ranks within the regime.
By Tsvetana Paraskova for Oilprice.com
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