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  August 25, 2017

New US Sanctions Against Venezuela to Cause Greater Economic Instability

US sanctions against Venezuela, which VP Pence announced Wednesday, target Venezuelan debt and will make borrowing more expensive, hurting the people Trump claims to help, says CEPR's Mark Weisbrot
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Mark Weisbrot is Co-Director of the Center for Economic and Policy Research in Washington, D.C. He received his Ph.D. in economics from the University of Michigan. He is author of the book Failed: What the "Experts" Got Wrong About the Global Economy (Oxford University Press, 2015), co-author, with Dean Baker, of Social Security: The Phony Crisis (University of Chicago Press, 2000), and has written numerous research papers on economic policy. He writes a column on economic and policy issues that is distributed to over 550 newspapers by the Tribune Content Agency. His opinion pieces have appeared in The Guardian, New York Times, the Washington Post, the Los Angeles Times and most major U.S. newspapers, as well as in Brazil's largest newspaper, Folha de Sao Paulo. He appears regularly on national and local television and radio programs. He is also president of Just Foreign Policy.


Sharmini Peries: It's the Real News Network. I'm Sharmini Peries coming to you from Baltimore. President Trump signed a new executive order on Thursday, taking effect on Friday, to impose financial sanctions on Venezuela and its oil industry. The executive order states that no U.S. citizen or resident would be allowed to trade in Venezuelan government oil industry debt. Shortly before the order was signed on Wednesday, Vice President Pence spoke at a meeting of Venezuelan opposition leaders in Florida. Here's what he said.

Mike Pence: ​And you may be assured, under the leadership of President Donald Trump, the United States of America will continue to bring the full measure of American economic and diplomatic power to bear until democracy is restored in Venezuela.

Sharmini Peries: These new sanctions came after a series of earlier sanctions passed under both President Obama and President Trump, which target Venezuelan government officials, including President Maduro and prevents them from holding assets in the U.S. In order to pass all of these sanctions, the U.S. had to declare Venezuela to represent a serious threat to U.S. National Security.

​Joining us now to analyze these latest sanctions from Venezuela is Mark Weisbrot. Mark is the author of the book Failed: What the "Experts" Got Wrong about the Global Economy. Mark is the Co-Director of the Center for Economic Policy and Research, and is President of Just Foreign Policy. He's also a syndicated columnist. Thanks for joining us Mark.

Mark Weisbrot: Thanks, Sharmini. Great to be here.

Sharmini Peries: So Mark, first what are the most immediate consequences of these newest sanctions against Venezuela?

Mark Weisbrot: ​Well, it will definitely harm the economy, because its basically trying to cut off financing, any kind of finance for Venezuela. I think you'll see more, if they're effective, which I think they will be. I think you'll see more shortages of essential goods, foods, medicines and the economy hit hard in every way. They made an exception for oil so that Venezuela can continue to export oil to the United States.

​Everything else is going to be very difficult. They won't be able to borrow money. They won't even be able to trade some of their debt. It's unclear how fast or how devastating it will be, but it would be very bad for the economy. It's a very unambiguous attempt to just try and topple the government. Obviously, the U.S. government's been trying to get rid of the Venezuelan government for 15 years, but now there's no ambiguity at all. They're just basically saying they want to wreck the economy in order to get rid of the government.

Sharmini Peries: Right. One of the reasons the White House gave for the sanctions is that the Venezuelan government, and I quote, "Rewards and enriches corrupt officials in the government security apparatus by burdening future generations of Venezuelans with massively expensive debt," it said. First, what is Venezuela's debt situation like? Second, will these sanctions improve or worsen Venezuela's debt situation, because it's sounds like they're trying to help Venezuela?

Mark Weisbrot: ​Well, their debt situation is very bad, because they can hardly borrow now, and this will just make it even worse. Any borrowing that they would be able to do would be at higher interest rates. So everything will be more difficult. I think that the main reason Trump is doing this ... Obviously, it's not to help Venezuelans, because it going to hurt them. I think partly it's a distraction, because he's been in terrible trouble here at home, as you know, and sinking in the polls. He always is looking for ... It's kind of his modus operandi, is to look for distractions all the time.

​I think that's where it's most dangerous, because he could go to war; he's threatened military action as well. I think that is one of the only things that could possibly save his presidency. To have a war that somehow became popular. I think that also you have Marco Rubio and his friends that are supporting this bill. I think he's going to lose support in the rest of the world for this, because it's such an outrageous measure. The sanctions against individuals, which were also unjustifiable and illegal under our law and under the OAS Charter and other treaties that we've signed. Nonetheless, they were against individuals, and so most of the public understood them as not that important.

​Here, you're talking about something that's really designed to ruin the economy and overthrow the government. There's no nuclear program, like in North Korea, or even a potential nuclear program like you had in Iran, or allegations that turned out to be false, like you had in Iraq. There's nothing there. There's no justification. There's no excuse that you can make for something like this. So it is really a kind of naked aggression.

​I think that some of the Latin American governments, who have been friendly to the Trump administration, will even have a problem with this.

Sharmini Peries: All right. As you know, Venezuela exports a large sum of oil to the United States. As you said earlier, it doesn't really touch the oil industry, but specifically it does relate to the sanctions, do relate to oil debt. How is that distinction drawn and how do you actually execute on this kind of sanction?

Mark Weisbrot: It's interesting. I don't know the timing of these statements from the White House, but the Executive Order I think came out first, and didn't say anything about oil. When I read that I thought, "Wow, what are they going to do about the oil?" Then there was another statement that said that they're going to issue what amounts to exemption for the export of oil so that Venezuela will still be able to export oil to the United States.

​There's a lot of business lobby, especially from states like Louisiana and places where there are refineries, Texas, not to have sanctions that would eliminate jobs there and also raise the price of gasoline here. Whether they're going to be able to accomplish that is not yet clear.

Sharmini Peries: Right. Now, these sanctions are being imposed as Vice President Pence is wrapping up a tour in Latin America, and also while the new secretary to the President, in terms of being the Chief of Staff, used to be the head of Southern Command. So there must be some greater confidence on the part of the White House in administering these sanctions against Venezuela at this time. Do you think Pence was mustering up support in Latin America to get support for these sanctions against Venezuela?

Mark Weisbrot: ​I don't think they can get support. Even the opposition in Venezuela, most of them are not going to ... I don't think any of them are actually going to openly support it. Again, it was done for political reasons. One for Trump at home, but also if you look at what's happened recently in Venezuela since the election of a constitutional assembly, things have gotten very quiet. The protests have died down and the opposition leadership, even some that are relatively hard-line, decided to participate in the October regional elections for governors and regional governments. That, I think, is something that the sort of Rubio faction is more hard-line than even most of the hard-line pro-regime change Venezuelan.

​What they're trying to do by this is to create more chaos and instability. I don't think it's necessarily going to help them, but that's the only thing they could get out of it. In other words, they want to get people back in the streets, and not pursuing anything that could lead to a peaceful resolution of the conflict. Which participation in the elections, of course, would be a step towards a peaceful resolution.

Sharmini Peries: ​All right. These sanctions, Mark, will obviously, as you've already stated, will be tremendously making life difficult for ordinary Venezuelans who are certainly still under a great deal of stress, related to basic goods and services that they need, and the economic situation is very dire there. Partly this has been due to the fact that the Venezuelan economy has plunged as a result of the price of oil, and so on. What is your take on the impact this will have on ordinary people in Venezuela? What should be the response of the international community to this?

Mark Weisbrot: It's obviously going to hurt people. If you push the economy deeper into depression, and you deprive the country of foreign exchange, you're going to make the shortages worse. The shortages of food and medicine and everything else, and create more unemployment. Shrink people's income, exasperate the inflation, depreciation spiral; which is tied to the balance of payments crisis, because you're going to make that worse. All of these things will happen, or at least those are the likely consequences of what ...

​I think the international community should condemn it. A lot of them will. Here we only hear about the governments that are allied with the U.S. mostly, but if you look at the whole world, or even if you look at the Organization of American States for example, the Trump administration, despite having a Secretary General who's fanatically opposed to the government, and really fanatical altogether, trying to get the OAS to take action against Venezuela.

​They never were able to pass anything in the Organization of American States, because the majority of actual governments in the OAS will not support it. Of course, they can't get anything at the U.N. It's ridiculous to the world. On that basis I think that they will ... A lot of countries, a lot of governments won't say anything, because they just don't want to have trouble with the United States, but nobody is going to support them. It would be good if there were more governments, who were willing to come out and say that this is outrageous and it's a violation of international law and an act of aggression against a sovereign state.

Sharmini Peries: ​All right. Mark, I will leave it there, but there is so much more to discuss. We're looking forward to having you back very soon.

Mark Weisbrot: ​Thank you.

Sharmini Peries: ​And thank you for joining us here on the Real News Network.


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