The Trump administration’s new sanctions freeze all of Venezuela’s U.S.-based assets and those of anyone who helps Maduro which will only increase poverty, says Venezuelan economist Francisco Rodriguez
Story Transcript
GREG WILPERT: Welcome to The Real News Network. I’m Greg Wilpert in Baltimore.
The Trump administration issued a new executive order on Monday to further intensify the economic sanctions against Venezuela. These new sanctions freeze all property and assets of the Venezuelan State in the United States, and of any individuals who assist Venezuelan government officials. The order was clearly issued with the intent to make a splash at an international conference on Venezuela held in Lima, Peru on Tuesday. Representatives from 50 governments gathered there to discuss how to push Venezuelan President Nicolas Maduro from office. The governments of Cuba, Russia, China, and Turkey were also invited, but they rejected the invitation. National Security Advisor John Bolton was there, of course, where he outlined the new sanctions. Here’s a short clip of what he had to say to the press.
JOHN BOLTON, NATIONAL SECURITY ADVISOR: So basically, one way to summarize this to a business for example, is do you want to do business in Venezuela or do you want to do business with the United States? And I think for any international corporations, whether they’re US-based, European, wherever they may be, to the boards of directors and shareholders, they ought to be asking their management if it’s worth risking for a trickle of income from the illegitimate Maduro government, if it’s worth risking their business in the United States.
GREG WILPERT: These latest US sanctions against Venezuela are on top of a continuously intensifying sanctions regime, that began under President Obama in 2015 against individual government officials and has led to a nearly total embargo against business dealings between the US and Venezuela under President Trump.
Joining me now to discuss the latest sanctions is Francisco Rodriguez. He is Chief Economist for Torino Economics in New York City where he conducts regular economic analysis of Venezuela and Latin America more generally. Also, he’s a former advisor to opposition presidential candidate Henri Falcon, who ran against President Maduro in 2018. Thanks for joining us, Francisco.
FRANCISCO RODRIGUEZ: Hi, Greg. Great being here with you.
GREG WILPERT: Some analysts have said that these new sanctions won’t make much of a difference because the earlier sanctions already blocked most of the economic transactions between the US and Venezuela. What do you think? What effect will these new sanctions have on the Venezuelan economy and its ability to import and export?
FRANCISCO RODRIGUEZ: I think that if you look at the executive order that was published a couple of days ago, that’s actually true from the standpoint of the letter of the law. This executive order doesn’t change that much because the big change came in January. And remember, there have been previous sanctions, but there have also been decisions, policy decisions by the US government that have had significant economic implications for Venezuela, and particularly the decision to recognize Juan Guaido as President of Venezuela
Now, putting aside the constitutional issues, there is a real issue there of recognizing a government that does not have de facto control over at least part if it’s territory. This is the first time that the US does this since World War II. And the problem there is that once they did that, they effectively froze the assets of the Venezuelan government from Maduro’s standpoint because Maduro no longer had control to bank accounts in the US after Guaido was recognized.
So what these sanctions do is just codify that, I mean, yes they freeze the assets, but Maduro hasn’t had access to those assets for the past seven months. What I think we’re seeing here, more than focusing on the change in legislation, I would focus on the change in policy. And what the words that you showed from Bolton clearly underscore, is that the US is now explicitly threatening third countries that do business with Venezuela with what are known as secondary sanctions.
In other words, the US has no legal authority to restrict what anybody other than its citizens do. It can restrict what US citizens and what US residents and what US firms do. But the US can’t restrict what an Indian firm does because it has no jurisdiction, but the US can impose sanctions on that Indian firm and say, “Well, since you are collaborating, you’re buying oil from the Venezuelan government, then that means that we’re going to sanction you and we’re going to freeze your assets in the US.” That the US can do, and that’s effectively what Bolton is threatening with doing.
This could be potentially disastrous and the sanctions have already been a disaster for the Venezuelan economy, but this would take away basically the only lifeline that there is. Venezuelan exports right now, what’s left of Venezuelan oil exports, are pretty much equally going to India and China. So stopping the Indian market, which is the one that would be kind of more reactive to sanctions or to a threat of secondary sanctions, as well as Malaysia, which is receiving some, closing of those two markets would take away around 50% of current Venezuelan exports of what’s left of Venezuelan exports, which have already fallen by 85% over the past seven years.
GREG WILPERT: Now, the executive order specifically exempts food and medicines from being included in the new sanctions. However, the Venezuela news channel TeleSUR actually just reported on Wednesday that a ship carrying 25,000 tons of soy beans was seized in the Panama Canal because of the new sanctions according to the government. Now, what do you make of this exception for food and medicine more generally? Will it do any good?
FRANCISCO RODRIGUEZ: Well, this exception has been put in sanctions regimes in other countries and it typically doesn’t have any effect. It’s very hard to actually use that exception because what the exception says, is that it allows for imports of food, medicine and clothing necessary to alleviate human suffering. So suppose you are a Venezuelan food importer, how do you know whether the food that you are importing is going to be deemed by the US to be necessary to alleviate or relieve human suffering?
Well, if the US was issuing very clear guidelines as to what that means, then that might offer a way to implement it. But since it doesn’t, then any firm is just going to say, “I’m not going to run the risk of having the US say, oh, you brought this so many tons of rice into Venezuela, but it turns out that some of those were bought by middle-class people, so therefore it wasn’t alleviating human suffering, and therefore you’re sanctioned.” So we get the problem that’s sometimes known as over-compliance, which is that based with rules which are not only strict, but also have a lot of discretionality in their interpretation where the private sector typically does is to say, “I won’t get involved.” And that’s effectively what’s been happening with these food shipments.
I’d also like to point out that you can’t buy food. I mean, even if you’re allowed to import food, you can’t buy food if you don’t have money to buy it with. And Venezuela’s money, Venezuela’s revenue, is generated with oil exports. So if you block Venezuela oil exports, you block Venezuela’s capacity to pay for food. Therefore it’s meaningless for you to let food into the country if you’re not letting oil out.
GREG WILPERT: Yeah. Actually I think that’s a very interesting point, especially because there were the sanctions against Iraq and they had an Oil for Food program, which of course was riddled with corruption. But not even Venezuela now has that kind of an outlet. But I would just want to turn to the material effect that these sanctions are going to have in the short-term or medium-term on Venezuelan people. How have they been affected by the sanctions so far, as far as you know?
FRANCISCO RODRIGUEZ: Well, obviously these sanctions or this latest round is very recent. The main channel, the main effect through which sanctions influence the Venezuelan economy is through their effect on oil production. And there’s been systematic research that’s been done in this, evidence of work. Jeffrey Sachs and Mark Weisbrot had also looked at this issue. And what I’ve identified, for example, in my work is that the first round of sanctions, those imposed in 2017, led to a loss of around 800,000 barrels in oil production. So that’s valued at $17 billion a year.
This year, sanctions have led to another loss of around 400,000 barrels. It’s less because, Venezuela is not producing that much anymore. And that would be valued at around $9 billion. So you’re talking about an aggregate effect of $26 billion. Venezuelan imports last year were $15 billion. So what this means is that, if Venezuela had had access to these resources, it could have last year imported three times as much as it did. That’s a very significant difference.
GREG WILPERT: Let’s turn to the political impact. Representatives of the Maduro government and of the opposition are currently negotiating in Barbados and in Norway to find a negotiated solution to the crisis. Now, rumors have surfaced recently that Maduro might be willing to hold an early presidential election, which is actually one of the opposition’s main demands. The other main demand which Bolton actually recently amplified and reiterated, is that Maduro resign from the presidency immediately before any new elections take place. And this demand seems quite unlikely to be agreed upon by the government. How do you think that these new sanctions will impact these government opposition negotiations?
FRANCISCO RODRIGUEZ: Well, it’s hard to tell. Obviously, they are designed to increased pressure on the Maduro government, and I think to a certain extent they do that. Now, it’s not clear that that’s going to lead to a negotiated solution because there’s already been a huge amount of pressure exerted, both on the Maduro regime and on the Venezuelan economy. But in order for you to be able to have that lead you to a negotiated solution, there has to be an agreement, a negotiation leading to an outcome which both sides consider that is acceptable and both sides consider to be an improvement over the current status quo. And that’s quite difficult to achieve right now.
Part of the reason is that Venezuela is essentially a winner-take-all political system where the executive branch has an overwhelming amount of power. While all other branches, the judiciary, electoral, all of the accountability branches, even the legislative power are essentially subordinated to the executive branch. So what political scientists call the stakes of power, are very high in this country. And what that means is that being in power is very good, being out of power is very bad.
I think that unless you solve that problem, unless you create incentives for coexistence of Venezuela’s feuding political factions and for Venezuelans essentially to have incentives, for these parties to have incentive to collaborate and cooperate for the well-being of the country. That is, unless you build in a power sharing agreement, then this is always going to be a fight to the finish between these two. And that’s what we’re still seeing, I mean we’re seeing that the opposition wants to get into power, but that would mean essentially political and maybe even more than political extermination for Chavismo. And it’s logical, understandable, that Chavismo does not want to accept that.
Now sometimes, and I think what the US is effectively pushing for or sometimes the discourse of the US can tend to suggest that they don’t want a negotiation, but if they don’t want a negotiation, what do they want? Do they want to put troops on the ground and invade Venezuela? There seems to not to be much willingness or appetite for that in the US. Do they want the military to overthrow Maduro? Sure, but they’ve tried that and that hasn’t happened.
So it’s not clear what the alternative to negotiation is here. But if you’re going to go the route of negotiation, which would be what’s best for all Venezuelan’s to have a peaceful solution to the crisis, then you have to accept that both sides are going to play a role, are going to have to play a role in the new Venezuela. You can’t build a negotiated solution out of threatening to exterminate the other side.
GREG WILPERT: I think that’s a very good point. And actually reminds me of the situation after the Sandinistas lost power, and one of the reasons that they were willing to do so of course was because precisely they were allowed to keep control of the military, which isn’t right now it seems, one of the bargaining chips as you’re saying in the Venezuelan negotiations.
FRANCISCO RODRIGUEZ: There was something there, which was the recognition of the Nicaraguan Constitution. The Sandinista Constitution had originally not been recognized by the opposition. They recognize it and once they recognize it, then they accepted existing institutions. Yes, you could have a negotiated transition because a separation of powers is essentially a way of power sharing. It guarantees that whoever gets into the executive isn’t going to have free reign to do everything. If modern democracy is, like—For example, if the US did not have a separation of powers, then we would have a Trump dictatorship right now. So this is really fundamental to the working of a democracy, and that’s why I’m very skeptical of these negotiations that try to fast crack the solution through an election.
Venezuela has had many elections. Some of them won by the government, some of them won by the opposition. Typically what happens is that whoever loses them doesn’t recognize them. The opposition, they didn’t recognize the 2004 referendum and didn’t recognize the 2013 presidential elections. The government didn’t recognize the 2015 legislative elections. They let the assembly be sworn in, but then it requested the annulment of the legislators that gave the two-thirds majority to the opposition. Elections, whether they’re recognized or not, and typically they’re not recognized by the losing party, they don’t really solve Venezuela’s problem because in order to solve it, first, you have to generate these institutions for coexistence.
GREG WILPERT: Well, yeah, I think that’s a good point. I mean, the elections by themselves probably wouldn’t do it, but certainly I think a power sharing agreement could be the result of a negotiation in theory if the United States didn’t say negotiations aren’t going to lead anywhere right off the bat.
FRANCISCO RODRIGUEZ: Right. And back in February, Jeffrey Sachs and I wrote an article for The New York Times, precisely arguing for this solution, a power sharing agreement where you would have the cabinet divided between the opposition and the government representatives, a two-year interim government that would address the humanitarian and the economic crisis, take the country out of hyperinflation, and carry out the institutional and electoral reforms to make sure that there are transparent elections, and also that whoever loses that election has significant protection against the potential abuse of power by the winner.
GREG WILPERT: Okay. Well we’re going to leave it there for now. I was speaking to Francisco Rodriguez, Chief Economist at Torino Economics in New York City. Thanks again, Francisco, for having joined us today.
FRANCISCO RODRIGUEZ: Thank you, Greg. A pleasure being here.
GREG WILPERT: And thank you for joining The Real News Network.
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