USA | Trump hits Venezuela with oil sanctions to pressure Maduro

National security adviser John Bolton speaks as Treasury Secretary Steven Mnuchin listens during a press briefing at the White House

The Trump administration yesterday [Macau time] sanctioned Venezuela’s state-owned oil company, ratcheting up pressure on socialist President Nicolas Maduro to cede power to the U.S.-backed opposition in the oil-rich nation in South America.

The action means Maduro’s embattled government would lose access to one of its most important sources of income and foreign currency along with around USD7 billion in assets of the state-owned company, Petroleos De Venezuela S.A.

Hours after the White House announced the sanctions, Maduro went on state TV and called the U.S. action “immoral, criminal.” In words directed at President Donald Trump, he said, “Hands off Venezuela!”

The sanctions follow the unusual decision by more than 20 countries, including the U.S., to recognize the opposition leader of the National Assembly, Juan Guaido, as the interim president of Venezuela. Maduro was re-elected last year in an election widely seen as fraudulent. The once prosperous nation has been in an economic collapse, with several million citizens fleeing to neighboring countries.

“We have continued to expose the corruption of Maduro and his cronies, and today’s action ensures they can no longer loot the assets of the Venezuelan people,” national security adviser John Bolton said at a White House news conference to announce the sanctions with Treasury Secretary Steven Mnuchin.

Bolton said he expects yesterdays’s actions against PDVSA — the acronym for the state-owned oil company — will result in more than $11 billion in lost export proceeds during the next year.

Oil production — the lifeblood of Venezuela’s economy — has been collapsing for years. Despite sitting atop the world’s largest reserves, Venezuela currently pumps just a third of the 3.5 million barrels a day it did when the late Hugo Chavez took power in 1999.

The nation’s refining capacity has also declined because of poor maintenance and lack of skilled personnel. That has left it reliant on Citgo, the Houston-based refining arm of PDVSA, to refine the oil and send gasoline back to Venezuela to meet domestic needs.

“They have just lost that source,” said Russ Dallen, managing partner of Caracas Capital, a brokerage company.

Venezuela is very reliant on the U.S. for its oil revenue, sending 41 percent of its oil exports to the U.S. Maduro can divert the roughly 500,000 barrels per day of oil currently being sold to Gulf Coast refineries to markets in Russia, China, India, Malaysia and Thailand.

But processing international financial transactions is hard without going through the U.S. or European banks. Transport costs would also jump because Venezuela’s ports aren’t well-equipped to load supertankers for transporting oil to distant markets. AP