The Trump administration is threatening to take “strong and swift economic actions” if Venezuelan President Nicolas Maduro proceeds with his plan to rewrite the nation’s constitution and consolidate power over the few remaining institutions outside the control of the ruling party. A senior administration official said Tuesday that “all options are being discussed and debated,” implying that Trump could use Venezuela’s dependence on oil exports to the U.S. as a means of pressuring Maduro to halt the July 30 constitutional assembly.
What’s at stake?
Oil-rich Venezuela has been plunged into political and economic turmoil as petroleum prices plummet, nationalized farms and factories halt production and corruption runs rampant. More than three months of street protests have left at least 93 people dead.
Maduro has called for the election of the special assembly to rewrite the country’s 1999 constitution. Opposition members fear any branch of government that doesn’t fall in line with Maduro will be left powerless, creating a single-party, authoritarian state along the lines of the system in Cuba, a close Maduro ally.
A coalition of opposition parties organized a symbolic vote against the assembly on Sunday that it said garnered more than 7.5 million votes, a number that could not be independently confirmed. The United States, European Union, Germany, Brazil, Canada and Mexico are among countries that have called for the constitutional rewrite to be canceled.
What is Trump threatening?
President Donald Trump said in a statement Monday that “the United States will not stand by as Venezuela crumbles. If the Maduro regime imposes its Constituent Assembly on July 30, the United States will take strong and swift economic actions.”
A senior administration official, speaking on condition of anonymity, said in a briefing for reporters Tuesday that “the President told us to consider all options, so options are on the table” but declined to provide any details of what actions might be in the works.
Sen. Marco Rubio, who has worked with the Trump administration on Latin American issues, has indicated several times on Twitter that he believes the U.S. is preparing to take action against Diosdado Cabello, the powerful vice president of Venezuela. Rubio and other U.S. officials accuse him of involvement in drug trafficking. Cabello denies the charge.
What can Trump do?
In February, the Trump administration imposed sanctions against Venezuelan Vice President Tareck El Aissami, accusing him of playing a major role in international drug trafficking – a charge he denies. Then in May it imposed sanctions on eight supreme court justices who voted to strip the opposition-led congress of many of its powers earlier in the year.
Rubio’s tweets indicate the administration may be thinking of doing the same for Cabello and other high-ranking Venezuelans. The individual sanctions freeze targets’ assets in U.S. banks, bar travel to the U.S. and make it illegal for Americans to do business with them. Venezuelan experts say it’s not clear if top officials are vulnerable to such measures, but said expanding the list of targets throughout the army hierarchy could force some military officials to reconsider the cost of supporting Maduro’s government.
A more powerful and risky weapon is cutting back on U.S. imports of Venezuelan oil, a measure with the ability to severely damage Maduro’s government and create broad chaos in Venezuela.
Venezuela, the US, and oil
The United States is the primary source of hard currency keeping the Venezuelan government afloat.
Venezuela exports an average of 700,000 barrels of oil a day to the U.S., about half its total exports. Because much of the other half serves as payment of debt owed to China, a total cut in exports to the U.S. would slash Venezuelan government income by 75 percent, Angel Alvarado, a member of congress and economist, told The Associated Press.
Venezuelan oil accounts for about 10 percent of U.S. oil imports, meaning a cut in oil from Venezuela could have an impact on consumer gasoline prices and on U.S. refineries.
Miguel Tinker Salas, an expert in Venezuela history at Pomona College in California, said U.S. officials likely fear that any disruption in the oil market would increase prices in the U.S. There is also skepticism over whether economic sanctions are an effective means of encouraging a political opening.
“There has been a lot of talk about raising the stakes of Venezuela but the one thing they have not touched is oil imports,” he said.
Three refineries in Texas, Louisiana and Illinois process Venezuelan crude. Last week, the chairman of the port of Corpus Christi, Texas, said in a letter to Trump that putting restrictions on Venezuelan crude could have a “significant” impact on those refineries.
But Antoine Halff, an oil-markets expert at Columbia University, said because crude imports from Venezuela are down and there are large inventories of crude in the U.S. and worldwide, a ban on Venezuelan crude wouldn’t have a major effect on prices at the pump for U.S. motorists. “A ban would not cause any supply shortfall,” he said.
While starving Venezuela of oil revenues could debilitate the Maduro government, it could also produce something resembling state collapse in Venezuela, where armed men already roam with impunity and tens of thousands have been fleeing the country.