US hits Venezuela’s state-owned oil company with sanctions

The United States has imposed sweeping sanctions on Venezuela’s state-owned oil firm, in a move aimed at pressuring President Nicolas Maduro to cede power to the opposition in the crisis-hit South American country.

The measures on Petroleos De Venezuela SA (PDVSA) are expected to block $7bn in assets and result in $11bn of lost export revenue over the next year, National Security Adviser John Bolton told reporters at the White House on Monday.

The sanctions stop PDVSA from collecting the proceeds of oil exported to US customers, while also freezing assets of PDVSA’s units, including Citgo, its US-based subsidiary.

Washington’s toughest financial punishment so far against Venezuela’s government came in coordination with Juan Guaido, the self-proclaimed interim president who issued his own statement said he was taking “orderly control of our republic’s assets abroad” to prevent a departing Maduro from trying “to empty the coffers”.

The announcements followed the decision by the US and several other countries last week to recognise Guaido, the leader of the opposition-controlled National Assembly, as Venezuela’s acting leader instead of Maduro, who was reelected last May in a widely boycotted vote that many foreign governments refused to recognise.

Russia, China and Turkey have come to Maduro’s defence.

‘Hands off Venezuela!’

In response to the US’s move, Maduro on Monday vowed to take action, calling the sanctions “criminal” and accused Washington of robbing Venezuelans of oil riches that rightfully belonged to them.

“I have given specific instructions to the head of PDVSA to launch political and legal action, in US and international courts, to defend the property and assets of Citgo,” Maduro said on state television.

In a direct message to President Donald Trump spoken in broken English, Maduro said forcefully: “Hands off Venezuela!”

Maduro has long accused the US and other countries of waging an “economic war” aimed at removing him from power. 

“Oil is Venezuela’s largest source of revenue and the US is Venezuela’s biggest customer – 41 percent of their oil exports come to the US, and their biggest foreign asset is Citgo, the US-based refining army of their oil company,” Al Jazeera’s Kristen Saloomey, reporting from Washington, DC, said.

“And crucially, the state-owned oil company is controlled by the military which is key to Maduro staying in power, so the goal here by the US government is to hold back this money from Maduro’s government and transfer it over to forces who are loyal to Guaido.”

Venezuela, a once-prosperous nation, has been in an economic collapse, with several million citizens fleeing to neighbouring 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,” Bolton said at the White House news conference.

US Treasury Secretary Steven Mnuchin said his department also took steps on Monday to authorise certain transactions and activities with PDVSA. He said Citgo assets in the US would be allowed to continue to operate – provided that any funds that would otherwise go to the state-owned oil company be sent to a blocked account in the US.

US Secretary of State Mike Pompeo stressed that the new sanctions did not target the people of Venezuela and would not affect humanitarian assistance, including medicine and medical devices that were “desperately needed after years of economic destruction under Maduro’s rule”.

US Senator Marco Rubio, a vocal critic of Maduro who has called for such sanctions, welcomed the move even before it was announced.

“The Maduro crime family has used PDVSA to buy and keep the support of many military leaders,” Rubio said. “The oil belongs to the Venezuelan people, and therefore the money PDVSA earns from its export will now be returned to the people through their legitimate constitutional government.”

Venezuelan oil exports to US decline

The sanctions will not likely affect consumer prices at the gas pump but will hit oil refiners, particularly those on the US Gulf Coast.

Venezuelan oil exports to the US have declined steadily over the years, falling particularly sharply over the past decade as its production plummeted amid its long economic and political crisis.

In 2017, Venezuela exported fewer than 500,000 barrels of oil daily to the US, mostly to Citgo and refineries owned by Valero Energy Corp and Chevron Corp, down from more than 1.2 million barrels a day in 2008, according to the Energy Information Administration. 

Still, Venezuela has consistently been the third- or fourth-largest supplier of crude oil to the US, and any disruption of imports could be costly for refiners.

In 2017, the most recent year that data was available, Venezuela accounted for about six percent of US crude imports.

Critically, US refiners are among the few customers that pay cash to Venezuela for its oil. That’s because Venezuela’s oil shipments to China and Russia are usually taken as repayment for billions of dollars in debts.