The Trump administration’s recent revocation of licenses and waivers allowing Western energy companies to operate in Venezuela could lead to an economic recession in the South American country.
The companies, including Spain’s Repsol, France’s Maurel et Prom and Italy’s Eni, as well as U.S. firm Global Oil Terminals, led by energy magnate Harry Sargeant III, must wind down operations by May 27th. This is the same deadline the Trump administration gave Chevron to wrap up its operations in Venezuela.
“The country (Venezuela) is probably going to go into a recession if the sanctions are actually effective, as they are already having an effect of the devaluation of the Bolivar in the parallel market,” said Franciso Monaldi, a fellow in Latin American energy policy and the director of the Latin America Energy Program at the Center for Energy Studies at Rice University’s Baker Institute for Public Policy.
With this move, the Trump administration further isolated Venezuela’s dictator, Nicolas Maduro, after President Trump issued an executive order declaring that, effective April 2nd, any country buying oil or gas from Venezuela will pay a 25% tariff on trades with the United States. China, India, Spain, Italy and France, are the countries expected to face the brunt of the impact.
The measures mark a return to the “maximum pressure” tactics, aiming to pressure the regime into accepting more Venezuelan deportees and advancing democratic reforms. =
However, analysts warn the strategy may backfire, pushing the South American nation further into the arms of U.S. adversaries while failing to deliver democratic change. Indeed, Venezuela has already deepened ties with these nations in response to previous rounds of sanctions.
Black Market oil could continue to flow freely as a result of the new line of sanctions that has been imposed by the Trump administration.=
“Venezuela offers discounts that are high enough that is still very profitable for the black market to continue operation, ,” added Monaldi.
Will this second round of sanctions work and halt Maduro’s resiliency to economic pressures?
According to Monaldi, “Economic sanctions typically do not generate regime change, and they didn’t do it, certainly, in Venezuela last time.”
But just as sanctions failed to bring the Maduro regime to its knees, this new set of sanctions could advance some other goals. Maduro, with the help of China, Iran, and Russia, has been able to skirt around the Trump-era oil and economic sanctions.
“It’s unlikely they will yield regime change this time. They might yield some sort of advancement in some democratic goals if, and only if, the US makes an effort to do so,” Monaldi added. “Just putting pressure without a plan to negotiate some reform is unlike to yield any advancements in democracy or human rights or anything else.”
Humanitarian Crisis
While Maduro is to blame for creating the humanitarian crisis Venezuela faces, the regime and its partners have been quick to blame the economic sanctions as the cause of the crisis.
Critics have also pointed to the humanitarian impact of restricting Venezuela's primary source of foreign revenue. The United Nations has documented severe shortages of food, medicine, and essential services affecting ordinary Venezuelans.
Venezuela’s economy could be on the verge of a total collapse, as Monaldi points out when he says that the sanctions could push the nation into a recession. This new round of maximum-pressure economic sanctions will destroy what’s left. There could be no other option for working people but to leave the country.
