The Trump administration will sanction Venezuela’s state-owned oil firm, a move the White House has long put off for fear that it would raise oil prices and hurt American refiners.
The move comes after a turbulent week for Venezuela that has created a standoff over the country’s leadership. The sanctions aim to transfer control of Venezuela’s oil wealth to forces that oppose socialist dictator Nicolas Maduro and deprive the strongman of resources that could prolong his grip on power.
Last week, the opposition leader of Venezuela’s National Assembly, Juan Guaido, named himself interim president amid street protests. President Donald Trump soon recognized Guaido as the nation’s leader and his administration has been marshaling international support for the opposition figure since then.
Maduro, having recently started another term following highly disputed elections, is refusing to back down. He is supported by the country’s minister of defense and Russia.
Treasury Secretary Steven Mnuchin on Monday determined that people operating in Venezuela’s oil sector are subject to U.S. sanctions. The nation’s energy industry is dominated by state-owned Petroleos de Venezuela, better known as PDVSA.
Mnuchin said the company has long been a vehicle for embezzlement and corruption by officials and businessmen. The sanctions against PDVSA will prevent the nation’s oil wealth from being diverted to Maduro and will only be lifted when his regime hands control of them to successor government, he added.
“The path to sanctions relief for PDVSA is through the expeditious transfer of control to the interim president or a subsequent democratically elected government who is committed to taking concrete and meaningful actions to combat corruption,” Mnuchin said during a White House press briefing.
In order to minimize disruptions and support for humanitarian aid, Treasury’s Office of Foreign Asset Controls has issued general licenses that authorize some transactions and activities with PDVSA to continue for a limited time, Mnuchin said. European and Caribbean companies will also be granted licenses so they can wind down business with PDVSA in an orderly fashion.
PDVSA’s Citgo refineries in the U.S. will be allowed to continue to operate, but revenues must be placed in an escrow account in the United States. Citgo operates three U.S. refineries with a combined ability to process about 750,000 barrels per day of crude oil into fuels.
Venezuela’s oil production has cratered in recent years following a long stretch of mismanagement and economic crisis that has prevented PDVSA from maintaining output, creating a vicious cycle of falling supplies and revenue.
Still, Venezuela remains a large supplier of heavy crude to U.S. refineries. Through October, Venezuela shipped an average 500,000 bpd of crude oil to the country in 2018.
Confirmation of the administration’s intent to sanction PDVSA came from Sen. Marco Rubio prior to the press conference, after Axios earlier reported the impending actions.
“The Maduro crime family has used PDVSA to buy and keep the support of many military leaders,” Rubio said in a statement. “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.”