On August 25, President Donald Trump announced an executive order that barred U.S. citizens from dealing in new debt and equity issued by the government of Venezuela and state oil company PDVSA, as well as some existing bonds.
As expected, Venezuela’s government responded swiftly to the announcement, with President Nicolas Maduro accusing the United States of violating international law and attempting to place a “blockade” on Venezuela similar to the Cuban embargo. The government has also claimed that the Trump administration is attempting to push the country into default, and that the move jeopardizes oil exports to the United States. On August 29, the Constituent Assembly issued a decree ordering judicial authorities to investigate and try Venezuelan “traitors” who supported the sanctions, part of a broader crackdown on opposition figures.
Perhaps more importantly, President of the Constituent Assembly Delcy Rodriguez immediately claimed that there were ships with food and medicine off of the Venezuelan coast that the country could not pay for because of the sanctions.
Interestingly, the international reaction to the sanctions has been relatively muted. While there were predictable denunciations of the announcement from Cuba and the rest of the ALBA bloc, as well as Venezuela’s main lenders Russia and China, there were no specific statements on the sanctions form the rest of the Latin American community or the European Union.
Unlike their response to recent rounds of targeted sanctions, Latin American nations like Colombia, Panama, and Mexico have not offered to place similar sanctions on Venezuela. However, in a region historically sensitive to violations of sovereignty, the silence of a majority of Latin America on the matter speaks volumes. When Obama announced new sanctions on Venezuela using language that described the country as an “unusual and extraordinary threat” to U.S. national security and foreign policy, the hemisphere united in protest, and did so again on August 12 by rallying against Trump’s “military option” threat. By not speaking out against U.S. economic sanctions, the non-ALBA countries of the region are effectively demonstrating tacit acceptance of the administration’s approach.
But no country in the region came out in support of the sanctions either. Officials in and analysts close to the US foreign policy establishment often suggest that if the US leads the way in defending democracy in the region, other countries will follow. They received some evidence of their claims when Canada, Mexico, Panama and Colombia said they would assume the US program of targeted sanctions.
This time around, no other country in the region has jumped on the bandwagon. Of course, no other country is as central to the world financial system as the US, but there have been no clear supportive statements for these sanctions in the region, and that is important. As many analysts have suggested, without significant diplomacy, US sanctions are sure to fail (read Shannon K O’Neil here, and our piece here).
Members of the European Union, meanwhile, have maintained that they (with the apparent exception of Portugal) are unwilling to rule out eventual sanctions. In response to a delegation led by National Assembly President Julio Borges this week, Germany’s Angela Merkel repeated this line while pledging to support “the Venezuelan people and all democratic forces.” On September 8, EU foreign policy chief Federica Mogherini told reporters that an EU debate on Venezuela sanctions could take place “in the coming days.”
The sanctions have generated a significant wave of commentary from Venezuela economic analysts over whether the government will be able to continue making debt payments, or be forced to default.
Many analysts suggest Venezuela will be able to avoid the pressures of U.S. sanctions by deepening its economic ties to Russia and China. Between the two, it appears that there is a growing consensus that China is in a better position to serve as patron for Venezuela.
As Evan Ellis notes, Russia has “fewer financial and commercial instruments” to continue supporting the Maduro government, and Chinese banks are already managing essential financial operations in Venezuela, from the importation of consumer goods to PDVSA’s current accounts for its oil transactions. Indeed, Economist César Aristimuño has suggested that Venezuela has already begun to approach the Chinese to negotiate some $15 billion in funding.
The impact of the current round of sanctions and the likelihood of broader economic sanctions was discussed at length in a September 6 Wilson Center discussion among Evan Ellis, Francisco Rodriguez, Risa Grais-Targow and Michael Penfold (listen to audio here).