How is the US strangling the Venezuelan economy?

¿Cómo EEUU estrangula la economía venezolana?

The US decision to resume the sanctions against Venezuela, which were lifted in October, has nothing to do with the decision of the Venezuelan justice system to prevent the candidacies of two opponents, since the candidates had already been convicted, the president of the Brazil-Venezuela Chamber of Commerce, Darc Costa, explains to Sputnik. He emphasizes that US sanctions against the country are not only directed at the energy sector, but at all trade with Venezuela.

“The ban is on doing business with Venezuela. The US Government prohibits US companies from doing business with Venezuela, to the point that the first to be sanctioned are the companies that are dedicated to gold extraction,” he explains.

He adds that the United States intends to block Venezuela’s trade and uses the Barbados Agreements as an argument. However, it points out that the opponents prevented from running for the 2024 elections  had already been convicted by the Supreme Court of Justice before the agreement, for having participated in acts of protest and conspiracy against the Government, which is why their candidacies were prohibited.  Costa claims that the resumption of sanctions, which took place on February 13, will affect oil production and, consequently, the entire oil and gas industry in the country.

“Venezuela has always depended heavily on the US capital goods industry to sustain its oil production. So the parts and other elements used in oil exploration all come from the United States. With the blockade, the oil industry and the Venezuelan gas industry is, in some way, very affected, because it does not have supplies or parts to replace, in this case the parts that wear out in this oil and gas production and this causes a drop in Venezuela’s oil production,” clarifies the specialist.

Why did Venezuela fall into an economic crisis?

Costa recalls that Venezuela’s economic crisis predates the US sanctions, applied in 2017 under the administration of Barack Obama. In the expert’s opinion, the crisis has its origin in “the recession that the Venezuelan economy entered in 2013 due to the fall in the price of raw materials worldwide. Oil was priced at $100 a barrel […], but fell to $30. This had a direct effect on Venezuela’s external accounts.”

However, he points out that the sanctions have contributed considerably to deepening the economic crisis, undermining oil production and causing the country’s gross domestic product (GDP) to fall by 70%.

“As a consequence of the sanctions, oil production, which ranged between one and a half to two million barrels, fell to 700,000 barrels. So, starting in 2017, the sanctions greatly affected Venezuela’s exports in terms of the amount of exported products, because in terms of price they had already been harmed since the 2013 crisis,” says Costa.

When the US applied the sanctions, it alleged that the measure was ideological in nature, since Washington considered that there was no democracy in Caracas. The issue, however, took a back seat to the oil shortage. Asked about the United States’ position on the matter, Costa affirms that “the US Government adopts the measures that its hegemony allows.[US hegemony] practices the defense of the discourse of the system it defends, and this system pretends to be democratic and capitalist, alleging that Venezuela was neither democratic nor capitalist, and that is why it practices a contingency policy, of sanctioning Venezuela.”

He adds that this not only happens with Venezuela, and cites Cuba, sanctioned since the 1960s, and Russia, sanctioned after the special military operation in Ukraine. According to Costa, the power of the US Government to impose sanctions is based on the hegemony of the dollar, which is increasingly questioned by other countries. “The US Government has the power to sanction others because, after Bretton Woods, it has a virtual monopoly on trade relations in the world, which is exercised through the dollar. By having the dollar, they have the power of ‘lordship’, the power to establish trade rules for other countries,” says the expert. He adds that Washington decided to impose sanctions on Venezuela because it considers the country hostile and does not agree with its way of governing.

What benefits has the relaxation of sanctions brought to Venezuela?

Costa maintains that since October, when sanctions on Venezuela were relaxed, Caracas has been able to resume oil exports, as well as access assets in the United States that were blocked by sanctions. “But the most important thing is that they entered the US market to buy the parts they needed to replace the oil exploration park that PDVSA has in Venezuela,” says Costa.

So, in his opinion, they have made significant profits from that, and the US has started buying things other than oil and gas. “They talk a lot about the oil industry, but the United States has gold and diamond mining companies in Venezuela, which are acquiring gold and diamonds from Venezuela and paying the Venezuelan treasury for this acquisition.”

He emphasizes that mining companies are precisely the priority of the current sanctions. “For companies that buy oil and gas, the term is longer, I think it is until April for those that carry out these operations,” adds Costa.

Can the US intervene militarily in Venezuela?

Washington has a history of military interventions in other countries, including major oil producers such as Iraq, Libya and Syria. When asked about the possibility of something similar happening with Venezuela, Costa answers that he rules it out. This is because a measure of this magnitude could lead to a regional war. “I think it is very difficult for that to happen, because it would be an intervention in a country of a reasonable size and with very strong implications for the geopolitics of the Western Hemisphere. So I think it is very difficult for there to be a military intervention. It is difficult for there to be a military intervention in the war situation in Ukraine, because there it would lead to a world war and here it would lead to a regional war,” he predicts.

What are the chances of Venezuela rejoining Mercosur?

Venezuela entered Mercosur in 2012 and was suspended from the bloc in 2017 by a joint decision of its members. When asked about the possibilities of the country returning to Mercosur in the short term, especially after the statements by President Luiz Inacio Lula da Silva advocating dialogue with Caracas, Costa is blunt and does not see it as possible at the moment.

“I don’t think so, due to the fact that there are governments in Mercosur that openly oppose the current Venezuelan government , such as those of Uruguay and Argentina. They also have the same type of opinions as the United States Government regarding Venezuela,” explains the specialist.

Recently, the spokesperson for the Venezuelan Government, Héctor Rodríguez, declared that the North American country should let Venezuela resolve its internal problems through democratic means. At that time, Rodríguez said that Venezuela may disagree with things that happen in the United States, “but they are sovereign matters of the United States.” The statement was made in response to the US announcement to resume sanctions for the ban on the candidacies of Capriles and Machado, and was considered a veiled way for Caracas to signal Washington’s interference in the country’s internal affairs.

When asked if the US is really meddling in Venezuela’s internal affairs, Costa has no doubts. “Of course they are doing it. When you sanction any country to fulfill some political objective, you are intervening in the affairs of that country. In fact, this goes against our policy, Brazil’s policy of not intervening in the affairs of that country, in the internal affairs of other States. This is traditional Brazilian policy, the one left [as a legacy] by the Baron of Rio Branco and which is included in the Constitution. Brazil will not intervene in the political affairs of other countries,” Costa emphasizes.

Regarding the resumption of ties with Brazil, after the distancing experienced under the Government of Jair Bolsonaro, when Venezuela was demonized and held up as a negative example of what Brazil could become under left-wing administrations, Costa points out that the rapprochement is already is underway. “As far as I know, the president’s special advisor for international relations, former foreign minister Celso Amorim, has visited Venezuela twice, and even witnessed the Barbados Accords in October [2023]. So the Brazilian government has been very closer to the Venezuelan Government than it was under Bolsonaro,” he explains. “And this discourse concerning Brazil and Venezuela could become political in nature. In the same way that those who believe in the Workers’ Party policy claim that Brazil could now become Argentina, with [Javier] Milei there [if Bolsonaro returns to power]. But this is a political discourse, Brazil will never become Venezuela because Brazil is Brazil. And it will never become Argentina because Brazil is Brazil. All of that is a discourse of a political nature, it is a discourse to create in the collective imagination the idea that there is a threat hanging over the country, in one sense or another,” he adds.

How is the Venezuelan Government addressing the issue of migration?

Since the Venezuelan crisis worsened, images of people leaving the country and emigrating to neighboring countries such as Brazil, Colombia and Chile have not stopped appearing in the news. When asked how Caracas views the migration problem, Costa points out that he cannot answer for the Venezuelan Government, but emphasizes that Venezuela is not alone in the need to deal with this problem.

“The departure of Venezuelans from the country is the only possibility that many unemployed people have to continue living. But it is not a problem that only affects Venezuela, just look at what is happening in Texas right now, in the United States, with the migration of Latin Americans to North America,” he says.He adds that the crisis situation in Latin America leads people to look for places to continue their lives and Brazil is a privileged country in this sense. There is migration in Brazil, but it is […] not as ostentatious as what happens in Mexico, in Central American countries, in Latin American countries in general.

What is Venezuela’s trade relationship with Brazil and Russia?

Costa mentions the trade relationship between Brazil and Venezuela, noting that “Brazil sells a lot of food to Venezuela,” as well as machinery and motorcycles produced in the Manaus Free Zone. However, he says trade relations between the countries, which once reached $5 billion, have fallen sharply since the start of the Venezuelan crisis. “Brazil had a very strong trade relationship with Venezuela in 2006, 2007 and 2008. It also exported a lot of bovine protein to Venezuela. It even exported live cattle. Even live buffalos went to Venezuela by plane,” says Costa.

Regarding the relationship between Caracas and Moscow, he points out that it remains very good, since Russia has become a supplier of military equipment for Venezuela, as well as parts and equipment for the country’s oil industry. “It makes sense for Venezuela to have a relationship with Russia, to the extent that it is a little worn down by the so-called Western countries. It is not just Russia. China also has a large presence in Venezuela, especially when it comes to buying oil. India also buys [oil from Venezuela],” says the expert.

The United States’ decision to impose sanctions on Russian oil has triggered a shortage of this raw material in the American market, as well as in the countries of the European continent that supported Washington’s approach. To overcome the situation, the administration of US President Joe Biden decided to relax sanctions on trade with Venezuela, a country with the largest oil reserves in the world, estimated at 300 billion barrels. The decision placed the Government of Nicolás Maduro in a position of geopolitical prominence, since Venezuela came to be seen as the key to the oil shortage. Subsequently, after the Venezuelan Supreme Court made it official that two opposition candidates, María Corina Machado and Henrique Capriles, could not run in the elections, Washington announced the resumption of sanctions, accusing Caracas of failing to comply with the Barbados Agreements , signed in October 2023, which established the rules for the Venezuelan presidential elections.