Since early 2015, the United States has been imposing targeted sanctions on individuals at the heart of President Nicolás Maduro’s regime: freezing bank accounts, banning U.S. entities from transacting with them, etc. More such sanctions were announced Wednesday, hitting eight additional Venezuelan officials.
But these individual sanctions don’t work. Venezuelan officials long ago learned to keep the bulk of their assets outside U.S. jurisdiction, away from Uncle Sam’s hands. Such sanctions, then, are largely symbolic: a nuisance, not a real exercise of power.
One alternative would be imposing sanctions on Venezuela’s oil industry, which accounts for 95 percent of the country’s export earnings. But if imposing sanctions on individuals isn’t nearly tough enough, going after the oil industry is entirely too tough. In a country where food and medicine are in short supply as it is, putting a hard stop to oil sales could set off a famine. It would also cause a politically untenable spike in gas prices in the United States.
That doesn’t mean sanctions are a dead end, however. It means the United States needs to think creatively about smarter, shrewder sanctions to coerce the regime into backing down from outright dictatorship.
What if, instead of stopping oil imports from Venezuela, the United States conditioned what Venezuela could do with the money? What if the United States set up a trust fund and declared that U.S. companies that buy Venezuelan oil must deposit payments there, and that that trust fund could disburse money only to pay for humanitarian necessities of the Venezuelan people?
Yes, I know. Since the United Nations’ “Oil for Food” program for Iraq became a cesspool of corruption, this kind of mechanism has been out of favor. But the basic policy idea is sound, and the scope to adapt it to Venezuela’s circumstances is considerable. Done well, it could hit the regime where it would hurt most while protecting both U.S. motorists’ pocketbooks and Venezuelan people’s basic needs.
The key to making a proposal like this work is to use it to empower what remains of Venezuela’s democracy movement. The heart of the Maduro regime’s headlong rush to dictatorship has been its refusal to share power in any meaningful way with the democratic opposition. Indeed, when the opposition won a huge majority in parliamentary elections at the end of 2015, the government responded by stripping the legislative branch of literally all its powers. The United States has often made statements lamenting this state of affairs, but hasn’t really done anything meaningful to counteract it.
Why not implement a sanctions bill that created a trust fund for the proceeds from Venezuelan oil sales with Venezuela’s National Assembly as the trustee? The United States could declare, in effect, that Venezuela’s oil wealth could not be spent without the duly elected parliament’s approval. That is in no way different from what the Venezuelan constitution already says, but given the Maduro regime’s determination to ignore the constitution, some outside encouragement is clearly needed.
Such a policy would radically upend the balance of power in Caracas. A regime that has found it costless to ignore the democratic will of the people for years would suddenly find itself needing to cut a deal with its opponents in order to pay the bills. Nor could it blame the United States for a policy move that, in effect, just reiterated what Venezuela’s constitution says.
It is important to grasp the United States has leverage here. A lot of leverage. The vast bulk of the oil that Venezuela sells for cash goes to just two countries: the United States and India. And Venezuela doesn’t have a lot of good options; much of its oil is extra-heavy crude that can be processed at only a handful of specialized refineries. Those refineries are, again, concentrated along the U.S. Gulf Coast, along with a few facilities in India and China. Building alternative refineries would take years and cost billions, meaning the Maduro regime’s hand, in the short term, is desperately weak.
Empty threats of military intervention only empower the autocrat in Caracas, handing him an enormous propaganda win. But smart sanctions to empower Venezuela’s democratic forces could rally support from both Republicans and Democrats and from both ends of Pennsylvania Avenue. There’s space for real consensus that can have a real effect. It’s not too late for Washington to play a constructive and decisive role in Venezuela’s awful crisis.