Since 2017, the Trump administration has progressively imposed an oil and financial embargo that has strongly curtailed the economy’s access to hard currency. After the latest round of oil sanctions this January, oil production fell by 400,000 barrels per day, leading to $8 billion in foregone export revenue. Imports have fallen by more than 50 percent from last year, according to my calculations based on trading-partner data, and now stand at less than one-tenth of their 2012 levels.
Sanctions seek to punish governments that violate the rights of their people and induce them to change their conduct. But they can also end up harming the people that they intend to protect. In Venezuela, the escalation of sanctions was part of a strategy of “maximum pressure” aimed at producing a break in the military’s support of the regime. That break has not come about, and Venezuelans now get to live in the worst imaginable world: ruled by a dictatorship and living in a sanctioned economy.
The United States urgently needs a Venezuela strategy that is adapted to a realistic scenario of prolonged confrontation between the Maduro regime and the country’s opposition. This means recalibrating the current sanctions regime so that vulnerable Venezuelans are not made to pay the cost of their country’s political stalemate.
The international community faced a similar problem in the 1990s, when concerns about the humanitarian impact of multilateral sanctions on Iraq led to the design of the U.N.’s oil-for-food program. While that plan was marred by a major corruption scandal, we can learn from its experience to avoid making the same mistakes. In 2005, a commission headed by former Federal Reserve chairman Paul Volcker carried out an exhaustive analysis of what went wrong with the program and issued concrete recommendations that should be used as the starting point for a new program’s design.
In recently published research, our organization has laid out the details of how a suitable program of this type could work in Venezuela. Our design incorporates the recommendations of the Volcker commission as well as of more recent literature on the design of humanitarian and social assistance initiatives. For example, in the case of Iraq, the Hussein regime used its control over oil sales to demand side payments into accounts outside of the control of the program. In our proposal, the Maduro administration would not be able to choose whom to sell the oil to.
Nevertheless, Venezuela’s case is in some respects very different from Iraq’s. Iraq had only one internationally recognized government. In the case of Venezuela, the interim government headed by the president of the National Assembly, Juan Guaidó, is recognized by more than 50 countries and, importantly, has the legal control over the accounts of Venezuelan state entities in the U.S. financial system. Put simply, Maduro can produce the oil, but only Guaidó can sell it in the United States.
Therefore, more than an oil-for-food program, Venezuela needs a humanitarian oil agreement: an accord that protects vulnerable Venezuelans from the consequences of the country’s political conflict.
It is crucial that the essential imports that are paid for through the program be distributed through a depoliticized mechanism that does not play into the hands of the Maduro regime. For years, Maduro has used control over food distribution to gain political leverage, threatening those who don’t attend government rallies or turn out to vote with losing the subsidized food that is often their primary source of sustenance. A well-designed humanitarian oil agreement should ensure that access to food acquired through the program is not subject to any type of political conditioning.
International aid agencies should directly monitor the distribution of goods, while the United Nations could oversee the management of funds and the procurement of imports. The National Assembly should have the power to oversee all transactions, which must be managed with the highest level of transparency. The program should make use of private-sector distribution networks, which combined with a well-designed voucher system would lessen the space for government discretion and constrain the emergence of black markets.
Children and families currently struggling to survive should not have been asked to wait for the resolution to a political crisis of unknown duration. The United States, the international community and the parties to Venezuela’s conflict have the responsibility of ensuring that no more Venezuelans become collateral casualties of the country’s political confrontation.