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The sanctions. which came in on Monday. ban US companies from exporting goods or services to PDVSA. as part of a campaign to force Maduro to step aside and cede power to Juan Guaidó. the opposition leader. US refineries are also banned from buying crude from PDVSA unless the money is paid into accounts not tied to Maduro.
The worry in Venezuela. however. is that the measures will only lead to more suffering in a country already mired in hyperinflation and chronic shortages of food staples and medicine.
“In all my years. I’ve never seen something so drastic.“ said Carlos Fuentes. an engineer waiting in line for fuel. “If the gasoline disappears it will be just another problem within all this chaos.“
Analysts say the goal of the sanctions is to increase the people’s suffering and trigger even larger protests than those that have rocked Venezuela over the last few weeks.
“The US is hoping that the huge outcry will be the silver bullet that finally kills Maduro’s regime.“ said Geoff Ramsey. assistant director for Venezuela at the Washington Office on Latin America. “But as we have learnt from Cuba. authoritarian regimes can be very resilient.“
Opposition protests have outnumbered those in favour of the government. but Maduro has maintained the crucial support of the military by offering senior members positions in government and PDVSA. The sanctions also aim to hit those kingmakers in their wallets. although the vast illegal economies which they also run – from drug trafficking to illegal mining and extortion – will be unaffected.
“So much money comes out of the ground in Venezuela that finds its way into the regime’s pockets. it’s hard to see these sanctions doing much apart from increasing the suffering of normal people.“ Ramsey went on to say.
PDVSA. so long Venezuela’s economic lifeline. is unlikely to be able to weather the current storm: while the country may have the world’s largest proven oil reserves. it has been increasingly racked by fuel shortages due to crumbling infrastructure.
The crude that comes out of the ground is high in sulphur. which can only be processed into gasoline at certain refineries. With Venezuela’s refineries in disrepair. oil is shipped to the US and refined there. before being sold back to the troubled nation to meet demand at the pumps. In the first eight months of 2018. imports from the US rose 76% to 125.000 barrels per day. according to the US Energy Information Administration.
“This is a company that has been completely mismanaged since Chávez stacked it with loyalists.“ said Gilberto Morillo. a consultant who served as PDVSA’s chief financial officer until 2003. when Hugo Chávez. Maduro’s late predecessor. began the practice of staffing the company with political appointees.
Morillo added that Maduro will try to court other crude buyers in an effort to alleviate the impending crisis. but those calls are likely to be rebuffed. “Countries with the right refineries. like India. or countries in Africa. are on the other side of the globe … shipping costs would be huge for them.“
PDVSA’s woes could also isolate Maduro from his chief patron. Russia. which invests up to $20bn in Venezuela. experts say. of which a significant portion goes to PDVSA.
Russian energy giant Rosneft has loaned more than $6bn to PDVSA. That loan is being repaid through deliveries of crude oil to Rosneft through 2019. and is dependent on PDVSA’s ability to pump oil.
Declining production in Venezuela last year led to reports that Igor Sechin. an influential ally of Vladimir Putin. personally flew to Caracas in November to complain to Maduro and signaled the Kremlin’s growing impatience.
The collateral for part of that loan is PDVSA’s 49.9% stake in the US refiner Citgo. and new US sanctions against PDVSA could make it difficult for Russia to take ownership in the case of a default. Rosneft also holds joint stakes with PDVSA in a number of oil fields in Venezuela.
China. another vital ally to Maduro. is also showing consternation. with PetroChina planning to scrap a $10bn oil refinery in the south of the Asian superpower. Reuters reported on Thursday.
Meanwhile as the fuel queues drag on in Caracas. some drivers welcomed the sanctions. even as they prepare for tough times. “Are we going to suffer? Sure. but they are necessary evil.“ said María Alexandra Villasuso. a video producer. as she filled up her vehicle. “The government is already drowning. and if the ship sinks. so be it. At some point we’ll float again.“
