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U.S. Ready to Target Other Countries for Supporting Venezuela's Maduro

Venezuela's President Nicolas Maduro
Venezuela's President Nicolas Maduro / Reuters
August 6, 2019

By Mitra Taj

LIMA (Reuters) - U.S. national security adviser John Bolton on Tuesday said Washington was ready to impose sanctions on any international company doing business with Venezuelan President Nicolas Maduro, a sharp escalation of U.S. pressure on the leftist leader.

Bolton, addressing a summit on Venezuela in the Peruvian capital Lima, emphasized that tougher international action was needed to speed up a transition of power in the country, where more than four million Venezuelans have fled economic collapse.

"We are sending a signal to third parties that want to do business with the Maduro regime: proceed with extreme caution," Bolton said.

His speech came a day after U.S. President Donald Trump signed an executive order that freezes the assets of the Venezuelan government and bans any transactions with it, an act that could ensnare its dealings with Russia and China as well as with Western companies.

Bolton told reporters the move forces companies around the world to choose whether to risk access to the United States and its financial system for business with Maduro.

"Do you want to do business in Venezuela, or do you want to do business with the United States?" said Bolton, one of the Trump administration's most influential hawks on Venezuela.

Asked by a reporter how Venezuela would respond to the executive order, Venezuelan Foreign Minister Jorge Arreaza said: "I'm going to paraphrase Donald Trump ... All options are on the table."

It was the first U.S. asset freeze against an entire government in the Western Hemisphere in more than 30 years. But it was also a reminder that successive rounds of U.S. sanctions have so far failed to peel away the crucial support of Venezuela's military for Maduro, who took office in 2013 following the death of his political mentor President Hugo Chavez.

Continuing the state controls started under Chavez, Maduro has overseen one of the worst economic collapses in recent world history, leaving his nation of 30 million people with severe shortages of food and medicine despite sitting on the world's largest oil reserves.

U.S. sanctions on Venezuela are similar to the kind of measures imposed on Iran, North Korea and Syria, Bolton said. "Now, Venezuela is part of this very exclusive club of rogue states," he said.

In private, Bolton had told Peruvian officials the measure would have the effect of about tripling current sanctions related to Venezuela, a Peruvian government source said, speaking on condition of anonymity.

The executive order stopped short, however, of a full U.S. trade embargo of the kind imposed on Cuba, experts said, by excluding Venezuela's still sizeable private sector.

The order maintains some exemptions for companies that do business with state oil company PDVSA [PDVSA.UL], and licenses published on Tuesday reiterated that companies like Chevron and Halliburton can continue to do business with PDVSA in Venezuela through Oct. 25.

RUSSIA: 'ECONOMIC TERROR'

Most Western and Latin American democracies accuse Maduro of rigging elections last year and are calling for him to step down so the country can hold a fresh presidential ballot.

But U.S. policymakers have privately expressed frustration that European partners have not acted more forcefully to match U.S. sanctions on Venezuela.

The summit, organized by Peru, a regional leader on demanding democratic reforms in Venezuela, had aimed to build support for new elections with Maduro's allies. Yet Russia, China, Cuba, Turkey, Bolivia and Iran all boycotted the summit.

Russia's foreign ministry said on Tuesday that Washington's asset freeze was illegal and amounted to "economic terror", the RIA news agency reported.

The order also could inflame the U.S.-China trade war if it hits Beijing hard, with Venezuela owing China oil deliveries as repayment for loans through 2021, said Fernando Cutz, a former top aide to Trump on the National Security Council.

Venezuela's foreign ministry said the freeze was designed to "formalize a criminal economic, financial, and commercial blockade" of the country but said the government would continue with political dialogue with the opposition.

Bolton accused Maduro of only pretending to engage in European-backed negotiations with the opposition on the Caribbean island of Barbados to buy himself time.

Bolton warned Russia against doubling down on its support for Caracas, and urged China to recognize opposition leader Juan Guaido as the country's legitimate leader if it wanted to recoup debt owed by Caracas, since a new government in Venezuela might not want to honor agreements made with countries that helped Maduro hang onto power.

Bolton said Washington had taken steps to ensure the sanctions did not hurt Guaido and his allies, nor prevent access to humanitarian goods.

Trump's Commerce Secretary Wilbur Ross also spoke to the Lima summit, promising U.S. support and cooperation to help Venezuela rebuild its oil sector, institutions and economy once Maduro leaves office, without giving details.

The plan has a goal of reversing Venezuela's decline in oil production within a year, and calls for a long-term deal with the International Monetary Fund, Ross said.

Though sanctioning third parties for doing business with Venezuela would escalate pressure on Maduro, such efforts can lead to push back from other countries that complain of being bullied into following U.S. goals. Proving that foreign companies are undermining sanctions on Venezuela requires significant investment of economic and human resource.

"How much is the U.S. government willing to spend in diplomatic capital in economic costs in the United States, in order to further its Venezuela policy?" said David Murray, Vice President of the Washington-based firm Financial Integrity Network who is an expert on sanctions compliance.

(Reporting By Mitra Taj in Lima, Additional Reporting by Roberta Rampton in Washington, Brian Ellsworth and Luc Cohen in Caracas; Editing by Alistair Bell)