The restrictions could not lead to an apparent split of the elites, despite the fact that they have affected the main beneficiaries of the economic system — high-ranking military personnel, as well as the political leadership. At the same time, the threat to their personal safety and possible criminal prosecution in the event of a regime change outweigh the losses from the sanctions. Given these conditions, neither the command of the armed forces, nor senior government officials are ready to take decisive action or side with the opposition, writes Dmitry Rozental, Deputy Director of the Russian Academy of Sciences’ Institute of Latin America.
The United States continues to exert political and economic pressure on the government of Nicolas Maduro. In recent years, almost all methods of pressure have been tried (barring a direct military invasion), but the siege of “Fortress Venezuela” continues. The introduction of large-scale economic sanctions has not helped either. The failure of these measures, the negative consequences of restrictions for the humanitarian situation in the Latin American country and the oil industry in the United States itself have become a subject of discussion within the expert community.
In particular, in February 2021, the US Accountability Office published a report on the impact of sanctions on socio-economic indicators in Venezuela. While acknowledging the lack of information on the real state of affairs, its authors nevertheless noted Washington’s attempts to mitigate the effects of restrictions on the population. In parallel, the report of the UN Special Rapporteur Alena Douhan on the difficult humanitarian situation in the Bolivarian Republic was released, which called for the removal of all restrictions.
Different assessments of the sanctions against Venezuela have given rise to speculations about their expediency and effectiveness as a tool for regime change. This need is also conditioned by the arrival of the new administration in the White House, its desire for a more cautious policy in Latin America and the revision of the line of its predecessors.
Sanctions as a tool for regime change
The political side of the issue is poorly touched upon in the reports, but so far, the sanctions did not have a noticeable effect on the stability of the Maduro administration. The use of this mechanism, in general, is rarely an effective solution for ousting an unwanted government.
In Venezuela, the restrictions have only increased the dependence of the impoverished population on the country’s leadership, which distributes food and preferential goods. It is no coincidence that the government insists on retaining the right to control the distribution of humanitarian aid, and prevents its uncontrolled delivery.
The restrictions could not lead to an apparent split of the elites, despite the fact that they have affected the main beneficiaries of the economic system — high-ranking military personnel, as well as the political leadership (more than 150 people were affected by the sanctions). At the same time, the threat to their personal safety and possible criminal prosecution in the event of a regime change outweigh the losses from the sanctions. Given these conditions, neither the command of the armed forces, nor senior government officials are ready to take decisive action or side with the opposition.
Finally, the COVID-19 pandemic slowed down all social processes in the country, playing into the hands of Maduro’s government. The general fatigue of the population from the political struggle reduced the potential for protest. At the same time, in the future, the lifting of quarantine measures and the economic consequences of restrictions caused by the coronavirus will inevitably exacerbate the situation in Venezuela.
Sanctions and the socio-economic situation
Analysing the reasons for the rapid decline in the Venezuelan economy (in 2019 it contracted by 35%, and in 2020 it contracted by 25%), it is difficult to determine the specific effect of the sanctions. The fall in the price of oil, which accounts for 99% of the Bolivarian Republic’s exports, has had grave consequences. Its economic model has also played a negative role: big and medium-sized entrepreneurs were ousted from the country. The COVID-19 pandemic, which hinders normal development, cannot be ignored.
The first economic restrictions against Venezuela were introduced in the summer of 2017, when its economy was already in serious decline. These measures, in any event, greatly accelerated its free fall. Having lost the opportunity to patch up budget holes by selling assets to North American companies (a ban on transactions involving securities of the Bolivarian Republic was introduced), Maduro’s government lost room for manoeuvere. According to official Caracas, $5 billion accounts were frozen, which could have been spent on infrastructure modernisation and social policy.
Especially painful for Caracas were restrictions on the purchase of Venezuelan oil and the sale of American thinners needed to liquefy heavy fuels for transportation.
Venezuela’s revenues have dropped to 1% of what they were during the pre-sanctions period. The price of gasoline, which for a long time had remained the lowest in the world, rose rapidly in the country. Automobile fuel disappeared from gas stations, and most of the public transport stopped. Supplies from Iran only slightly compensated for the fuel shortage.
The situation is aggravated by the threat of secondary sanctions imposed on organisations cooperating with the Maduro government. In particular, several subsidiaries of Rosneft have already fallen under them (which prompted the Russian giant to cede its property to a company owned by the Russian government); sanctions have effected enterprises from China, Switzerland, and Malta. Despite the fact that these prohibitions are often violated, oil is supplied, bypassing restrictions; however, the ability of Caracas to export its raw materials has been seriously complicated. In February 2021, according to Bloomberg, it fell by 13% to 419 thousand barrels per day.
The question of the impact of sanctions on the economy of the United States itself remains open. It should not be exaggerated. In recent years, Washington has significantly reduced its dependence on Venezuelan hydrocarbons, reorienting itself to Canada, Mexico, Colombia and Saudi Arabia. According to American auditors, the processing factories located in the Gulf of Mexico weren’t seriously damaged — they were forced to find other suppliers. However, information appeared in the media that oil from the Bolivarian Republic was being smuggled to these refineries.
In turn, restrictive measures in Venezuela have led to a deepening humanitarian crisis. The shortage of essential goods and the lack of qualified specialists have complicated things for the general population. According to the UN, there are 7 million people in the country in need of humanitarian aid. Attempts to solve their problems by creating special conditions for the sanctions regime take a long time and remain ineffective.
Sanctions under the Joe Biden administration
The coming to power of President Joe Biden did not lead to an improvement in bilateral relations. This could not have happened. Despite serious disagreements with Donald Trump in methods and approaches, the position of the new US President in many ways mirrors the guidelines of his predecessor. He seeks to strengthen his position in Latin America and stop the influence of antagonistic countries: Cuba, Venezuela, and to some extent, Nicaragua. Under these conditions, pressure on Caracas will continue — Washington has already re-recognised Juan Guaido as the interim head of the Latin American country.
Another thing is that the sanctions have not yet yielded results, Caracas has adapted to them (this was also recognised by the US administration). Under these conditions, Joe Biden’s team does not seek to remove restrictions, but has declared its readiness to loosen its grip in the event of a negotiation process between the government and the opposition. This gives hope for the flexibility of the new administration and a more moderate position.
At the same time, one should not expect fundamental adjustments in the American approach. It is likely that there will be some relaxation of sanctions, which have a negative impact on the humanitarian situation. Nevertheless, the failure to pressure Caracas will be negatively perceived by the hawks in Washington, and the removal of all restrictions will undermine the position of the Joe Biden administration within the United States. In these conditions, the government of Maduro will have to withstand more than one assault.