May 25, 2021
From Popular Resistance
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Above Photo: Ciudad Valencia

US economic sanctions against Venezuela are a violent and illegal form of coercion, seeking regime change through collective punishment of the civilian population. The motives are fairly clear from the public statements of US officials. The number of Venezuelans who have died as a result of these sanctions has been estimated in the tens of thousands, and this has certainly increased substantially over the past two and a half years that have elapsed since the last available mortality data. These casualties may be even higher than would be expected to result from some military options that the Trump administration has said it is considering. Yet this state-sponsored violence receives very little attention in US and international media. This chapter will look at the economic sanctions that the US government has imposed on Venezuela. It will cover the damage that sanctions have done, including deaths and damage to human health, as well as economic damage. It will analyze the illegality of these sanctions, under both international and US law. It will lastly discuss what can be done to eliminate the use of illegal economic sanctions, and prevent them from killing more people and causing more suffering in Venezuela and other countries in the present, and future.

As this chapter is being finished, the Trump administration is continually tightening sanctions in ways that increase harm to civilians.

For example, in June 2020 Copa Airlines was fined $450,000 for transporting passengers to Venezuela through Panama.2 On the flight ban that was being enforced – which was not even officially part of what the US government calls “economic sanctions” – the New York Times has reported that this decision “will be a heavy blow for millions of Venezuelans,” because it will cut off access to remittances from relatives abroad. By banning airline courier services to Venezuela from Miami, the policy will make it much more difficult for many Venezuelans “to obtain scarce medication, spare parts and food.”3 The effect of this change alone was described as a “catastrophe for a lot of people” as it would “complicate enormously the transportation of humanitarian aid” by a spokesperson from Acción Solidaria, a medical NGO.

President Obama imposed sanctions against Venezuela with Executive Order 13692 in March of 2015. These sanctions targeted individuals in Venezuela, mostly officials of the Venezuelan government, and have generally been treated as though they caused no harm to the civilian population. However, these sanctions were a significant blow to an economy that was already hit very hard by falling oil prices. As Reuters noted at the time, “Declaring any country a threat to national security is the first step in starting a U.S. sanctions program.”4 Of course investors, lenders, buyers of Venezuelan oil, and everyone doing business with Venezuela knows what generally happens to countries that are declared a “national security threat” to the United States. By itself, this would make Venezuela’s economic recovery more difficult, even before the more sweeping sanctions that were to come.

Declaring Venezuela “a national security threat” was not just harmful, dangerous, and obviously untrue, it was also a false declaration made in order to meet US legal requirements for imposing these sanctions. This executive order, and the others imposing sanctions that followed, labeled Venezuela “an unusual and extraordinary threat to the national security” of the United States, which the law requires in order to impose sanctions. The executive order also stated that Venezuela was creating a “national emergency” for the United States, a transparent legal fiction, required for the invocation of the 1976 National Emergencies Act.

The 2015 sanctions did some damage by reducing Venezuela’s access to credit. For example, Citibank closed the accounts of Venezuela’s Central Bank and the Bank of Venezuela in 2016 after conducting a “risk management review.”5 The 2015 sanctions also harmed the Venezuela economy by making it more difficult, or impossible, for high officials of the government to simply carry out official state business. In a country dependent on its state-owned oil industry for almost all of its foreign exchange earnings, this caused significant problems. There were no economic or statistical studies of the impact of the 2015 economic sanctions, so it is difficult to quantify how much damage they did.

The first sanctions to receive serious economic study were those imposed in August of 2017. Their impact was first evaluated by Francisco Rodríguez, a Venezuelan economist who is a leading expert on Venezuela’s economy.6 Rodríguez was the chief economic advisor to opposition presidential candidate Henri Falcón in the 2018 election. He has done extensive research on Venezuela, including developing some of most reliable estimations of economic statistics available after 2015, when the authorities stopped regular publication of many indicators.

The 2017 sanctions were targeted at the financial sector, cutting off Venezuela from most borrowing in the United States and preventing a badly needed debt restructuring. International trade is reliant on short-term credit, and although there was an exception that prevented the 2017 sanctions from amounting to an effective trade embargo, the exception was overly limiting because an important part of trade credit for Venezuelan government entities exceeds the thresholds put in place by the executive order.7 The result was the drying up of credit for trade and, especially, the credit-thirsty oil industry.

The financial toxification of Venezuela accelerated with the executive order. A September Financial Crimes Enforcement Network (FinCen) letter toxified business with Venezuela, the letter warning that “all Venezuelan government agencies and bodies, including SOEs [state-owned enterprises] appear vulnerable to public corruption and money laundering.”8 As a result, banks and other financial institutions closed Venezuelan accounts and tried to reduce their exposure to transactions from the country.9 This had an extraterritorial effect: 95 percent of international dollar payments are made via the Clearing House Interbank Payments System (CHIPS), which is reliant on less than 50 correspondent banks that must have a branch office in the United States, leaving the system subject to US law.10 Without access to these correspondent banks, it is much more difficult and costly to make international transactions in dollars. This results in another negative knock-on effect on imports and other cross-border trades.

The massive loss of oil production caused severe economic damage to an economy that is dependent on oil exports for more than 90 percent of the dollars that it needs for imports. Venezuela has been, for many decades, a highly import-dependent economy. Thus, when imports fall drastically, so does overall output (GDP) and employment, and poverty increases dramatically. When the August 2017 sanctions hit, Venezuela had already been in recession for more than three years, and had lost about a quarter of its GDP. As Mark Weisbrot and Jeffrey Sachs note, inflation was running at between 758 and 1,350 percent annually.11 The country was already facing balance of payments problems, and difficulties meeting its foreign debt payments, all of which had already been exacerbated by the sanctions that began in March 2015, as well as a sharp fall in oil prices. Despite this, there was still a possibility of debt restructuring, in particular for the debt of PdVSA, the national oil company, which had $30 billion of debt. There were joint ventures that could borrow because they had oil revenue that was a form of collateral, and oil in the ground can also be securitized or even sold.

Indeed, it would seem odd that a country with the largest oil reserves in the world could go broke after oil prices had started to rise again. The sanctions blocked all of this, effectively ending the foundations of any economic recovery. The sanctions thus locked the country into a path of hyperinflation, debt default, and depression that continues to this day. This is worth emphasizing, since economic recessions/depressions do not last indefinitely, and neither does hyperinflation. In fact, the median episode of hyperinflation since the Second World War in Latin America lasted just four months.12 To get rid of hyperinflation, it is necessary to change people’s expectations of what their money will be worth in the near future. Otherwise, its vanishing purchasing power becomes a self-fulfilling prophecy. Most hyperinflation is brought to an end by creating a new exchange rate system – known as an Exchange Rate Based Stabilization. In Bolivia in 1985, for example, this got rid of hyperinflation in ten days.13

To escape from hyperinflation in this way, Venezuela’s government would need access to a sufficient amount of dollars, and to the international financial system. The August 2017 financial sanctions took both of these away from Venezuela. This helped push Venezuela into hyperinflation and keep it there for most of the next three years.14

This continued loss of imports also deepened the depression in Venezuela’s economy. Venezuela lost 745,000 barrels of its oil production, or about 36 percent, in the year following the beginning of those sanctions, as production fell from 1,942 to 1,239 barrels per day.15 Today, it is just 570 barrels per day, down by 71 percent from before these sanctions.16 The US government added PdVSA to the list of sanctioned entities in January 2019. These oil sanctions imposed by the Trump administration amounted to a trade embargo, cutting Venezuela off from its largest market (the United States received 35.6 percent of Venezuela’s exports in 2018).17 Even worse, the US government used the threat of secondary sanctions against other countries to cut off other oil markets, as well as access to credit.18 With this, as well as the effects of the 2017 FinCen letter and financial sanctions, the noose was tightened, cutting off Venezuela, not just from the United States, but also internationally.

The more I thought about it, the more I realized the decision on political recognition was more important now than the oil sanctions. First, US recognition would have major implications for the Federal Reserve Board, and therefore banks worldwide. The Fed would automatically turn control over Venezuelan government assets it possessed to the Guaidó-led Administration … the international financial consequences of recognition were nonetheless significant, since other central banks and private bankers weren’t looking for reasons to be on the Fed’s bad side. Second, the logic of sanctioning the country’s oil monopoly, and other measures Mnuchin and Treasury were resisting, would become unanswerable once we endorsed Guaidó’s legitimacy.19

Even worse, recognition of the Guaidó “government” would make Guaidó “the legal owner of funds or goods owned by the Venezuelan government.” According to Weisbrot and Sachs, this meant the loss of “most of the government’s $9 billion in reserves that [were] in gold; trade credits worth an estimated $3.4 billion; and CITGO, with estimated net assets of $5.2 billion.”20 The August 2017 sanctions also cut off some $2.5 billion annually of dividend payments from CITGO to the government.21 By the same measure, any remaining access to correspondent banks was “mostly wiped out,” which led to a situation where Venezuelans are denied the “necessary credits for importing medicine, food, and other essential goods.”22 In August of 2019, President Trump’s former National Security Adviser John Bolton upped the ante when he declared:

one way to summarize this to a business for example, is do you want to “do business in Venezuela or do you want to do business with the United States?” And I think for any international cor porations, whether they’re US-based, European, wherever they may be … they ought to be asking their management if it’s worth risking for a trickle of income from the illegitimate Maduro government, if it’s worth risking their business in the United States.23

He said this as his government issued Executive Order 13884, which froze all Venezuelan government assets in the United States and broadened the scope of secondary sanctions, leaving non-US people and entities considered by the Treasury as having supplied “material assistance” liable to have their US assets frozen. An advisory by a maritime legal firm highlighted that this could conceivably be used against ocean transportation services.24 This fear was later realized, with shipping firms and tanker captains sanctioned.

As of May 2020, Venezuela produces just 570 barrels of oil per day, down 71 percent from what it produced before the August 2017 sanctions.25 Furthermore, “to entice buyers wary of drawing scrutiny from the United States,” reports Reuters, it is selling this oil at enormous discounts as compared to other countries.26 In addition to the estimated 24.3 percent drop in GDP in the recession prior to the August 2017 sanctions, the economy shrank by an estimated 19.6 percent in 2018, and 25.5 percent in 2019.27 This is the worst economic decline in Latin American history. In 2019, an estimated 32 percent of the population was “in crisis or worse” with regard to food needs.28 Bloomberg reported that about one-fifth of Venezuela’s food is being wasted, mostly because of fuel shortages.29

THE IMPACT OF SANCTIONS ON VENEZUELA’S POPULATION

It is well known that the kind of economic damage that Venezuela has seen under US sanctions can kill people, and indeed it has. Weisbrot and Sachs looked at the increase in mortality between 2017 and 2018 and concluded that the 2017 sanctions had killed tens of thousands of people in a year. This did not include the last four months of 2017. It is not difficult to see how the economic damage described above would lead to people dying. In their report, Weisbrot and Sachs provide some of the stark numbers: an 85 percent shortage of essential medicines; 80,000 HIV positive people denied retrovirals since 2017; 16,000 needing dialysis; 16,000 with cancer; and 4 million with diabetes and hypertension who lack reliable access to insulin and cardiovascular medicine.30

Some 22 percent of children are stunted, according to data cited by the UN, which also reported that “lack of access to water, soap, chlorine and other hygiene inhibits hand washing and household water treatment.”31 The deterioration in living standards is also clear from the massive increase in migration since 2015. The number of Venezuelans living abroad was almost 700,000 in 2015, a rise of 150,000 since 2010. By 2019, this number ballooned to 4,490,000.32 For the six South American countries that the UN disaggregates by year, the number of Venezuelan arrivals registered in 2017 was 65,000; in 2018 it reached 240,000 – an increase of 266 percent.33 In 2019, the arrivals surpassed 860,000, another rise of 260 percent.34

The most recent data on mortality in Venezuela was gathered by the National Survey on Living Conditions (ENCOVI), run by three universities in Venezuela. The group never released the data, but it found its way into the public view from a UN report that was distributed to major media. This data showed a 31 percent increase in mortality among the general population. Weisbrot and Sachs noted that this would mean an increase of more than 40,000 deaths, and concluded that tens of thousands of Venezuelans had died as a result of the 2017 sanctions.35 Rodríguez estimates that in the year following the 2017 financial sanctions, Venezuela lost about $16.9 billion in oil revenue due to the decline in production.36 This is an enormous amount of revenue with regard to the essential, and even life-saving imports – of medicine, medical equipment, and other imports – needed for public health. Total imports of medicine in 2018 were just US $400 million, down 41 percent from 2017, and 88 percent below their level of $3.4 billion in 2012.37 What would the government have done with an extra $16.9 billion of revenue? It is not difficult to imagine that they would have spent some of it on public health, including medicines, medical equipment, and the horribly deteriorated health, water, and sanitation infrastructure. It is also quite likely that many of the tens of thousands of doctors and medical professionals who left the country would have stayed in Venezuela.

We do not know all the reasons that various measures of public health and health indicators were deteriorating during the deep recession/depression that began in 2014. They were, however, clearly related to the collapse of the economy. It is also clear that the sharp drop of imports, the loss of credit, the loss of access to the international financial system, the balance of payments crisis, and most importantly the hyperinflation – which definitionally began after the 2017 sanctions – all contributed to the deep and prolonged depression. It is not difficult to imagine that in the absence of the powerful economic shock of the 2017 sanctions, the economy would have even begun to recover, the norm after more than three years of recession and especially for Venezuela, in the face of a sharp recovery in oil prices. In this case, mortality, which was elevated due to the collapse of the economy and public health, would have been expected to decrease. As a first approximation, it is not unreasona ble to attribute the increase in mortality to the sanctions. Indeed, if there is ever a survey to measure mortality since the sanctions, it will probably show an accelerating annual increase from 2018 to 2020, even before COVID-19.

SANCTIONS AND COVID-19: TAKING ADVANTAGE OF THE CRISIS

The sanctions left Venezuela vastly more vulnerable to COVID-19. The shortages of vital medical supplies – in some cases, including shortages of soap and water – made it very difficult to follow the basic hygiene measures that reduce the spread of infection. A 2018 survey of hospitals conducted by an opposition political group and a medical NGO revealed the severe vulnerability of Venezuela’s health system, with hospitals reporting problems, including non- or intermittently functioning laboratory testing, as well as shortages of water (79 percent), medicines (88 percent), and surgical supplies (79 percent).38

The world recession brought on by the pandemic had a drastic effect on oil prices, which fell further than they did in 2016, exacerbating the collapse of export earnings. In addition, remittances have been of growing importance to the Venezuelan economy, due to the massive outflow of migrants in the last few years. A May 2020 report by the Inter-American Dialogue estimated that 35 percent of Venezuelan households receive remittances.39 The lockdown in foreign countries would affect this flow. Migrants tend to work in more precarious jobs and are thereby more exposed to the COVID 19-caused economic downturn, which has been severe even in the high-income countries.

Despite calls from members of the US Congress, the UN High Commissioner for Human Rights, and the editorial board of the Financial Times, to ease sanctions as a response to the crisis, the US government saw the crisis as an opportunity to increase the pressure on Venezuelans, in the hope of forcing the government from power.40 As NPR put it, the combination of the health crisis and crash of oil prices weakened the government and has prompted “the U.S. to intensify efforts to drive [Maduro] from power.”41 As Elliott Abrams described, the United States had decided to ramp up the pressure on all “critical points in [Venezuela’s] petroleum sector from production to shipping to the customers.”42

The aggressive, extraterritorial enforcement of sanctions included the February sanctioning of a subsidiary of the Russian oil company Rosneft, causing it to cease trading Venezuelan oil and sell its Venezuelan assets.43 This impacted the dwindling number of other purchasers of Venezuelan oil. Refiners in India stopped purchasing in March.44 The United States also began to sanction the transport of Venezuelan oil, leveling individual sanctions on tanker captains and vessels, leading a number of shipping firms to cease transporting Venezuelan oil.45 Worse, a number of the measures seem deliberately targeted at trades which have obvious and direct humanitarian consequences. An oil-for-food and humanitarian supplies deal between Venezuela and several Mexican companies was targeted in June, with the companies and their owners blacklisted, forcing the trade to end before receipt of the food.46 According to legal experts on international compliance, the deal had been deliberately crafted to take advan tage of the humanitarian exception to the sanctions.47

These events show the superficial nature of the US government’s humanitarian exception. As noted by Rodríguez, “it is reasonable to believe that the exception could have been used only if it was as a result of an underlying agreement between the government and the opposition,” leaving the humanitarian needs of Venezuelans hostage to an unlikely deal with the Guaidó-led opposition, which has called for the immediate resignation of President Maduro as a precondition for negotiations.48

THE STRATEGY, AND ILLEGALITY, OF COLLECTIVE PUNISHMENT

US Secretary of State Mike Pompeo has not tried to hide what the sanctions are doing or intended to do. On March 11, 2019 he had the following exchange with Associated Press Reporter Matt Lee:

MATTHEW LEE: Are you satisfied with the pace of the momentum behind Guaidó and his leadership? …

MIKE POMPEO: Well, we wish things could go faster, but I’m very confident that the tide is moving in the direction of the Ven ezuelan people and will continue to do so. It doesn’t take much for you to see what’s really going on there. The circle is tightening, the humanitarian crisis is increasing by the hour. I talked with our senior person on the ground there in Venezuela last night, at 7:00 or 8:00 last night. You can see the increasing pain and suffering that the Venezuelan people are suffering from.49

This is consistent with his, and the Trump administration’s, use of sanctions against Iran. As noted by Human Right Watch, Pompeo told CBS News on February 14, 2019: “Things are much worse for the Iranian people [with the US sanctions], and we are convinced that will lead the Iranian people to rise up and change the behavior of the regime.”50 Senator Marco Rubio, considered to be a major influence on the Trump administration’s Latin America policy, expressed satisfaction that “Maduro’s days are numbered” because “he can’t access funds to rebuild the electric grid and he can’t end the sanctions.”51 This certainly looks like a strategy of collective punishment, and one that has killed civilians, for example with blackouts shutting down medical equipment in hospitals. The implication is that the government will be toppled because it cannot end the suffering caused by the sanctions. On February 8, 2019 a senior White House official told Reuters that the US government was “holding direct communications with members of Venezuela’s military urging them to abandon President Nicolás Maduro and is also preparing new sanctions aimed at increasing pressure on him.”52 These sanctions violate US law. They also violate international law, including treaties that the United States has signed. This can be seen clearly in Articles 19 and 20 of the Charter of the Organization of American States:

Article 19: No State or group of States has the right to intervene, directly or indirectly, for any reason whatever, in the internal or external affairs of any other State. The foregoing principle prohib its not only armed force but also any other form of interference or attempted threat against the personality of the State or against its political, economic, and cultural elements.

Article 20: No State may use or encourage the use of coercive measures of an economic or political character in order to force the sovereign will of another State and obtain from it advantages of any kind.

Clearly this regime change effort violates the OAS charter. It violates the UN Charter and international human rights law, according to legal experts.53 It violates prohibitions on collective punishment that form part of both the Geneva and Hague conventions, of which the United States is also a signatory.54 These conventions and prohibitions apply legally only during war time but this is an historical coincidence. It does not make sense that something which is a war crime when committed while people are shooting and killing each other should not be a crime when done during peacetime.55

CONCLUSION

It is clear that the US sanctions against Venezuela have caused considerable suffering and death and constitute a serious crime. Although they currently remain in effect, there is grassroots organizing against them in the United States, as well as other countries whose governments have joined Trump’s “coalition of the willing” for regime change in Venezuela. It is beyond the scope of this chapter to describe the political forces involved in this struggle, but it is important to call attention to it, because the US government will sooner or later lose the power to use structural and economic violence in order to choose the governments of other countries.

Within the United States, some of the most successful past efforts to rein in this type of aggression have targeted the US Congress. This is beginning to bear some fruit. For example, Representative Ilhan Omar has introduced the “Congressional Oversight of Sanctions Act,” which would require Congressional approval for sanctions imposed by the president. This is similar to the 1973 War Powers Resolution, in that it would take away from the president some of their power to harm other countries. This is part of a culmination of pushback from Congress against US regime-change efforts in Venezuela since 2014, including a number of letters and statements from progressive members of Congress. Although it’s not yet close to moving the Democratic leadership, this was true a couple of years ago for the efforts to invoke the War Powers Resolution against US military involvement in the genocidal war in Yemen. In the spring of 2019 – as a result of the same type of grassroots organizing we are seeing in Venezuela – both Houses of Congress voted to order President Trump to remove the US military from that war. Although Trump has so far refused to get out, it was a historic, unprecedented vote, and probably would have moved a more “normal” president to exit. There is a good chance that the next US administration will be forced to abandon its efforts at regime change in Venezuela, as well as the war in Yemen.

Over the longer run, the US government will not be able to get away with these types of crimes. This could never have happened even as recently as 2013, when independent, left governments were elected in countries containing the majority of Latin Americans. Currently, Washington has a number of right-wing allies in power. Most of these regimes came to power with help from their US patron, including in Brazil, Ecuador, Honduras, and Bolivia, the latter two taking power in US-backed military coups. Colombia, Peru, and Paraguay (also victim of a US-supported coup) have also allied with Trump. This is not sustainable, and it will change in the next few years, as it has changed in the latest Mexican and Argentinian elections.

The world is also changing, and the United States will not forever be able to control and weaponize the international financial system as it does today, with more than 60 percent of central bank reserves, and most of commerce, in dollars. The Chinese economy is already bigger than that of the United States, and within a decade it will be more than twice as big, on a purchasing power parity basis – which economists use for international comparisons. Yet, Venezuela and other countries suffering from US aggression cannot wait for these world-historical shifts toward a more multi-polar world. The United States will also have to change from within.




Source: Popularresistance.org