*Professor of Practice at the William J. Perry Center for Hemispheric and Defense Studies at National Defense University, in Washington, DC. The views expressed in this chapter as those of the author and do not necessarily reflect the views of the William J. Perry Center for Hemispheric Defense Studies, National Defense University, or the Department of Defense.

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Under the Donald Trump Administration, the United States has imposed extensive sanctions to isolate and deprive the Nicolás Maduro regime economically as part of a maximum pressure campaign to restore democracy to Venezuela. Nation states and international bodies like the United Nations (UN) and the European Union impose economic sanctions to force changes in behavior, through coercion, deterrence, punishment, or shame to the countries, entities, and individuals that endanger their interests or violate international norms. The United States uses sanctions to advance foreign policy goals including counterterrorism, nonproliferation, and the promotion of democracy and human rights. This article will examine the intent, impact, and limitations of US sanctions policy in the case of Venezuela under Maduro. 

US Sanctions Programs: 

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The United States employs comprehensive and targeted economic sanctions against rogue states, dictators, terrorists, drug traffickers, proliferators, and human rights abusers that threaten US national security. These sanctions can be used alone or to complement the diplomatic, military, and information instruments of national power to inflict short-term economic pain and encourage behavioral change in those targeted nations and non-state actors. US sanctions originate from Executive Orders issued under the International Emergency Economic Powers Act, which grants the president powers to govern a “national emergency” in response to an “unusual or extraordinary threat,” or from Congress through specific laws. They take a variety of forms, including travel bans, asset freezes, arms embargoes, capital restraints, foreign aid reductions, and trade restrictions (Masters, 2019). The United States also works to remove economic sanctions when appropriate to reward and incentivize improved behavior or demonstrate US support for newly established democratic governments (U.S. Department of State, 2020). The Treasury Department Office of Foreign Assets Control (OFAC) maintains and amends a number of sanctions lists that include measures against narcotics traffickers, terrorist groups and rogue states such as Cuba, Iran, Syria, Ukraine/Russia, and Venezuela, among others.

US Sanctions on Venezuela 

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The US maximum pressure campaign against the Maduro regime uses diplomatic, financial, economic, and political measures to support interim president Juan Guaidó and encourage the Maduro regime to step down and facilitate a democratic transition. The program for Venezuela targets government leaders, the central bank, and key industrial sectors. It includes terrorism-related and drug-trafficking-related sanctions, under the Foreign Narcotics Kingpin Designation Act and sanctions for anti-democratic actions, human rights violations, and corruption by the Maduro regime under the 2014 Venezuela Defense of Human Rights and Civil Society Act. As of August 20, 2020, the Treasury Department had imposed financial sanctions on more than 150 Venezuelan or Venezuelan-connected individuals, and the State Department has revoked the visas of more than 1,000 individuals and their families, including President Maduro and his wife, Cilia Flores; Executive Vice President Delcy Rodríguez; United Socialist Party of Venezuela Vice President Diosdado Cabello; eight supreme court members; the leaders of Venezuela’s army, national guard and national police; four state governors; the director of the Central Bank of Venezuela; and the foreign minister (Seelke, 2020).

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In 2018, the Trump Administration expanded the sanctions program by targeting the oil and gold sectors, Venezuela’s top revenue generating sectors under Executive Order 13850. Venezuela has the world's largest proven oil reserves and heavily relies on this sector since 95% of its exports are oil and petroleum products. On January 28, 2019, the Treasury Department designated Petroleum of Venezuela (PdVSA), Venezuela’s state-owned oil and gas company, and subjected it to US sanctions, blocking all PdVSA property and interests subject to US jurisdiction and prohibiting US persons from engaging in transactions with the company.  These sanctions on PdVSA have cut Venezuela’s oil production to approximately 388,000 barrels per day as of July 2020 or 60% below the average oil production rate of July 2019 (Reuters, 2020). On March 11, 2019, Treasury sanctioned the Moscow-based Evrofinance Mosnarbank, jointly owned by Russia and Venezuela for helping PdVSA funnel its cash flow from oil sales (Seelke, 2020). In April 2019, the Treasury Department sanctioned 44 vessels (along with six shipping companies) involved in transporting Venezuelan oil, including five companies that have transported Venezuelan oil to Cuba.

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In 2020, Treasury sanctioned two subsidiaries of the Russian state controlled Rosneft Oil Company for facilitating Venezuelan oil exports and four shipping companies for transporting Venezuelan oil. Through the Iran sanctions framework, Treasury sanctioned Iranian individuals and entities linked to recent shipments of Iranian petroleum products to Venezuela in exchange for gold.  On March 19, 2019, the United States sanctioned Venezuela’s state-owned gold sector company, Minerven, for using illicit gold operations to help the regime financially. On April 17, 2019 the Treasury Department sanctioned the Central Bank of Venezuela in order to cut off its access to US currency and limit its ability to conduct international financial transactions. All these Venezuela-related sanctions illustrate how extensive these measures are that support the maximum pressure campaign against the Maduro regime.

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Impact of Venezuela-related Sanctions

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Critics argue that US sanctions against Maduro’s regime have not worked as Maduro continues to be in control of Venezuela despite more than 50 countries’ recognition of Guaidó since January 2019. Under the sanctions regime, Venezuela is showing signs of distress with widespread power outages and a significant shortfall of foreign currency income. The latest sanctions have accelerated Venezuela’s economic decline that originated from the Chávez and Maduro regime’s gross economic management, unsustainable subsidies, falling world oil prices, and rampant corruption. The Venezuelan oil embargo is hurting the Maduro regime as well as its allies, like Cuba and Nicaragua, which are heavily dependent on Venezuelan oil and petroleum products. The US sanctions are actually imposed on visible, licit economic activities. 

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Unfortunately, the Maduro regime is evading sanctions and living off the illicit economy, based on off-the-book oil sales, gold smuggling, drug trafficking and widespread corruption (Diehl, 2019). Venezuela under Chávez and Maduro has been characterized as a mafia state, engaged in drug, arms and human trafficking, and collaborating with rogue states like China, Iran, Russia, and Turkey to circumvent oil and gold sanctions. The UN estimated that in 2018 alone, 240 metric tons of cocaine crossed into Venezuela from Colombia to be flown out of the country with a street value of around $39 billion. In 2018, two of Maduro’s nephews were convicted in a US court and sentenced to 18 years in prison for trying to transport 800 kilos of cocaine into the United States.

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The United States complemented its sanctions regime with significant law enforcement actions on March 26, 2020, when US Attorney General Bill Barr unsealed indictments charging Nicolás Maduro and 14 members of his inner circle with drug trafficking, money laundering, and narcoterrorism. This criminal indictment is only the second the United States has brought against a foreign head of state since Panama’s Manuel Noriega in 1988. US officials alleged a detailed conspiracy headed by Maduro that worked with Colombian guerrillas to transform Venezuela into a transshipment point for moving massive amounts of cocaine to the United States. 

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At the same time, the State Department announced a reward of up to $15 million for information related to Nicolás Maduro and rewards of up to $10 million each for information related to: Diosdado Cabello Rondón, President of the National Constituent Assembly (which the United States consider illegitimate); General (retired) Hugo Carvajal Barrios, former Director of Venezuela’s military intelligence (DGCOM); Clíver Alcalá Cordones, Major General (retired) in Venezuela’s Army; and Tareck Zaidan El Aissami Maddah, Minister for Industry and National Production. While holding key positions in the Maduro regime, these individuals violated the public trust by facilitating shipments of narcotics from Venezuela, including control over planes that leave from a Venezuelan air base, as well as control of drug routes through the ports in Venezuela (Department of Justice Press Release, 2020). 

Conclusion 

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The US sanctions program against the Maduro regime in Venezuela demonstrate both the impact and limitations of this economic instrument of national power. Despite formidable economic pressure on the Maduro regime, sanctions have not yet led to desired transition to democracy in Venezuela due to Maduro’s sanctions evasion with the help of Cuba, Iran, Russia, China, and Turkey, and the illegitimate Maduro regime reliance on the illicit economy through narcotics trafficking, illegal oil sales, and illicit gold mining to sustain itself. Economic sanctions are just one of the instruments of national power at a government’s disposal and must be tailored, updated, and combined with diplomacy and threat or actual use of force to achieve foreign policy goals as witnessed in the case of Venezuela. 

References

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Diehl, J. (2019). Opinion | The real reason Venezuela’s Maduro survives: Dirty money. Washington Post.

Economic Sanctions Programs. (2019). United States Department of State. https://www.state.gov/economic-sanctions-programs/

Nicolás Maduro Moros and 14 Current and Former Venezuelan Officials Charged with Narco-Terrorism, Corruption, Drug Trafficking and Other Criminal Charges. (2020, marzo 26). https://www.justice.gov/opa/pr/nicol-s-maduro-moros-and-14-current-and-former-venezuelan-officials-charged-narco-terrorism

Masters, J. (2019). What Are Economic Sanctions? Council on Foreign Relations. https://www.cfr.org/backgrounder/what-are-economic-sanctions

Seelke, C. R. (2020). Venezuela: Overview of U.S. Sanctions. 3.

United States of America – Global Sanctions Guide—Eversheds Sutherland. (s. f.). Recuperado 4 de septiembre de 2020, de https://sanctionsguide.eversheds-sutherland.com/countries/the-u-s/

Venezuela’s oil exports stagnant in July at below 400,000 bpd -data. (2020, agosto 3). Reuters. https://www.reuters.com/article/venezuela-oil-exports-idUSL1N2F5108

Nicolás Maduro Moros and 14 Current and Former Venezuelan Officials Charged with Narco-Terrorism, Corruption, Drug Trafficking and Other Criminal Charges. (2020, marzo 26).

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https://www.justice.gov/opa/pr/nicol-s-maduro-moros-and-14-current-and-former-venezuelan-officials-charged-narco-terrorism