Venezuela, once a booming oil economy, seems to be falling into despair and no one knows when it will end. Many have deliberated about the roots of Venezuela's economic troubles, and journalists such as Patricia Sabga of Aljazeera believe that they are the result of poor economic and political policies, culminating in what could become a total economic meltdown. According to Francisco Rodriguez and Jeffrey Sachs of the New York Times, the Venezuelan economy may be seeing the light at the end of the tunnel as socialist President Nicolas Maduro, largely blamed for current economic woes, is no longer recognized by influential countries like the United States and Britain. Maduro is charged with illegitimately claiming the presidency through staged elections and laws that prevent his removal. Due to this, the United States recognizes the leader of the opposing party, the National Assembly’s Juan Guaido. While this action could alleviate some of the suffering of the Venezuelan people, the same cannot be said for other recent US actions. The essay aims to examine the different recent economic policies that the United States has taken towards Venezuela, their potential ramifications, and positive steps that should be taken.
First, it’s important to recognize the precarity of Venezuela’s situation. According to the Council on Foreign Relations, Venezuela is a petrostate, listed alongside nations like Saudi Arabia and Algeria. Petrostates are characterized by weak political institutions, highly concentrated minority power, and economic reliance on exportation of oil and natural gas. Venezuela first struck oil in 1922 and foreign investors flooded in, prompting the government to put more resources into their growing energy economy, including capital and land investments. This move, while creating the groundwork for a successful oil industry, prevented Venezuela from developing other aspects of their economy, such as agriculture. Oil is highly affected by boom and bust cycles. With no other markets to rely on, when the oil market began experiencing economic problems, such as oil companies in other nations entering and exiting the market, the downward spiral became hard to prevent and the economic situation slowly grew more precarious. Furthermore, poor political decisions designed to maintain government power by helping oil industries meant that when oil prices fell in 2014, Venezuela had no money to subsidize the oil industry or invest in other areas of the economy. The Index of Economic Freedom describes the results, including ever increasing hyperinflation (according to Steve Hank of Forbes magazine, a whopping 80,000% in 2018 that is only expected to increase), food and dollar shortages, and political turmoil.
According to the Department of State, Venezuela and the United States have a long and evolving relationship that officially began in 1835. Their relationship was previously diplomatic, but since the rise of socialist leader Hugo Chavez and his successor Nicolas Maduro, tensions have risen. Venezuela regularly criticizes American policies and Maduro calls the Venezuelan crisis a Western creation. While the relationship has slowly deteriorated, the United States remains the largest importer of Venezuelan products, importing approximately US $10.9 billion of crude and petroleum oil in 2016. As US dollars become largely unavailable to Venezuelans, US imports continue to decrease drastically, decreasing by 36% between 2015 and 2016, as prices of products become too expensive for Venezuelans to buy. The US continues attempts to give aid during food shortages, but Maduro has rejected every offer. After the United States recognized Guaido as president, Maduro called for a break in diplomatic ties, but the United States refused to recognize his authority by removing American diplomats from Venezuela. The culmination of worsening US-Venezuela relations, the devastated Venezuelan economy and a volatile political situation have led to the current crisis.
President Trump has taken a much more hard-lined approach than President Obama, who was criticized for not doing enough to prevent Venezuela’s economic downfall. Obama’s policies towards Venezuela began with a very soft-lined approach. According to Antonio Delgado of the Miami Herald, the Department of State was hesitant to put sanctions on Venezuela and instead hoped to stabilize the region by creating open dialogue between the two countries. While this was a move designed to maintain peaceful relations, the lack of action likely led to further deterioration. According to Teresa Welsh of U.S. News, when Obama finally issued sanctions against Venezuela for human rights abuses, it widely backfired due to contestation by Latin American nations and Venezuela’s increasing economic precarity. Despite their controversy, Obama’s sanctions only limited visas and froze assets of officials, ultimately having no real impact on the economic situation of Venezuelans. By 2016, it was too late for Obama to help end the Venezuelan crisis, but according to the Washington Post in 2017, there is still hope for Trump.
Trump’s policies put an increasingly tight leash on the Venezuelan economy, with the hope of pushing Maduro to concede the presidency to Guaido. According to Public Radio International Trump’s sanctions began similarly to those of Obama, targeting high-ranking officials. Slowly, sanctions have also begun targeting Venezuelan oil, with the goal of using economic pressure to push Maduro to allow a peaceful transition. These economic policies have only made Maduro angrier, and with support from the Kremlin, it’s clear that these policies will fail to make a substantial difference in the crisis. PRI continues that on January 28th, 2019, the Trump Administration imposed the harshest sanctions to date, which could potentially cripple the Venezuelan economy for good. These sanctions are aimed at Venezuela’s national oil firm, Petroleo De Venezuela SA (PDVSA) and will currently freeze exchanges and block imports. Furthermore, according to Kenneth Rapoza from Forbes magazine, if Maduro refuses to relinquish control by April 28th, 2019, there will be a complete ban on PDVSA and any oil company that the Venezuelan government owns 50% or more of.
According to Frida Ghitis of CNN news, Trump’s policies could be the solution, but he must proceed with caution. The direction of his policy actions are clear; he won’t stop until the Maduro regime is destroyed, but the outcome of his actions are risky. His policies rely on an assumption that Venezuela’s allies, such as China and Cuba, will not have the means or interest to support Venezuela. It also rests on the assumption the causing such significant damage to the Venezuelan people will be enough to finally overthrow the illegitimate government. If Trump’s plan fails, Venezuelans will likely be left starving in a totally destroyed economy. Only time will tell if Trump’s policies will be successful, but one thing is true: it’s one of the only options outside of direct military action that has not yet been exhausted.
With a failing economy, Venezuelans are desperately in need of solutions, and since the soft-lined approach failed, Trump’s plan, while viewed by many as rash, may be necessary. The United States’ policies towards Venezuela have yet to be successful, and relations are quickly deteriorating. Oil sanctions are therefore the last peaceful tool the United States can utilize to bring democracy and peace to Venezuela. While there could be significant downfalls if Trump’s proposal fails, it seems to be the only option left which is why Venezuelans and the United States government should cautiously support it.