- The Washington Times - Wednesday, June 27, 2018

The Trump administration’s hope that economic pressure will punish Venezuela’s socialist government shift toward authoritarianism is running into challenges.

Sanctions lacking the bite sought by the White House amid a rise in global oil prices has kept cash flowing to political elites in Caracas.

U.S. officials boast of more than $1 billion in seized or frozen assets from some of the top aides around Venezuelan President Nicolas Maduro, but analysts say Washington may need a more strategically modest approach that could even involve partnering with Cuba to more effectively deal with the Western Hemisphere’s most glaring failed state.

Vice President Mike Pence this week is in the midst of a tour of key Latin American capitals, with the question of how to deal with the economic, humanitarian and security challenges posed by Venezuela a prime topic of conversation.

U.S. officials say Mr. Trump’s “maximum pressure” campaign helped bring the isolated North Korean regime to the bargaining table, but that could prove more difficult with Caracas. Despite an imploding economy, Venezuela still boasts some of the world’s largest proven oil and gas reserves.

“There have been tough sanctions” against the Maduro government, Michael Shifter, president of the Washington think tank Inter-American Dialogue, said in an interview, “but we have not seen significant evidence to date to see that it has changed the behavior of the regime.”

DOCUMENT: Venezuela's oil production

A move to pressure Western Hemisphere neighbors to address Venezuela’s profound political and economic meltdown came earlier this month in the wake of Mr. Maduro’s election to another six-year term, which observers dismissed as a “sham vote.”

Secretary of State Mike Pompeo told delegates to the Organization of American States that “the full-scale dismantling of democracy and the heartbreaking humanitarian disaster in Venezuela” represents the hemisphere’s single greatest challenge.

Mr. Pompeo, alongside Mr. Pence and Carlos Trujillo, U.S. ambassador to the OAS, managed to cobble together enough votes to pass a resolution against Venezuela’s dictatorship. But the tally — 19 in favor, 11 abstentions and four against — highlighted the challenge to the regional pressure approach and the leverage that energy riches still give Venezuela.

The Trump administration’s ultimate goal is to suspend Venezuela from the 34-country alliance, a move requiring 24 votes. Latin American diplomats say privately that the number is unattainable because Venezuela supplies several small Caribbean countries with oil.

How much an expulsion would hurt is also an issue. A dismissal would suspend aid from the Inter-American Development Bank. But Cuba has been suspended since 1962, and its dictatorship is now in its seventh decade. Mr. Maduro has also threatened to unilaterally withdraw Venezuela if the U.S. secures the votes.

Christopher Sabatini, Venezuela analyst and professor of international policy at Columbia University, said the U.S. moves “have tightened the noose some” but that it is hard to see how it all adds up to political change in the near future.

“There are not a lot of good additional options right now,” Mr. Sabatini said. “Other than for other governments to step up — there are not many diplomatic tools we’re not already using.”

Boiling point

Nearly two decades of mismanagement of its state-controlled oil industry — which claims to have more reserves than Saudi Arabia — have taken a staggering toll on Venezuela, a member of OPEC. Hyperinflation has driven away scores of skilled energy-sector workers. Claims from creditors seeking retribution for unpaid bills have given the appearance of an industry near the boiling point.

Falling Venezuelan supply was a prime motivation behind a Saudi-led move at OPEC’s meeting this week to boost production and ease the pressure on global oil prices. But the Trump administration’s announcement Tuesday that it will press Iran’s oil customers to stop buying from Tehran by November has once against sent oil prices surging.

Despite the turmoil, Venezuela’s elite continue to live directly off oil revenue. Though plummeting, the revenue is still massive.

From January to April this year, Venezuelan crude production dropped to the lowest annual average level in more than three decades, as oil exports fell 28 percent to 1.19 million barrels per day.

Once a cash cow, Venezuela’s state-run oil company PDVSA still accounts for more than 90 percent of its export earnings. But PDVSA is nearly a month behind in shipping crude to customers from its main oil export port, where more than 80 tankers wait offshore.

Mr. Shifter warned that the U.S. must tread lightly when it comes to the politics of oil prices. Global oil prices in recent months have reached $60 a barrel for the first time in years because of strong demand.

“If oil prices continue to go up, it becomes a domestic political issue that the Trump administration does not want to deal with,” he said.

Despite the bilateral tensions, the U.S. stopped short of imposing an all-out embargo on Venezuela’s oil shipments. But analysts say the sanctions have worked in one area aimed at preventing the Venezuelan government from selling off state assets. Houston-based energy giant ConocoPhillips has taken advantage of this by seizing PDVSA assets in the Caribbean amid a scramble by creditors to recover the more than $40 billion they claim they are owed.

Impact on neighbors

Venezuela’s neighbors are feeling the impact of the crisis. Mr. Pence this week toured a Brazilian town with a heavy influx of refugees who had fled Venezuela’s economic and political crises, and Colombian authorities this month announced census data showing that more than 800,000 Venezuelans were living in their country — more than half illegally.

Mr. Pence told a young Venezuelan migrant woman he met Wednesday that the U.S. would “keep helping until democracy is restored in Venezuela.”

“We’re talking about more than 1 million people who have come here from Venezuela in the last 15 months,” Christian Krueger, director of Colombia’s immigration agency, was quoted as saying.

At least 1.6 million Venezuelans lived abroad last year — more than double the figure from 2015, according to the International Organization for Migration.

The migrant crisis could spur Colombia’s incoming president, Ivan Duque, the young conservative protege of powerful former President Alvaro Uribe, to confront the Maduro regime head-on. Mr. Duque pledged during his campaign to take the lead in denouncing Venezuela’s socialist regime before international courts in addition to backing the new Trump sanctions.

Although Mr. Duque has denied the need for a military conflict with Venezuela, Mr. Uribe has repeatedly called for a coup against Mr. Maduro.

Mr. Duque “could certainly be a more aggressive partner for the U.S.,” Mr. Sabatini said, “which could help move the needle.”

Craig Deare, a professor at the National Defense University who served early in the Trump administration as an adviser for Western Hemisphere affairs at the National Security Council, said while the OAS and Colombia support are helpful, “the solution to Venezuela runs through Cuba.”

Since the rule of anti-U.S. populist Hugo Chavez, Cuba’s military and intelligence agents have wielded huge influence and power in Caracas.

“If Cuba wants to improve its relationship with the U.S., it needs to help resolve the Venezuela crisis, which is largely of its making,” Mr. Deare said.

The administration, he suggested, can threaten to sharply scale back the Obama-era opening to Cuba by reimposing trade restrictions and halting working groups established in 2014 to mend fences between the longtime enemies.

“U.S. business is chomping at the bit to get into Cuba,” Mr. Deare said. “Trump, with his direct style, can poke them in the eye and say, ‘What do you want: a relationship with Venezuela or with us?’”

Miguel Diaz-Canel is the first Cuban leader not named Castro in 60 years and has an opening to forge a new path. The “pink tide” of leftist Latin American governments has receded, leaving socialist states such as Cuba and Venezuela feeling more isolated, Mr. Deare said.

Mr. Shifter, however, said the Venezuelan government may be shaken but will be hard to dislodge through outside pressure.

“The Maduro regime, despite the crisis, is in a pretty strong political position right now,” he said.

• Dan Boylan can be reached at dboylan@washingtontimes.com.

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