The Economic War on Venezuela
THE STARKEST GLIMPSE of US sanctions policy is Eisenhower’s 1960 memorandum outlining “a line of action which, while as adroit and inconspicuous as possible, makes the greatest inroads in denying money and supplies to Cuba, to decrease monetary and real wages, to bring about hunger, desperation and overthrow of government.”
Over the last four decades, the world economy has become more integrated. With the dollar as a reserve currency and a monopoly over the world financial system, the US is the nerve centre of monetary power in global commerce.
Jack Lew, Obama’s Treasury Secretary, declared that “economic sanctions have become a powerful force in service of clear and co-ordinated foreign policy objectives - smart power for situations where diplomacy alone is insufficient, but military force is not the right response. They must remain a powerful option for decades to come.”
The legal cover for intensifying economic warfare on Venezuela began in December 2014. A congressional act directed the President to block assets and apply exclusion sanctions to any person involved in violating human rights and hindering democracy in the country. It was extended under Trump which intensified sanctions on Venezuela. In March 2015, Obama declared a national emergency over the threat to US national security posed by Venezuela. It set in place surveillance of Venezuela’s financial transactions in the US and fired the first shots against Venezuelan individuals and businesses operating in the US financial system.
Concurrently the major financial rating agencies ranked Venezuela as a high risk country akin to countries in armed conflicts, despite Venezuela’s regular debt repayments. This aimed to push Venezuela towards default by preventing debt restructuring, creating disincentives for international investments and provided a pretext for impounding Venezuelan assets.
The banks took their cue and stopped extending credit to Venezuela. Venezuela accounts were shut down by major US and European banks, cutting Venezuela’s capacity to make payments in dollars. The hammer blow was struck in August 2017 when Trump banned new financial dealings with the Venezuelan government and its oil company, causing a dramatic decline in oil production and preventing it from obtaining finance for investment.
Perhaps even more important was the Financial Crimes Enforcement Network September 2017 warning to financial institutions that “all Venezuelan government agencies appear vulnerable to public corruption and money laundering”. Fearing the risk, many financial institutions proceeded to close Venezuelan accounts and Venezuelan payments to creditors were blocked.
The US has been engineering the collapse of the Venezuelan currency, the Bolivar, for years, by preventing the inflow of dollars and facilitating their outflow. The dollar shortage drives up its value and pushes down the value of the Bolivar. The prices of imported goods rise rapidly. Domestic businesses cut back on production, leading to mass layoffs and lower wages which leads to a collapse of consumption. With a shortage of dollars, the black market thrives. The manipulation of the exchange rate has been used to artificially drive up inflation levels since 2010.
To stop Venezuela using its gold reserves, in November 2018 the US imposed sanctions on the gold sector and the Bank of England froze Venezuelan gold deposits worth $1.2 bn.
In January 2019, Trump imposed further wide-ranging sanctions on Venezuela’s oil sector which exported $12 bn of oil products to the US in 2018. US companies are prohibited from buying and selling any oil products from and to Venezuela. At a single stroke, this move deprived Venezuela of a major source of foreign exchange revenue risking its ability to import vital food and medicines.
Venezuela does not have any capacity to refine its oil and is at the mercy of US oil companies and the US government, which recently blocked assets worth $7 billion, depriving Venezuela of dollars which could be used to import food and medicines.
The cruellest move is the deliberate blocking of imports of vital medicines and equipment. In July 2017, Citibank refused to process Venezuelan payments for the import of 300,000 insulin doses. In November 2017, the Colombian government blocked the dispatch of antimalarial drugs Venezuela had paid for, and the European company Euroclear seized $1.65 billion that was destined for the purchase of food and medicine. In May 2018, the payment of $9 million was blocked for the acquisition of supplies for dialysis equipment.
The US economic war on Venezuela since Maduro’s 2013 election through to 2017 cost the country $350 billion in lost production. If Maduro had received international financing from the IMF, Venezuelan GDP growth from 2013-17 would have exceeded Argentina’s.
This hidden war of monetary imperialism has seriously damaged Venezuela’s economy. The economic warfare on Venezuela is worse than that waged against Iraq in the 1990s and a portent for countries such as Cuba, Nicaragua and Iran, unless international solidarity can challenge the corporate media’s narrative for regime change and the US and Tory governments’ sanctions policy.