by Tyrin Douangvichit
As of January 22, 2021, the Treasury Department had imposed sanctions on roughly 166 Venezuelan or Venezuelan-connected individuals and the State Department had revoked the visas of more than 1,000 individuals and their families (FAS.org, Congressional Research Service). The current discourse on the matter has to deal with whether or not it is advisable to pull these sanctions away from Venezuela, with many advocating that the U.S.-led sanctions are not helping Venezuela’s current economic crisis.
Weisbrot and Sachs in 2019, in an article by Brookings Institution, claims that “sanctions have inflicted […] very serious harm to human life and health, including an estimated more than 40,000 deaths from 2017-2018.” Also they reduced the public’s “caloric intake, increased disease and mortality (for both adults and infants), and displaced millions of Venezuelans who fled the country (due to economic depression and hyperinflation)” (Brookings). Sanctions that included oil, which cut the exports to the U.S. down significantly, contributed also to Venezuela’s decline seeing as it was so dependent on oil revenue. Sanctions on individuals began as early as 2015, when the Obama administration had declared Venezuela as a threat to U.S. national security and froze the assets of several Venezuelan officials (Time, 2015). The Trump administration brought additional financial sanctions in 2017 which had a more serious and financial precedent. “President Donald Trump intensified sanctions in 2017 and this year imposed an oil embargo that blocked the purchase of petroleum from Venezuela’s state oil company, PDVSA. It also confiscated Venezuela’s US subsidiary CITGO, worth $8 billion. It was a huge blow for Venezuela, which received 90% of government revenue from the oil industry.” The U.S. government has also frozen “$5.5 billion of Venezuelan funds in international accounts in at least 50 banks and financial institutions”. (Deutsche Welle (DW) article).
Venezuela was already in hyperinflation and economic instability before any major sanctions by the United States were imposed. The current economic crisis can be traced back to 2010, where signs of hyperinflation began to rise and there was a general shortage of basic goods. Hyperinflation is when the inflation rate of a nation exceeds more than that is sustainable and controllable. Typically, any inflation rate above about 50% is considered to be in a “hyperinflated” state. Venezuela’s current and persistent crisis with hyperinflation began in 2016, when the annual inflation rate rose to an immense 255%. Today, the approximate inflation rate is estimated to be 2,300% to 6,000% (Statista) and the highest it ever reached in recent years has been in 2018 and 2019 hovering around 160,000% (U.S. Bureau of Labor Statistics, 2019). Additionally, President Nicolas Maduro’s leadership since 2013, succeeding an already unstable government from Hugo Chavez, has seen very little to combat the economic policies of the previous administration. The Maduro presidency allowed the continuation of overspending and increasing retail price controls, which only allowed Venezuela to spiral into an economic crisis that persists to this day (Foreign Policy).
Furthermore, the sanctions imposed upon by the United States on Venezuela did not occur until August of 2017, about seven years after the beginning of the economic crisis. Even then, these sanctions were, by comparison of other U.S.-led sanctions, moderate in nature. The New York Times states that these sanctions allowed for the “financing of most commercial trade, including the export of American light crude oil to Venezuela for mixing with its heavy crude, and financing for humanitarian services to the Venezuelan people” (New York Times, 2017). The heavier sanctions were not imposed by the United States until 2018 to 2019, where the Trump administration imposed broader sectoral sanctions to block transactions with anyone involved in the Maduro government and sanctions on the Maduro government overall (FAS.org, Congressional Research Service). Additionally, stricter sanctions came into effect in 2019 regarding the transportation of oil from Cuba to Venezuela which, as mentioned before, cuts into the stability of their oil industry. Not only are the U.S.-led sanctions regulating political ties with President Maduro and his government, but also are interfering with Venezuela’s economic strengths such as oil importation and exportation.
What can be deduced, then, is that the sanctions imposed by the United States are not the cause of the current economic crisis that befalls Venezuela, but a component that exacerbated the existing situation even further. The United States punched down when it could have been raising Venezuela up. In March of 2021, an article from PBS stated that many current Democrats are pressuring the Biden administration to carefully review the sanctions imposed upon diesel fuel swaps between the United States and Venezuela. Democrats argue that this and many other sanctions are leading to a worsening of the country’s “dire humanitarian crisis” as diesel fuel is needed by farmers to move food supplies to markets using trucks. Juan Gonzalez, the National Security Council’s senior director for the Western Hemisphere says that they’re framing it as a humanitarian situation, but the Venezuelan government is “giving it to Cuba while the people suffer” (PBS, 2021). Additionally, because of the economic decline and the incompatibility of retail prices and the minimum wage, the average person living on minimum wage can buy fewer daily calories worth of food in 2019 compared to 2010.
While one side seeks to bring about the humanitarian crisis as an argument, the other side sees it more as an act of political caution. Common arguments arise of whether the influx of economic materials being brought in by the removal of sanctions will be taken advantage of by the instability of the Maduro government. The conversation wrestles with either putting Nicolas Maduro out of power or lifting the sanctions and reaching out to Maduro in order to at least regulate the distribution of imported aid. However, at this moment, the sanctions are only doing harm to the existing economic crisis of Venezuela. The preferred position in the discourse is simply to lift them from the country completely.
(FAS.org, Congressional Research Service): https://fas.org/sgp/crs/mideast/RS20871.pdf
(FAS.org, Congressional Research Service): https://fas.org/sgp/crs/row/IF10715.pdf
(Historians For Peace): https://www.historiansforpeace.org/working-groups/empire-and-war/
(Historians For Peace): https://www.historiansforpeace.org/working-groups/empire-and-war/an-empire-of-sanctions/
Data and Graphs
(Jewish Policy Center): https://www.jewishpolicycenter.org/2019/04/04/venezuelas-hyperinflation-29-months-and-counting/
— Tyrin Douangvichit is an economics major at UMass Boston and a Spring 2021 intern with Massachusetts Peace Action