The Biden Administration Tries Something Different in Venezuela

Economic sanctions have not worked in Venezuela. Will lifting them work better?

Photo by Ronal Labrador on Unsplash

The United States has sanctioned Venezuela a lot over the last fifteen years. Like, a whole lot. The reasons for these sanctions have varied over the years — anti-terrorism, anti-narcotics, anti-democratic practices, you name it — but the result has been an escalating series of sanctions that helped lay waste to Venezuela’s economy. According to International Monetary Fund estimates, between 2016 and 2020 the Venezuelan economy shrank by more than 20 percent every year. This occurred at the same time that Venezuela’s inflation rate peaked at over 65,000%. In other words, sanctions helped contribute to stagflation on steroids.

There are three things to know about the U.S.-led sanctions against Venezuela and their economic and political effects:

1. Do not underestimate Venezuelan leader Nicolás Maduro’s role in deep-sixing the Venezuelan economy. The sanctions only partially contributed to that country’s economic mess;

2. As much as I love to criticize the Trump administration, their 2018 decision to ratchet up of Venezuelan sanctions was way more justified than most of their other foreign policy moves. The Venezuelan economy was tanking, there was strong civil society opposition to Maduro, and there was multilateral support for coercive diplomacy. As odds go for sanctions success, that combination is pretty solid;

3. The sanctions have failed to dislodge Maduro and his party from power.

This might explain why the Biden administration changed tack this week. After a deal between Maduro and the opposition to conduct free and fair elections, the Biden administration announced a temporary lifting of some of the sanctions. According to the Washington Post’s Karen DeYoung and Ana Vanessa Herrero:

The Biden administration on Wednesday eased oil, gas and gold sanctions against Venezuela a day after the government of President Nicolás Maduro and the U.S.-backed opposition agreed to terms for a competitive presidential election next year.

The Treasury Department issued a general license authorizing U.S. companies to engage in long-barred transactions primarily in the state-controlled energy sector. It said the license is to be valid for six months, to be renewed only if the authoritarian socialist government “meets its commitments” for elections and “with respect to those who are wrongfully detained.”

The agreement signed by the government and opposition politicians Tuesday, following years of on-again, off-again negotiations, could be a breakthrough in the South American nation’s stifling political stalemate. The Biden administration promised to consider suspending some sanctions in exchange for progress….

The United States “has also conveyed our expectation and understanding” that before the end of November, Maduro will “define a specific timeline and process for the expedited reinstatement of all” candidates in upcoming elections, including “all who want to run for president” next year, and a “level electoral playing field,” [Secretary of State Antony] Blinken said.

Not everyone is happy about this move. Politico’s Ben Lefebvre notes that a lot of congressional Republicans are displeased:

News of sanctions relief left Republicans fuming. Lifting the financial penalties is “beyond absurd,” Alaska Sen. Lisa Murkowski, who has criticized the administration for restoring a ban on oil production in some of Alaska’s wilderness, said in a statement this week.

“They’re easing up on the worst regimes in the world, giving them the revenues to stay in power and spread terror and corruption, while kneecapping environmentally responsible development in Alaska,” she said in a statement.

Sen. John Barrasso of Wyoming, the No. 3 Republican in the Senate, followed suit: “With Israel under attack, Biden is desperate for anything to mask the consequences of his reckless policies,” he said in a statement.

“His latest gimmick is to ease sanctions on Nicolas Maduro’s brutal regime in Venezuela. America should never beg for oil from socialist dictators or terrorists,” said Barrasso, who is also the ranking Republican on the Energy and Natural Resources Committee.

Reading through the coverage, Barrasso’s accusation seems way off. Lifting the sanctions will not inject much more oil into the market. First, Venezuela’s brand of heavy crude is difficult to refine, meaning there will not be a lot of spare capacity to handle it. Second, and more importantly, Venezuela’s socialist regime has succeeded in running its state oil company PDVSA into the ground. The country’s current oil output is barely a fifth of what it was fifteen years ago. Scaling up Venezuela’s oil production will take time and money. A six-month reprieve of sanctions is unlikely to spur that much activity.

The hard-working staff here at Drezner’s World has only a glimmer of hope that this new strategy will pay off. There are plenty of reasons to be skeptical. Maduro, and Hugo Chavez before him, were really, really good at tilting the playing field in favor of their party (the United Socialist Party of Venezuela) for any elections over the last twenty years.

Of course, the same was true of Poland in recent years, and last week Polish voters came out in record numbers to cast aside the populist Law and Justice Party in favor of a united opposition. Venezuelan experts sound cautiously optimistic that this is a better way forward than the prior status quo.

The primary argument in favor of this move towards lifting sanctions is that it is the best shitty alternative available. The status quo policy was definitely not working. The U.S.-led sanctions against Venezuela had harmed the economy but not dislodged the regime. If the promise of lifting some sanctions allows a freer election in the country — and staunches the flow of refugees at the same time — then it is worth trying out. There is the added bonus of demonstrating to the world that the United States is capable of lifting sanctions — a credible commitment that has been difficult for Washington to display in recent years.

The bottom line is that I wager there is only a 25 percent chance that this will advance U.S. interests in Venezuela. The thing is, there was only a 5 percent chance of the sanctions advancing those same interests. So, even though this effort is likely to fail, it’s still the better policy option. The Biden administration is right to try it.