Trump tightens Venezuela’s access to US financial system – Washington Post

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President Trump signed an executive order on Aug. 25, to restrict Venezuelan President Nicolás Maduro’s access to the U.S. economy. National security adviser H.R. McMaster said the action strongly punishes Maduro’s “illegitimate dictatorship.” (Reuters)

President Trump moved Friday to restrict the Venezuelan government’s access to the U.S. financial system and squeeze the oil-based economy that sustains President Nicolás Maduro but stopped short of imposing a full oil embargo.

New sanctions dealing with Venezuela’s access to credit were effective immediately, officials said. Trump signed an executive order barring dealings in new bonds and stocks issued by the government and the state oil company, Petróleos de Venezuela (PDVSA), the parent of Citgo. Banks also cannot engage in new lending with the government or the oil giant.

“These measures are carefully calibrated to deny the Maduro dictatorship a critical source of financing to maintain its illegitimate rule,” a statement issued by the White House said.

The action followed Maduro’s decision to convene a special assembly to rewrite the constitution of the oil-rich nation and assume many government powers. U.S. and Latin American leaders say Maduro’s government is veering toward dictatorship.

“The president is making sure that the U.S. financial system will not be complicit in any future further placement of debt that would allow the Venezuelan government to finance this abhorrent behavior,” a senior Trump administration official told reporters in a phone briefing.

Venezuelan President Nicolás Maduro speaks at a news conference in Caracas on Tuesday. (Ariana Cubillos/AP)

“The president is taking steps to inhibit the Maduro regime’s ability to continue to finance its unconstitutional, undemocratic behavior,” said the administration official, speaking on a condition of anonymity set by the White House.

The new economic sanctions are likely to deepen a financial crisis in Venezuela, where the oil-based economy has shrunk by about 35 percent since 2014.

The Trump administration’s goal is a return to full democracy, including free elections, adherence to the country’s constitution and the reestablishment of the authority of the elected assembly, U.S. officials said.

This is the fourth round of U.S. sanctions and the first to directly target Maduro’s access to prime sources of funding.

U.S. officials called the new financial penalties calibrated and acknowledged that they are less severe than some of Maduro’s critics had requested. Venezuela can still export oil to the United States and import it. Venezuelan heavy crude oil is crucial to some U.S. refiners, which are geared to handle that specific type. Venezuela imports lighter crude, including from the United States.

The sanctions would prevent, for instance, a repeat of a $2.8 billion bond deal with Goldman Sachs reached earlier this year that gave the cash-strapped Venezuelan government an important lifeline. Yet Venezuela’s growing international isolation due to Maduro’s power grab, coupled with its fast-eroding financial stability, has already effectively shut it out of debt markets as investors see it as too great a risk.

President Trump spoke about Venezuela after meeting with Secretary of State Rex Tillerson, left,Nikki Haley, U.S. ambassador to the United Nations, and national security adviser H.R. McMaster in Bedminster, N.J. on Aug. 11. (The Washington Post)

The sanctions do, however, make its inability to access traditional debt markets official, and it will be ever harder for the government there to climb out of its financial hole.

And while the sanctions stop far short of an oil embargo, the move does suggest a willingness by the Trump administration to gradually turn up the heat on Maduro in new ways.

“It won’t have any important impact in terms of financial flows to Venezuela, because there aren’t any to speak of right now,” said Siobhan Morden, managing director and Latin America expert at Nomura Holdings. “But it confirms what we know, that they now definitely do not have access to external capital.”

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