The effects of US oil sanctions on Venezuela

TEHRAN, Mar. 03 (MNA) – Progressively, the sanctions against the Venezuelan government produce an expansive wave that affects the interests of the United States and its foreign policy. despite the reassuring projections that the Energy Information Administration (EIA) of that country has communicated to reduce concerns about the global impact of the freezing of Venezuelan assets on US soil by the Treasury Department.

On Monday, January 28th, Treasury Secretary Steven Mnuchin announced coercive measures against the main Venezuelan companies operating in the United States, accusing them of “helping prevent Maduro from continuing to divert Venezuela's assets and preserve these assets. for the Venezuelan people, The executive order places the institutions of the entity, including the Central Bank of Venezuela (BCV) and PDVSA as the target of sanctions.

In addition to blocking $ 7 billion worth of assets, the ban on US and allied companies to negotiate with PDVSA would result in a loss of $ 11 billion additional, no more for exports.

In an analysis published by the EIA, it is denied that sanctions against PDVSA will have significant consequences on the operation of US refineries. Apparently, the oil companies that supplied Venezuelan oil were reducing their imports by providing for this scenario.

However, experts in the area say that in the coming weeks it will be possible to see how it will affect the performance of the Gulf Coast industries.

Antoine Halff, the principal investigator of the Columbia University Center for Global Energy Policy, explained that “Venezuelan oil is of a unique quality that fits very well with US refineries on the Gulf Coast” and finds an immediate alternative is a difficult task due to several factors.

These refineries located in the states of Louisiana and Texas must be fed for operation with about 30% of heavy oil. Although their costs of production are more expensive, they can compete in the market for the low price of oil, which they have imported into much of Venezuela. According to information provided by the Department of Energy, in 2018 the United States imported an average of 500,000 barrels of Venezuelan crude oil per day.

The director of the UK Energy Institute, Eric Smith, explains that the imported resource represented 2.8% of the 20 million barrels consumed by the United States, but in relation to heavy oil, the percentage rises to 17%. The drop to zero leaves a gap of 3 million and 500 thousand that cannot be replaced so easily.

Options to replace the resource are mainly offered by Mexico, Canada, Russia, Saudi Arabia, and Iran.

Mexico and Canada, which are preferred by their border proximity, present specific challenges. Canada does not have a pipeline system that lowers the price of imports from the north to the Gulf coast. The train, currently used for transporting oil, is twice as expensive as other forms of transport. The government of Mexico is currently facing a significant reduction in oil production due to the abandonment of the energy sector and the robbery in its oil pipelines. Work to rebuild the national industry and increase production will take at least three years.

For its part, Russia and Saudi Arabia are among the OPEC and non-OPEC countries that have agreed to produce less crude, in order to influence global market prices and sustain barrel prices. Iran, however, elaborates the commercial aggressions that the United States imposed in November 2018.

if OPEC's efforts to reduce production are consolidated, is directly related to the increase in gasoline. The sanctions against Venezuela, it could contribute to this effect, as happened last year with the blockade against Iran.

The American Automobile Association, which was monitoring the potential impact of sanctions, pointed out that the measures taken in November against the Persian nation had a rebound in gasoline prices “significantly more expensive than in 2017”.

The volatility of unilateral measures ends up being paid by low-income citizens, who must allocate an important part of their budget to things like gasoline. Even diesel production, an input derived from oil that is used for heating, is at risk by limiting crude oil revenues to US refineries. If there is no option to replace the lack, the price of domestic supplies will increase, affecting low-income households.

To this we must add the distribution systems that are supplied with diesel (trucks, boats, and railways) that increase in transport would have an impact on all consumer goods.

On this, we must mention the social work carried out by the Venezuelan government through its subsidiary CITGO, a company that was taken de facto, following the announcement of the embargo.

In Bronx County, New York, the social warming program for low-income people has been running since 2005. The Venezuelan refinery provides this resource to over 40,000 families who do not have the means to pay for private service.

Fuel is supplied to 25 other states, reaching 1 million people with an investment of $ 500 million.

The US maneuver is transferred to third parties affected by the oil embargo. Thanks to the strategic route of Petrocaribe, traced by Venezuelan foreign policy, the national oil industry has joint ventures and refineries in the Caribbean and Central American countries. The precarious relationship between Washington and the Caribbean countries, which now have to bear the economic shock, allows another scenario, not at all desirable for the White House.

The time to press and force a regime change is exacerbated as the bizarre effect of the sanctions affects the White House financially and politically. Threatening a sensitive element like oil, an energy resource that forms the backbone of the global economy, puts at risk the country that currently faces the rest of the world in a clear position of bravado.


News Code 143043


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