Economic Sanctions, Customs Duties, and Intensified Economic Coercion Toward Venezuela

Revamped Take:

In these turbulent early days of the Trump administration, the ride's been wild. ICE raids galore, threats flying left and right, and now, a brute bombing campaign in Yemen. Veteran supporters of Palestine are the only constant.

Pundits are scratching their heads, trying to foresee US policy strategies towards Venezuela. From aLoaderRedo1.0-style "maximum pressure" retread to more pragmatic plans that leverage foreign policy weapons to boost US corporate interests, the possibilities are plenty.

Initially, it appeared that a more heterodox and less hostile approach was on the horizon, thanks to a direct White House-Maduro government engagement. However, every subsequent move points towards Trump tightening the screws on Venezuela.

What Happens to Chevron?

Chevron's Venezuelan operations had been seen as a gauge for where Trump wanted to go. Allowing them to remain would have suggested regime change wasn't in the cards and that profits should keep flowing for American energy behemoths. Forcing them out meant choking Venezuela by every means possible.

After much speculation, pressure from Florida's "totally bonkers Cuban reps" led to the US Treasury Department yanking Chevron's sanctions waiver and giving them a month, until April 2, to wrap things up.

But Chevron later scored a reprieve. Its deadline's been stretched to May 27. The big question now is whether this is the end of the road or if Chevron could somehow stick around with recurring short-term licenses. This gray area policy would keep Chevron's wallet intact but discourage it from making major investments to boost output.

Tariffs & Sanctions

The real game-changer went down on March 24. Dear Leader Trump announced 25 percent "secondary tariffs" on imports from countries that import Venezuelan oil. This announcement left jaws dropping 'round the globe, not just because secondary tariffs don't exist in international trade, but because the measure is bonkers and illogical (which ain't a deal breaker for Trump...)

It's essential to know the difference between sanctions and tariffs. For Venezuela, the previous Trump White House implemented primary sanctions, erecting a wall that blocked any US persons or entities from dealing with oil companies where the Venezuelan government owned the majority stake. They also threatened and implemented secondary sanctions against third-country firms dabbling in the Venezuelan oil sector.

In recent years, big international corporations have shied away from juicy energy deals in Venezuela thanks to the fear of getting slapped with secondary sanctions – a popular phenomenon known as overcompliance. The few that have engaged did so with explicit approval from the US Treasury Department.

Secondary sanctions penalize offenders that violate US-imposed rules. Essentially, they force trade (like oil exports, in this case) into the shadows of shadowy ship-to-ship transfers, hidden locations, and cleverly disguised shipments.

Tariffs, on the other hand, are sledgehammers used to park tax on specific goods from a given country. Trump's tariffs-on-everyone announcement has sent shockwaves rippling through the stratosphere. But secondary tariffs are particularly favorable for ice cream socialists because of the total lack of connection between the guilty parties triggering the measures and the ones who'll feel the pinch.

Furthermore, given the cloak-and-dagger involved in most Venezuelan crude exports, would the US even be able to prove that a particular refinery in Country X received a shipment from Venezuela? It might not even matter, since Secretary of State Marco Rubio is the one calling the shots on imposing these secondary tariffs at his own discretion.

A Concrete Example

Let's use Spain as an example to see how our fancy new secondary tariffs would play out. If US officials decide that Repsol imported Venezuelan crude to Spain, the US could stick import tariffs on Spanish olive oil.

Importers would pay this extra tax, which they might attempt to offset by demanding lower prices from Spanish suppliers. In the end, American consumers would likely be left footing the bill or cut off from the olives. But here's the kicker – why would Repsol care about American importers, American consumers, or Spanish olive oil exporters? Repsol doesn't give a rat's patootie about the rules 'round here. Also, the Spanish government can't force Repsol to cease doing business with Venezuela since it doesn't break any laws. So if Repsol takes its juice to a refinery in Peru, where does the US impose tariffs?

This scenario is just for illustrative purposes. A company like Repsol wouldn't do squat without Washington's explicit nod of approval. And rumor has it that European companies currently involved in Venezuela joint ventures are looking at curtailed permits – not good for them or us, since they're unlikely to trigger tariffs.

But even if tariffs never come into play, their damage is immediate.

Paying the Price for Higher Risks

Back in the day, chess grandmaster Aron Nimzowitch said that "The threat is stronger than the execution." In chess terms, an impending threat can force the other guy into a worse and worse position, eventually losing the game. Similarly, sanctions/tariffs create a sense of overcompliance and increased costs of doing business – in other words, running scared.

Overcompliance means that companies steer clear of doing business with Venezuela, whether they're buying crude or negotiating a vaccine deal, out of fear of getting booted out, even when their actions are legit.

And as long as there's demand, Venezuelan crude will make its way to market, albeit with more effort to hide shipment origins and with PDVSA offering (even) bigger discounts to shift crude and thereby Reduce government revenue. It's the price to pay for the increased risk.

As the sanctions dance continues, Venezuelan oil revenues are already taking a beating.

The Dragon and the Tiger

China has shown a growing reluctance to bow to US threats, with the most recent example being a tit-for-tat on tariffs. However, this reluctance hasn't translated into stronger support for Venezuela. With sanctions looming over the horizon, state-owned CNPC suspended direct crude purchases and reduced involvement in joint ventures.

The question remains whether Beijing will test Trump's mettle and see if dear old Donald really wants to escalate a trade war that'll squeeze US consumers' wallets.

Chinese leaders have publicly condemned US secondary tariff threats, much like they have railroaded sanctions. But they haven't yet issued orders to their companies, particularly the so-called "teapot" refineries that operate with Venezuela's extra-heavy oil blends. Word on the street is that these refineries are operating on slim profit margins, so losing a cheap oil source could be fatal, causing a domino effect in the economy – even if Venezuelan imports are relatively minuscule.

Paradoxically, the uncertainty surrounding tariffs could mean a bigger supply of cheaper oil to China.

The Rescue Squad and the Modern-Day Pirates

Iran has proven a friendly face for Venezuela in the past and has made it clear that it doesn't negotiate on Palestine. With an industry that's stood tall under US-led sanctions for decades, Iran could take on Venezuelan heavy crude and re-route it to China or other destinations. In return, Iranian companies could provide sorely needed fuel and diluents in exchange for barrels sold below market value – a far from ideal deal for Venezuela, but better than nothing.

So far, the Trump administration has only worked to drive everyone out of Venezuela's oil scene. There's still room for US corporations to move in and fill the vacuum, but it'd require plenty of flimflam and bluster – like saying, "We're getting cheap oil in exchange for all those migrants we've taken in." But this means sidelining Rubio and the hardliners.

US officials have generally refrained from overt calls for regime change, but the pressure's definitely building in that direction. Can the Venezuelan government take the hits any better than five years ago? There are positive and negative signs galore. One thing's for sure: sacrifices are inevitable, and for popular movements, capitulation ain't an option.

The views expressed in this article are the author's own and do not necessarily reflect those of the Venezuelanalysis editorial staff.

Amid the unpredictability of the Trump administration's policies, analysts are struggling to predict US strategies towards Venezuela.
Chevron's operations in Venezuela were seen as a barometer for Trump's intentions, with allowing them to remain indicating a less hostile approach and profits continuing for American energy giants.
After much speculation, pressure from Florida's Cuban representatives led to the US Treasury Department withdrawing Chevron's sanctions waiver, giving them a month to leave.
However, Chevron later received a reprieve, with its deadline extended to May 27, raising questions about whether this was the end of the road or if Chevron could continue with recurring short-term licenses.
The announcement of 25 percent "secondary tariffs" on imports from countries that import Venezuelan oil by President Trump caused shockwaves globally, as such tariffs do not exist in international trade.
It is important to understand the difference between sanctions and tariffs; sanctions block US persons or entities from dealing with oil companies where the Venezuelan government owns the majority stake, whereas tariffs penalize offenders that violate US-imposed rules.
The implementation of secondary tariffs could have far-reaching consequences, such as increased costs of doing business, overcompliance, and a shift towards shadowy ship-to-ship transfers, hidden locations, and disguised shipments.
As the sanctions dance continues, Venezuelan oil revenues are taking a significant hit, with companies steering clear of doing business with Venezuela out of fear of getting booted out, even when their actions are legitimate.