US Secretary of State Rex Tillerson ended a recent foreign trip through South America this week with notable comments that the US was exploring energy sanctions on Venezuela in response to an upcoming Presidential election in April.
It was not clear at the time if Tillerson’s comments were simply talking points during a visit through the region or a real change in US policy. It now appears that it is indeed a change in US policy as we have learned that President Trump has given the green light to future oil sanctions on Venezuela.
An announcement is likely several weeks away until other details are finalized. Specifically, the scope of sanctions is still being discussed internally about whether sanctions will prohibit US imports of Venezuelan crude or wider sanctions on all Venezuelan crude sales globally or other measures.
Tillerson is now the main advocate for oil sanctions and recommended this action to President Trump this week. Tilleron’s trip to the region was largely to consult allies about the impending US action.
US officials now believe that current conditions are untenable for the Venezuelan people and sanctions are needed to expedite the end of the Maduro government. The April Presidential election in Venezuela is now the catalyst for US sanctions.
Venezuela exported about 500,000 barrels a day to the US gulf refiners in January but down from about 800,000 from a year ago. Sales of Venezuelan crude to US refiners provides the cash lifeline for the Maduro regime. Venezuela will have difficulty finding a replacement buyer of its crude exports to the US and so removing his crude from the market will provide a boost to oil prices and the added benefit of enhancing OPEC’s deal compliance.