The White House today announced an executive order that would ban US persons and entities from participating in any petro-currency transactions with Venezuela. The order prohibits transactions involving “any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venzuela.” A copy of the executive order is available here.
Venzuela’s President Nicholas Maduro has designed a petro-currency offering to try to avoid US sanctions. In our view, this petro-currency approach is really only viable in Maduro’s own mind. Trump’s executive order is mostly symbolic to send Maduro a message that the walls are closing in on him as the US shuts down what he views as a loophole in US sanctions.
We do not think today’s executive order precludes future US energy sanctions on Venezuela. But we suspect that discussions have somewhat paused since the departures of Rex Tillerson and Gary Cohn from the Administration.
Tillerson had emerged as a strong advocate for US sanctions on Venezuela crude sales and did an end-run around the White House staff to get Trump’s approval. The National Economic Council (NEC) staff was trying to walk back Trump’s approval of the policy and replace it with less-harsh sanctions on individuals. The NEC is concerned about the impact on US gulf refiners who rely on the heavy Venezuelan crude that is not easily replaced. However, the additional departure of NEC Director Gary Cohn may have also sidelined the NEC effort. Secretary of State-designee Mike Pompeo is likely to have a major influence on on-going policy discussion regarding oil sanctions.
The Trump Administration is increasing pressure on Maduro after he announced new scheduled presidential elections on May 20.
President Trump has announced that he will attend the Summit of the Americas on April 13-14 in Lima, Peru, and we expect the US policy on Venezuela to be finalized going into this international meeting. Maduro, who is isolated in Latin and South America, has not been invited to the Lima meeting but he has made comments suggesting that he will crash the meeting.
