The Trump Administration has dropped any immediate plans to impose sanctions on Venezuela oil sales until at least after the US mid-term election, according to our ongoing assessment and discussions with administration officials.
McClatchy News reported on August 24 that US sanctions on Venezuela oil were being “actively discussed” by the Trump Administration citing two unnamed senior officials.
We immediately dismissed the report since our understanding from administration officials is that the White House is spooked by high gasoline prices this summer after re-imposing Iran oil sanctions and does not want to take any further actions that could spike prices.
But several clients asked us to investigate the McClatchy report to see if there was any new thinking of a policy shift by the administration.
Certainly, the administration remains very concerned about Venezuela and is increasing talks with allies in Latin America on the situation as evidenced by Defense Secretary Mattis’ recent tour through the region last month.
However, we have been assured by our contacts in the administration that there are zero plans to impose US sanctions on Venezuela oil – at least until after the US election.
We suspect the McClathy report originated from the State Department or even perhaps the National Security Council which both favor tougher action on Venezuela. We can certainly see some additional targeted sanctions on Venezuela that could include a ban on diluent sales from the US to Venezuela. However, even if foreign policy officials wanted to pursue sanctions on Venezuela oil, we strongly believe Trump himself would nix any such action.
Also, while the timeline suggested by administration officials that there will be no oil sanctions “until at least after the election,” we think the timeline will be longer. That’s because Iran oil sanctions become effective the same week of the US mid-term election that should send oil prices higher in November and end of Q4.
It is also worth noting that to the extent Trump focuses on Venezuela, we are told he has several times over the last year asked out loud to his staff why military action is not a real option to expedite Maduro’s removal.
On August 11, 2017 at a White House press event, Trump stated that “we have many options for Venezuela, and by the way I am not going to rule out the military option.”
Some Trump friends with whom we have consulted have told us that the President cites the US military action in Panama during the George H.W. Bush administration when discussing Venezuela and Maduro. We are told that Secretary Mattis and other national security officials have discouraged Trump on the military option but it appears to keep coming up.
We are not suggesting that US military action in Venezuela is in the works but only raise it to show that when Trump thinks about Venezuela, he does not focus on oil sanctions.