US Secretary of State Mike Pompeo last week said that the US was planning to ramp up pressure on Venezuela and would be making an announcement this week leading to speculation that oil sanctions could be forthcoming. But we believe there is almost zero chance that the US is planning to impose oil sanctions on Venezuela crude.
As we wrote in a client note on September 6, 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.”
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.
We suspect that Pompeo is referring to an effort this week by the US to ask the UN to increase pressure on the Maduro regime during the UN General Assembly. We certainly think other sanctions on individuals and perhaps even on US exports of diluent to Venezuela.
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.
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.
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.