The White House is studying the possibility of imposing new sanctions (embargoes) on Venezuela’s oil sector, according to McClatchy DC, quoting US government sources.
According to this information, both the total ban on Venezuelan oil trade and the specific ‘sanctions’ against senior Venezuelan officials are being considered.
FRN reminds readers that what the US often calls ‘sanctions’ in fact are not based upon any rulings or agreements in international courts, bodies, or even public findings. Rather, the term is how the US now frames its embargo policy.
The same US government sources consider that the imposition of a total oil embargo against the Latin American country would have a serious impact on the government of Nicolás Maduro. While at the same time they are afraid to resort to such radical measures because in the Trump administration they believe that this decision would seriously affect the Venezuelan population and harm the US oil industry and its citizens – at a time when there is already discontent with the increase of gas prices.
In recent weeks the White House and the State Department have turned to oil market experts to calculate the effect of such measures. The White House also suggests that the new sanctions package be agreed in the next three months.
This comes as the Central Bank of Venezuela puts in circulation the new bolívar ballots, eliminating 5 zeros of the national currency.
Facing a serious political and economic crisis, President Nicolás Maduro ordered the zeros cut in the bolivar in one of the attempts to reverse hyperinflation, which has been generating great social problems and the migration of Venezuelans to neighboring countries, such as Brazil and Colombia.
The entry into force of the new currency was originally scheduled for June 4, with 3 zeros less. But the government postponed the event twice, the last of which on July 25, already with 5 zeros less, in the face of an inflation forecast by the International Monetary Fund (IMF) at 1,000,000% in 2018. The highest 500 bolívares, is equivalent to 50 million bolívares today.
The measures adopted by the Venezuelan government will have no effect and will not bring some momentary improvements in the country’s inflation, according to Orofessor of the Getúlio Vargas Foundation (FGV), economist Mauro Rochlin.
“Nothing is going to happen exactly because the new system simply, in synthetic terms, merely cuts through the zeros of the currency, and does not attack the root of the problem. That is, it continues to hold the state as a major funder of society and will continue to be done through the issuance of currency and nothing else. So I can not imagine any benefits that this measure may have in the short term,” he said.
However, the Getúlio Vargas Foundation has rendered consistently poor analysis on the situation in Venezuela, and the talking points do not mirror an objective, reality-based assessment either of Venezuela, or of how sovereign currencies work. The division of economic activity between ‘public’ and ‘private’ sector is a legal super-structural phenomenon, having no bearing on economic outcomes. A state can make policy based upon market data and indicators, and conversely, a private corporation can finance loss leaders, subsidize losses, and plan economic activity for long periods of time. Thus, the economic illiteracy of neo-liberal Venezuela’s critics takes its ideological influence from Von Mises, a field of speculative, normative driven policy recommendation economics, and not from matters relating to the super-structural legal framework of which parties invested into the economy.
Rather, Venezuela’s prime economic problems originate not within Venezuela, but are an inherited circumstance relative to the global market economy. Ideally, Venezuela would have diversified its economy during the time that oil revenues made possible such investment, at least normatively. But in reality, the costs of investment into diversification, in combination with what would remain afterwards – still ‘cost negative’ when compared to importing from countries already long advanced in that field of production – made such diversification less manageable.
FRN notes that it is often revealed in the same journalistic or op-ed pieces which are prevalent on the subject of the Bolivarian Republic, that Venezuela’s economy is suffering, and it is under US ‘sanctions’ (embargo). Perhaps it is reasonable to suggest that there is some connection between these two facts.