Sanctions Update: Venezuela Is not Russia

March 24, 2015 9:15 AM

The Obama administration imposed new sanctions on Venezuela last week, declaring, in a letter to House Speaker John Boehner, “a national emergency with respect to the unusual and extraordinary threat to the national security and foreign policy of the United States posed by the situation in Venezuela.”

These sanctions will deny visas and freeze the assets of officials who the US claims were involved in violent street protests that killed 43 people in February 2014. The sanctions also target officials who undermine democratic processes, limit freedom of expression, or engage in public corruption.

The assertion that the situation reflects a “national emergency” for the United States is puzzling. Venezuela is a national security threat only to itself. Years of distorted economic policies have left Venezuela with a second straight year of negative economic growth and the world’s highest rate of inflation. Foreign reserves are dwindling—a bizarre situation for an oil exporter that enjoyed nearly a decade of record high petroleum prices. A four-tier currency system benefits corrupt insiders but hurts the poor and middle class. Widely reported are shortages of basic goods—toilet paper, diapers, baby formula, and medicines among others.

The declaration of a national emergency is a procedural aspect of most sanctions programs, as a senior administration official clarified in a conference call. The White House points out that the sanctions are aimed not at the Venezuelan people but at particular individuals. Strong US language, however, will certainly add fuel to President Nicolás Maduro’s anti-American rhetoric and conspiracy claims. In turn, sanctions will serve as a rallying cry against the Venezuelan opposition as well as the United States. Sanctions may actually help Maduro recover his dismal popularity ratings. They have already prompted the Venezuelan congress to grant Maduro expanded executive powers—the same powers he previously used to limit speech and quell opposition.

Equally important, this action serves to chill the incipient warming in hemispheric relations that resulted from President Obama’s December 17, 2014, decision to resume diplomatic relations with Cuba. Coming only a month before the first Summit of the Americas in which the United States will sit at the table with Cuba, the Venezuelan sanctions will dim Obama’s luster as a friend of hemispheric reconciliation

And the hemisphere needs a boost of goodwill. After a decade of robust growth, many South American countries are facing low growth, rising inflation, and popular discontent—particularly Brazil. Increased engagement could generate economic payoffs as well as diplomatic results. Brazil’s President Dilma Rousseff had been signaling an intent to reschedule her state visit to the United States—cancelled in 2013 in the wake of the National Security Agency’s phone taps. It would be unfortunate if regional loyalties kept her from making the trip once again.

That the new sanctions target particular state officials is cold comfort for those who view US policies as a heavy-handed assault on the Venezuelan people. Here it is instructive to turn back to conclusions reached by Gary Hufbauer and Jeffrey Schott in their decades-long study of economic sanctions. Their first lesson is that “the economic impact of sanctions may be pronounced, especially on the target, but other factors in the situation often overshadow the impact of sanctions in determining the political outcome.”

It is worth asking whether the cost in hemispheric goodwill is worth whatever impact these sanctions may have. Sanctions may eventually help to put pressure on the administration. It is more likely, however, that the Maduro regime will be brought down by its own economic policies.

Comments

Andrew

Surely we're well overdue for a PIIE analytical piece on the details of the Venezuelan government's serial mishandling of economic policy.

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