Extending Venezuela sanctions to crude oil may backfire

Extending Venezuela sanctions to crude oil may backfire, senators say

Four Republican US senators warned President Donald Trump that extending unilateral sanctions against the regime of Nicolas Maduro in Venezuela to that country’s crude oil exports could inadvertently harm US Gulf Coast refiners and the consumers who use their products.

“Sanctions targeting the oil sector, the [Venezuelan] government’s only real source of revenue, increase the likelihood of a disorderly default, a situation where the government is pushed into default without having worked out a restructuring in advance with creditors,” Sens. Bill Cassidy (La.), Thad Cochran (Miss.), John Cornyn (Tex.), and Roger F. Wicker (Miss.) said in their Aug. 10 letter to the president.

“Creditors could then seize oil assets and cut off the country’s remaining supplies of financing. This would make it even more difficult to import items that the people of Venezuela need, including food and medicine,” they pointed out.

The four GOP senators expressed concern that unilateral sanctions against Venezuela could harm the US economy, make US businesses less competitive globally, and raise costs for US consumers.

“While deliberating the spectrum of potential responses, we believe it is critical to consider the role that the US energy industry and refining sector play in our economic and national security interest,” they said.

‘Could inflict great harm’

USGC refineries that process heavier grades of Venezuelan crude represent a substantial portion—nearly 10%—of US imports, the senators said. “Blockading imports could inflict great harm on this industry and burden US taxpayers with the cost,” they said.

“It is clear that there is a market outside of the US to receive the Venezuelan oil. Without cooperation by the international community, including Russia and China, the US energy industry and American citizens will bear the economic consequences of the sanctions,” the senators warned.

The lawmakers emphasized that they support efforts to counter disturbing decline of democracy and social well-being in Venezuela.

“Ultimately, it is in the best interest of the US and the Venezuelan people to maintain our economic ties as leverage for delivering a democratic government back to the people,” they told the president. “As your administration considers additional measures to stem this decline and ultimately reverse it, we urge a coordinated, multilateral approach that deprives the Maduro regime of all funding options, rather than simply closing the door to the US market.”

The American Fuel & Petrochemical Manufacturers expressed similar concerns to Trump in July about imposing US sanctions on Venezuelan crude oil imports to refineries in this country (OGJ Online, July 10, 2017).

Source of article: Oil & Gas Journal