US to target Venezuelan gold trade to pressure Maduro

The US Treasury Department is looking at measures to cut off gold exports from Venezuela as a new means to apply pressure on President Nicolas Maduro's government.

The Maduro government since 2016 has allowed unregulated gold miners to operate in Venezuela's Orinoco belt under the protection of senior military officials, assistant treasury secretary Marshall Billingslea said today. "The vast majority of that gold is going to Turkey. We have seen 21 metric tons that have gone to Turkey in recent months," he said at the Brookings Institution, a Washington-based think tank.

The focus on gold trade indicates an ongoing re-evaluation of the US sanctions on Venezuela that have so far failed to prevent Maduro from consolidating his power at the expense of the opposition-controlled National Assembly. The US has already imposed restrictions on financing for state-owned PdV and the Venezuelan government. Direct sanctions on the country's oil sector, which provides the bulk of its foreign exchange revenue through sales to US buyers, remain an option, but the US is wary of hastening the country's economic collapse.

"The regime has largely devastated PdV — there is nothing left to steal," Billingslea said. "We have seen a dedicated shift to looting this particular national resource (gold)."

PdV internal data obtained by Argus suggest that just 100,000 b/d out of Venezuela's September oil exports of around 1.1mn b/d generates 100pc cash revenue, with the rest exported to service oil-backed debt to China and Russia or swapped for gasoline and naphtha.

Venezuela's military has courted foreign investors to set up joint ventures with its fledgling oil, gas and mining company Camimpeg. Caracas has also turned to state-owned or controlled companies in Africa and China for investment in the mining sector. But its overtures have so far have been rebuffed.

"We are aware of a wide range of reporting that (Colombian rebel groups) FARC and ELN are involved in the mining," Billingslea said. The unauthorized gold mining is creating severe environmental and health problems. "They are stripping the forest, creating open bodies of water and dumping mercury to process gold. This will be an environmental catastrophe for centuries," he said.

The administration seems to have given up on a possibility of a negotiated outcome between Maduro and his opposition, but still hopes that government insiders may somehow instigate a change in policies. "We urge those who have not yet been designated (for sanctions), or those who are part of the inner circle and want to have a future beyond Maduro, to move now. They need to move actively," Billingslea said.

The US administration acknowledges that the Maduro government has divided and marginalized the opposition, but insists that the National Assembly remains the only institution that can authorize new debt. "The only legitimate institution that we at the Treasury recognize as being able to authorize such transactions is the National Assembly," Billingslea said of the proposal to replace PdV with a new national energy company that would inherit everything but PdV's growing debt.

"When we see Maduro and his cronies come out with new evasion schemes, we will preempt them, as you saw us do with this crazy Ponzi scheme called the petro," Billinglsea said. The Treasury earlier this year issued a prohibition on all US persons and companies from any transactions involving Venezuelan "petro" — a virtual currency backed by undeveloped oil reserves in that country.

The government in Caracas faces more immediate financial pressure of paying over $950mn of principal and interest due by 27 October on a bond backed by 50.1pc of the shares in US refiner Citgo's indirect parent firm, Delaware-based PdV Holding. Citgo, considered PdVs most valuable asset, is subject to a separate lien by former Canadian mining firm Crystallex over an unpaid arbitration claim that in late December may result in a court ruling ordering the US refiner to be put on the block.

"Treasury and the State Department are both following (the Citgo issue) very, very closely, and we are constantly re-evaluating our approach to all of the economic issues surrounding Venezuela," secretary of state Mike Pompeo said last week.