The US adopted a fourth round of sanctions to prevent Venezuela and state-owned oil company PdV from issuing new debt and equity that it says are helping to finance the "illegitimate rule" of president Nicolas Maduro.
But the sanctions, which US president Donald Trump approved today, include exemptions that allow PdV continued access to financing needed to maintain crude exports, and allow PdV's US downstream subsidiary Citgo to sustain business operations.
US officials say the sanctions are intended to pressure Maduro to hold elections, while avoiding harm to Venezuela's economy and its citizens.
"We will not stand by as Venezuela crumbles," the White House said today. "The president's new action prohibits dealings in new debt and equity issued by the government of Venezuela and PdV."
The sanctions would limit Venezuela's ability to raise revenue through the US financial system by prohibiting the issuance of new debt and bonds, with exceptions such as commercial trade financing, financing the import and export of petroleum, and financing for humanitarian assistance.
The US says the Venezuelan government has resorted to "opaque financing schemes" and liquidating assets at "fire sale prices" to enrich itself.
The White House stopped short of prohibiting imports of Venezuela crude, and included multiple exemptions to allow Citgo to "continue its business operations and ensure the dictatorship does not loot" the company, says a senior US administration official.
But the US says further sanctions are possible in the future. "What we are trying to do here is create a series of escalatory measures we can take. Obviously the US has a lot of influence over the Venezuelan economy, but we do not want to rush in and use our influence in an irresponsible manner," said a senior administration official.
Prior to today's action, the US had imposed targeted sanctions on around 30 Venezuelan officials, including more recently Maduro himself.
Speaking at the UN in New York this afternoon, Venezuelan foreign minister Jorge Arreaza called the new US actions "anachonistic" and "hostile", and said the US "could not be allowed to cause a humanitarian crisis in Venezuela."
In Caracas, there was no immediate response from PdV or the energy ministry.
But the Venezuelan defense ministry said it would hold military exercises involving "over 1mn armed combatants" this weekend to show it can repel a US invasion. Maduro ordered the exercises last week after Venezuelan intelligence and diplomatic officials confirmed that Washington was preparing tough new financial sanctions, a senior defense ministry official tells Argus.
Military delegations from Cuba, Russia, China, Belarus and Vietnam will participate as direct observers in the national defense exercise, the defense ministry said.
Venezuela currently produces around 1.9mn b/d of crude, of which about 1.4mn b/d is exported mainly to the US, China and India. Production has fallen steadily since the 1990s, when the Opec country pumped in excess of 3mn b/d.
Former Venezuelan central bank economists Orlando Ochoa and Jose Guerra warned earlier this month that Venezuela's economy may contract by over 10pc in 2017, with annual inflation ballooning to over 1,200pc by early 2018.
