US looks to transfer oil revenue away from Maduro

The US administration is looking at ways to deprive Venezuela's sitting president Nicolas Maduro from accessing state-owned PdV's US oil sales revenue, White House national security adviser John Bolton said today.

"What we are focusing on today is disconnecting the illegitimate Maduro regime from the source of its revenues," Bolton said. "We think, consistent with our recognition of Juan Guaidó as the constitutional interim president of Venezuela, that those revenues should go to the legitimate government."

The US is the top destination for Venezuela's crude exports, and the primary source of foreign exchange revenue for Caracas. US imports of crude oil from Venezuela averaged 488,000 b/d in January-October 2018, a year-over-year decline of 24pc. US imports of Venezuelan crude and products averaged roughly $1bn/month in that period, US Census data show.

Redirecting oil sales revenue from the sitting government is a less intrusive step than an embargo on US imports from Venezuela, or US exports of naphtha and gasoline to that country. But taking that step will be complicated, in part because Guaidó and the opposition-controlled National Assembly over which he presides are yet to set up parallel government institutions. Holding that revenue in escrow funds in US banks is a possible solution. But it could also give pretext to holders of defaulted Venezuelan debt obligations to press their claims.

"It is very complicated. We are looking at a lot of different things we have to do, but that is in the process," Bolton said.

US president Donald Trump yesterday recognized Guaidó as Venezuela's interim leader minutes after he declared himself the country's acting president before a large crowd of protesters in Caracas. Twelve other countries in the western hemisphere support Guaidó's claim, including Venezuela's neighbors Brazil and Colombia. The EU, Mexico and Uruguay have called instead for talks between Maduro's government and the opposition. Russia and China, both of which have lent tens of billions of dollars to Maduro's government, have condemned Guaidó's declaration.

The US administration is looking to back Guaidó's claim to power through other means as well. The US will allocate $20mn to the National Assembly to spend on providing humanitarian assistance, secretary of state Mike Pompeo said today at a session of the Organization of American States (OAS) in Washington.

The State Department is yet to provide details on how the funds will be disbursed. The US to date has allocated $92mn on humanitarian assistance to Venezuela, but Maduro's refusal to accept aid has meant that the funds are spent on relief operations in neighboring countries. Estimates for Venezuela's humanitarian and reconstruction needs range from $60bn and higher. An estimated 4mn Venezuelans have sought refuge abroad in recent years, with Colombia absorbing a quarter of the total.

Pompeo called on other OAS members to recognize Guaidó's interim authority and pledged US assistance in helping restore Venezuela's economy. "We have watched Venezuela suffer far too long. The tyranny of the now defunct Maduro regime has choked its country and citizens."

But Maduro's government is not yet defunct. Venezuela's military leaders have declared support for Maduro as president and vowed to "categorically reject all actions to install a parallel government" led by Guaidó.

Maduro yesterday severed diplomatic relations with the US and ordered US diplomats to leave the country. But Pompeo said the US diplomats will remain in Caracas, citing Guaidó's statement of maintaining existing ties. "The US does not consider former president Nicolas Maduro to have the legal authority to break diplomatic relations with the US or to declare our diplomats persona non grata," the State Department said.

Pompeo today warned the Venezuelan armed forces to ensure "safety and protection" for Guaidó and the National Assembly members, or face consequences. The US said it will impose sanctions on Venezuela — including an oil embargo — if Maduro refuses to step down and transfer power peacefully to the National Assembly.