US offers to ease Venezuela sanctions: Update

Updates throughout.

The US government would suspend oil sanctions on Venezuela in the early stages of a political transition plan that was laid out by senior US officials this morning.

The plan envisions the incremental lifting of sanctions in tandem with steps toward restoring democracy, including the overhaul of the Opec country's supreme court and the national electoral authority (CNE). The process, lasting six to 12 months, would culminate in free and fair elections as early as the end of 2020.

Venezuela's national oil industry led by PdV has seen its production and exports nosedive over the past year, with sanctions accelerating a decline rooted in years of neglect and mismanagement. But even if the US lifts oil sanctions, it is unclear that Venezuela would be able to sell much oil following the oil price crash and virus-hit demand this month.

The initiative, which US secretary of state Mike Pompeo and the US special envoy for Venezuela Elliott Abrams announced this morning, is designed to restore political momentum at a time when the world is laser-focused on tackling the inexorable spread of the new coronavirus. The UN is urging the US to ease sanctions on Venezuela, Iran and other targeted nations to enable them to fight the deadly disease.

The White House is countering that it will gradually lift sanctions on Venezuela, and provide significant aid -- "with special initial focus on medical care system, water and electricity supply" -- if Nicolas Maduro gives up power. Pompeo stressed that the sanctions do not prevent Venezuela or any other targeted country from importing humanitarian aid. Detractors argue that the economic consequences of the sanctions keep meaningful help from getting in.

All Venezuelan institutions, with the exception of the National Assembly (AN), are controlled by Maduro, whose presidency is not recognized by the US and more than 50 other countries on the basis of his May 2018 re-election that they deem to have been a fraud. Starting in January 2019, these countries recognize opposition leader Juan Guaido as Venezuela's interim president instead, but his authority remains superficial outside the opposition-controlled National Assembly.

Early in the US roadmap, both Maduro and Guaido would step aside to allow the formation of a five-member "Council of State" with a military adviser. Four of the council's five members would be selected by the opposition-controlled AN, and it would be led by a secretary general acceptable to both sides who would shepherd the country to new elections.

Each step in the 13-point "democratic transition framework" would trigger an easing of sanctions, kicking off with the restoration of the members and rights of the AN and dissolution of the rubber-stamp National Constituent Assembly (ANC). The US would then lift sanctions on ANC members. This step would be followed by the liberation of all political prisoners and the immediate departure of "all foreign security forces...unless authorized by 3/4 vote of the AN", a reference to Cuban and Russian military advisers in Venezuela, with an apparent opening for a US-led military presence.

The oil sanctions, which the US imposed in late January 2019, would be suspended upon the formation of the council. "Once the Council of State is established and foreign security forces have departed (unless approved by 3/4 vote at the AN), U.S. sanctions on the Government of Venezuela, PDVSA, and the oil sector are suspended." The current sanctions prevent US refiners from importing Venezuelan crude and from exporting refined products to the country.

In the later phases of the roadmap, a Truth and Reconciliation Commission would be established. Remaining sanctions would be lifted after presidential and assembly elections in six to 12 months. Guaido would be permitted to run for president, but could not lead the Council of State.

In a final step, a "Bi-partisan commission within the AN is developed to create long term solutions to rehabilitating the economy and refinancing the debt." Venezuela has at least $150bn in unpaid debt, including PdV 2020 bonds that are backed by 50.1pc of the shares in the US parent firm of PdV's US refining subsidiary Citgo, currently controlled by the opposition.

Virus imperative

The US is hoping the initiative will break Venezuela's political impasse and restore momentum for political change. The proposal is not new. In today's briefing, Abrams confirmed that the framework was tabled by the opposition at failed Norwegian-sponsored negotiations in Barbados last year. Nonetheless, the US is hoping a looming health catastrophe and the oil price crash will alter the political calculus in Miraflores presidential palace.

Abrams pointed to a "maneuver" by Russia's state-controlled Rosneft to shift its Venezuelan assets to a new Russian state entity as a "clear reaction to the collapse of oil prices and the oil sector in Venezuela," Abrams said. "The amount of money going to the regime is going to be on a pretty steep decline."

Yet there is little sign that Maduro or his inner circle would be any more willing to accept the relaunched plan than they were last year. Following last week's US indictments of Maduro and more than a dozen senior associates for drugs trafficking and money-laundering, the Venezuelan leader and his associates would likely be reluctant to agree to any transition plan without an exit strategy. The only guarantees under the plan are for the military high command and state and local officials to remain in place during the transition period.

For the timebeing, Russia and China continue to support Maduro, and are now sending in aid. A new Russian ambassador to Venezuela was received by Maduro this week.

In a fiery speech yesterday, Maduro warned that justice would come to all parties that conspire against him.

By Patricia Garip