Caracas Chronicles

For all the news of fresh sanctions against Venezuelan regime-linked individuals, it’s the prospect of sectoral sanctions on the Venezuelan oil industry that should really worry Nicolás Maduro. Luckily, for him, many in the U.S. see this as an extreme option. Partly, this is because cutting off the flow of Venezuelan oil would jack up prices at the pump, which is politically difficult in the U.S. But it’s also due to humanitarian concerns: a longtime net food importer, Venezuela depends on revenue from oil exports to feed its people. Sanctions that disrupt food imports would deepen an already severe humanitarian crisis.

Taking control of the flow of dollars away from the regime in Caracas would put a hard stop to the main reason enchufados support the regime.

And yet, the U.S. is badly in need of better policy options for Venezuela. So far, it has relied on sanctioning specific regime power players, but this has proven ineffective. This has narrowed down the U.S. policy menu to  “continue something that doesn’t work” and “set off a famine.”

A more nuanced approach is called for.  

During the years between the two Gulf wars, the U.N. administered an Oil-for-Food program for Iraq. Export revenue was controlled by the U.N., which guaranteed the money could only be spent on humanitarian priorities like food and medicine. In retrospect, the program was successful: it kept the Saddam Hussein regime from investing proceeds from oil on military capabilities.

It’s time the U.S. tried something similar for Venezuela: buying Venezuelan oil only if the proceeds are turned over to an escrow account that can be used only on food and medicine for the country.

Taking control of the flow of dollars away from the regime in Caracas would put a hard stop to the main reason regime supporters (enchufados) continue to have for supporting it: getting their hands on some of the oil money, through currency arbitrage or straight-up corruption.

Nowhere is it written down that an oil-for-food program has to be administered by the United Nations.

The flow of Venezuelan oil to U.S. refiners could continue as would the flow of food to Caracas, the distribution of which would need some monitoring.  PDVSA, the state oil company and the Bolivarian Republic of Venezuela would necessarily default on their debts, an outcome already expected and priced into the market, and the money put to far better use.

Right now, it may seem utopian to imagine a resolution like this making it through the U.N. Security Council. The regime still has two veto-wielding allies in the UNSC —Russia and China— and both have continued to voice support for Maduro even after the Constituent Assembly was convened. It would take a dramatic reversal for them to turn on Maduro now, though in the wake of a unanimous sanctions resolution against North Korea, maybe impossible things aren’t as impossible as they once were.

One phone call between Donald Trump and Indian Prime Minister Narendra Modi would be enough to set this up.

But nowhere is it written down that an oil-for-food program has to be administered by the U.N. In fact, some aspects of Venezuela’s oil industry make it imaginable that it could work even without the U.N. approval.  

Venezuela’s customer base for oil is strange: virtually the only ones of its clients that pay cash-up-front are the U.S. and India. One phone call between Donald Trump and Indian Prime Minister Narendra Modi would be enough to set this up. And if Venezuela doesn’t like it and wants to sell its oil elsewhere…well, good luck finding customers! There just isn’t any refinery capacity outside the U.S. and India for Venezuela’s extra-heavy crudes.

An Oil-for-Food Program for Venezuela could redraw the strategic picture in Caracas without either jacking-up the price Americans pay at the pump or starving the Venezuelan people. In a world where we tend to assume the U.S. has no good policy options, maybe some creativity is in order.