Realist, not conformist analysis of the latest financial, business and political news

Trump Extends Venezuelan Oil Sanctions To Cuba

As to why this is happening, the extension of Venezuelan oil sanctions to Cuba by the Trump Administration, this is obvious. The US doesn’t like Cuba – or the current political set up there at least – and doesn’t like Venezuela either. So, interrupt trade between the two and we’re golden then. That both parties are reliant upon that trade just adds to the attraction.

The thing is, well, how are those sanctions going to be imposed? It’s largely a barter trade so the US control of who can use the dollar or the US banking system is largely irrelevant.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The Trump administration is trying to make it harder for Nicolás Maduro to send oil to Cuba. The Treasury Department on Friday announced sanctions against two shipping companies and one vessel for transporting oil between Venezuela and Cuba, as the United States has declared that Venezuela’s oil resources belong to Juan Guaido’s interim government and not Maduro. [/perfectpullquote]

Sure, as is being done it’s possible to block certain uses of ships. But even that’s not 100%:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The restrictions placed on the 34 vessels are meant to make it more difficult for Maduro to ship oil to other regional customers in order to generate revenue, and diminish his influence in the region.[/perfectpullquote]

But those shipments to Cuba don’t generate revenue.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The United States on Friday targeted oil shipments from Venezuela to Cuba in its latest round of sanctions to pressure the government of President Nicolas Maduro, aiming to choke off a crucial supply of crude to the Communist island. The U.S. Treasury imposed sanctions on 34 vessels owned or operated by Venezuelan state-run oil company Petróleos de Venezuela, S.A, or PDVSA , and also on two companies and a vessel that delivered oil to Cuba in February and March. [/perfectpullquote]

If those ships subsequently deliver oil to Cuba, then dock in the US, then they might be in trouble. But here’s the real problem for these sanctions:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The U.S. government and lawmakers have said that Venezuela sends oil to Cuba in exchange for security and intelligence services, using a lucrative natural resource to help Maduro maintain power instead of helping to alleviate Venezuela’s humanitarian crisis.[/perfectpullquote]

Other oil sanctions aren’t really about physical shipments of oil at all. They’re about the flows of money which follow them. For example, oil sanctions against Iran slow down oil shipments, sure. Change prices. But what they really do is make sure that no one dealing in Iranian oil can use the American banking system. And as every international bank worth the name is linked into the USA banking system that then means that no bank anywhere – nearly – will finance Iranian oil. It’s that control of the financial system that matters, not the bans on ships and oil.

But as Venezuela and Cuba deal in oil via barter – crude one way for the crude thugs the other – such sanctions aren’t going to be all that effective. We’ve a bit of politics here, not an effective economic blockade.

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Jonathan Harston
Jonathan Harston
5 years ago

Surely the best politics would be for the elephant to ignore the flea? Otherwise, it just gives the flea a reason to complain about the elephant.

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