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Trump administration imposes Venezuela sanctions on Russian oil company

The Trump administration’s Tuesday sanctions on a subsidiary of Russian oil giant Rosneft for trading Venezuelan oil and gas represent a substantial escalation in relations with both countries, following a successful U.S. visit by Venezuelan opposition leader Juan Guaidó.

The White House announced sanctions against Rosneft Trading S.A. and its vice president, Didier Casimiro, warning penalties would extend to any person or entity doing business with them.

Administration officials claimed the Rosneft subsidiary has conspired with the Venezuelan government and Petróleos de Venezuela (PDVSA) to circumvent existing U.S. sanctions.

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“While state-owned oil company PDVSA and the Maduro regime are sanctioned by the United States, Rosneft Trading S.A. nevertheless propped up the Venezuelan oil sector and actively attempted to evade U.S. sanctions, sending a lifeline to the regime,” said a senior administration official on a call with reporters, referring to Venezuelan President Nicolás Maduro.

Maduro has sustained his hold on power despite crippling U.S. sanctions with aid from his foreign allies in Cuba, Russia and China. And he has successfully kept Guaidó at arm’s length, despite the United States and 58 other countries recognizing Guaidó as Venezuela’s legitimate president.

Still, Maduro has been unwilling or unable to arrest Guaidó, despite increasing pressure on his inner circle, including arresting Guaidó’s uncle and charging him with terrorism last week.

“One has to assume that they have made a cost-benefit calculation that the reaction from countries all over the world — the U.S., Canada, Latin America, the EU countries — would be too great.  And obviously, we think that’s a correct judgment on their part,” special representative for Venezuela Elliott Abrams told reporters Tuesday.

Still, Maduro has been allegedly paying his bills through proceeds from the oil trade — supplying countries in Asia and Africa through sanction-evasion schemes facilitated by companies like Rosneft — as well as proceeds from illicit gold mining.

The Venezuelan military has also been widely accused of being a key player in the transatlantic cocaine trade.

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“It’s no secret that Maduro has been using petroleum profits to prop up his narco-authoritarian regime, and these types of sanctions have been necessary for a long time now,” said Rep. Debbie Mucarsel-Powell (D-Fla.), who last week said she’d like to see more pressure on Russia regarding its role in propping up Maduro.

“It’s clear that the United States must develop a more comprehensive strategy on Venezuela that brings in our global allies to increase the effectiveness of our diplomatic and humanitarian efforts,” added Mucarsel-Powell.

Guaidó earlier this month ended a tour of Europe, Canada and the United States with a visit to Washington, where he was received as President Trump‘s guest at the State of the Union address, and later met with congressional Democrats in Speaker Nancy Pelosi‘s (D-Calif.) office.

Mucarsel-Powell last week said that Guaidó warned Democrats of increasing Russian influence in Venezuela.

“The White House understands that pushing back against Russia on this issue is not only the right thing to do, but it’s a political win. There’s no doubt about it,” said Michael McCarthy, a professor at George Washington University’s Elliot School of International Affairs.

Tuesday’s sanctions will add Rosneft Trading SA and Casimiro to the Treasury Department’s Office of Foreign Assets Control (OFAC) list of specially designated individuals, blocking their ability to trade with U.S.-based persons or entities.

“As a result of today’s action, all property and interests in property of Rosneft Trading S.A. and Didier Casimiro that are in the United States or in the possession or control of U.S. persons, and of any entities that are owned, directly or indirectly, 50 percent or more by the designated individual and entity, are blocked and must be reported to OFAC,” read a statement released by the White House.

“The action taken today by the Trump administration is a signal, and also a commitment that President Trump made to President Guaidó during his visit,” said Antonio de la Cruz, executive director of the Inter American Trends think tank.

“One of President Guaidó’s points was that with Rosneft skirting sanctions, it wasn’t easy for Maduro to feel the effects [of the sanctions],” added de la Cruz.

In part because of Russia’s help — the country restructured Venezuela’s foreign debt in 2017 and initiated the Rosneft deal to sell Venezuelan oil abroad — and in part because he’s been adept at finding new sources of revenue, Maduro has remained firmly in power despite increasing U.S. sanctions.

With increasing Russian aid to Maduro, observers were increasingly bullish in predicting the sanctions on Rosneft before Tuesday.

“The decision to sanction Rosneft Trading is both necessary and important. Russia is playing a critical role in helping the Maduro regime work around US sanctions, and doing so in a predatory way,” said Roger Noriega, a visiting fellow at the American Enterprise Institute who was the State Department’s top Western Hemisphere diplomat under former President George W. Bush.

“Rosneft is exploiting the current conditions to amass profit and to acquire control of Venezuelan assets. Until now, these gains have been worth the risk.  This action will raise the costs substantially and ratchet up pressure on the regime and it’s enablers,” added Noriega.

Still, the Trump administration was careful not to rock the boat too aggressively in its bilateral relationship with Russia.

Secretary of State Mike Pompeo on Friday met his Russian counterpart Sergei Lavrov privately on the sidelines of a conference they both attended in Munich and warned him the sanctions were coming.

“When you still have a degree of cordial relations, it means that you’re still trying to get the person on the other side to do something, rather than just punishing for punishment’s sake,” said McCarthy of the Pompeo-Lavrov talks.

The Munich meeting also had the side effect of giving Putin the next move on Venezuela.

The Russian president is due to visit Cuba soon, and will have to decide whether he also grants a visit to Maduro, or lets slip the costly investment he’s made in Venezuela.

“The question is, can Trump really get a deal from Putin on this? Russia’s pain threshold is pretty high — this may disincentivize them from doing more to help them Maduro, but I don’t think it incentivizes them to cut ties fully, McCarthy said.

—Updated at 5:38 p.m.

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