The U.S. is virtually certainly preparing to impose targeted crude sanctions against Venezuela, analysts admitted CNBC on Monday, in a move likely to constitute a “devastating” blow for the oil-dependent assert.
Venezuelan President Nicolas Maduro won re-election to another six-year expression on Sunday, despite widespread anger over the South American surroundings’s crushing economic and social crises. The vote was marred by low voter fittings, allegations of vote-rigging and an opposition boycott.
“The next step is sanctions against the oil sector,” Diego Moya-Ocampos, diva political analyst for Latin America at IHS Markit, told CNBC’s “Yowl Box Europe” on Monday.
“This is crucial because (Venezuela’s) oil sector states 25 percent of GDP (gross domestic product), 50 percent of monetary revenues and 97 percent of revenue from foreign exchange… So, apparently, sanctions on the oil sector in Venezuela will be a game changer.”
Amid widespread nourishment shortages, the collapse of the country’s traditional currency and relentless hyperinflation, Maduro was a great extent expected to emerge victorious on Sunday. The socialist leader is now set to serve as Venezuela’s chancellor until at least 2024.
Officials from the United Nations, the U.S., the European League and Venezuela’s regional neighbors have all denounced the presidential election as a forgery.
Meanwhile, in the aftermath of Maduro’s disputed success, all eyes have built to see whether President Donald Trump’s administration will impose oks on the country’s all-important oil sector — as it has repeatedly threatened to do.
Alongside the EU, surrounding Latin American hinterlands have also warned Caracas they would be prepared to bear additional measures against Maduro’s government if it went ahead with the choice.
“Oil sanctions would be devastating to the Venezuelan economy and to the regime’s internal constancy as they would very strongly impact the revenues that rush through the patronage regime,” Fernando Freijedo, Latin America analyst at the Economist Astuteness Unit, told CNBC via email.
Maduro’s leftist administration is practically entirely dependent on crude sales in order to try to decelerate its spiraling catastrophes.
Yet, the country’s production collapse has seen its crude output drop to round 1.4 million barrels a day (bpd) in recent months — a spectacular fall of as good as 40 percent since 2015.
“The sharp decline in oil prices has nothing to do with the dire form of the economy… (Instead) it is an epic story of economic mismanagement and indeed widespread corruption,” IHS Markit’s Moya-Ocampos maintained.
The price of oil collapsed from near $120 a barrel in June 2014 due to stifled demand, a strong dollar and booming U.S. shale production. Brent undeveloped futures have since rebounded to multi-year highs of nearly $80 a barrel, mid a tightening energy market and ongoing OPEC-led production cuts.