The US imposes sanctions on Venezuelan VP
The US Treasury Department has imposed sanctions of Venezuelan Vice President Tareck El Aissami. He is alleged to have had a hand in shipping narcotics weighing over 1,000 kilograms from Venezuela, some of which landed in the US. The Department also suggests that the consignment of narcotics was owned, in part, by El Aissami.
As reported by CNBC, the Department has frozen several million of dollars worth of assets owned by El Aissami and his aide Samark Jose Lopez Bello.
Impact of the sanctions on relations between US and Venezuela
The US (SPY) and Venezuela have not had the most cordial of relationships in recent history. Venezuelan President Nicolas Maduro was notably hostile towards the erstwhile Obama administration, and blamed it for Venezuela’s economic descent and derailment.
In the run up to the US Presidential election, Maduro was critical of Donald Trump as well. However, after the latter’s eventual victory, Maduro scaled back his criticism, saying that President Trump won’t be worse than Obama for Venezuela.
However, the latest action represents the most senior most Venezuelan official the US (IVV) has ever sanctioned, and will is unlikely to go down well with Venezuela. The country has not reacted yet to the move though.
Busy signing deals with China?
While the US has been putting sanctions on El Aissami and Lopez Bello, China (FXI) has been signing deals with the country.
The two countries agreed on 22 deals amounting to $2.7 billion during the 15th meeting of the China-Venezuelan High-Level Mixed Commission in Caracas. The deal is aimed at strengthening economic ties between the two countries.
The deals allow for China’s direct investment in Venezuela in heavy machinery production, infrastructure projects, and cargo transport, among others.
Meanwhile, Venezuela will provide 70% of the crude oil for China’s Jienyang refinery which has a refining capacity of 400,000 barrels per day. China’s CNPC will own 60% of the project, with the remaining owned by Venezuela’s state-owned oil company, PDVSA.
This project could be crucial to Venezuela as the oil industry is vital to the founding OPEC (Organization of the Petroleum Exporting Countries) member. According to OPEC data, oil revenues form a staggering 95% of the country’s export earnings while the oil and gas sector is a quarter of the nation’s GDP (gross domestic product).
The only concern could be the cash stricken PDVSA which has witnessed ships stuck at sea as it does not have the money to pay for hull cleaning and other services.
However, China (MCHI) has not been hesitant in investing in Venezuela. In November 2016, it had signed a deal with the latter to increase oil production by 227,000 barrels per day.
Does Venezuela care about the US sanctions?
Venezuela has little to lose anymore when it comes to its economic situation. The country has not provided inflation data since December 2015 and has avoided publishing economic growth statistics for over a year. Trying to gauge the country’s economic situation is a task all unto itself. For instance, the International Monetary Fund projects inflation in the country to have galloped at a 720% pace while Reuters places the pace at 800%.
Regardless of which estimates are correct, all point to the desperate situation the country is in. There are not enough daily consumables for citizens, who are forced to queue outside malls for the little that is available. The government does not have money to spend on public welfare, inflation is in triple digits, and the economy is in a double digit recession.
In such a situation, the country might be more focused on business friendliness shown by an economic power such as China rather than the hostility shown by the US – a relationship which was not on solid footing to begin with. This may be one of the reasons why Venezuela has chosen not to respond to the sanctions on its vice president.