They say the sanctions that the European Union and the United States have imposed on Russia are the toughest in history. But we have similar experiences, with very extensive sanctions, albeit against countries of much lesser importance to the world economy.
Since 2017, Venezuela has been subject to tough sanctions by the US and the EU. The objective was for the economic pressure on the authoritarian regime of Nicolás Maduro to force democratic elections and changes in government. However, this did not happen.
Sanctions against Venezuela began with a US-imposed arms embargo in 2006. The reason was that Venezuela has not contributed sufficiently to the fight against terrorism.
This led the South American country to turn to Russia, which quickly became its most important arms supplier.
After a rapid erosion of democracy and the erosion of human rights, in 2014 the United States introduced sanctions against people close to the government. The country was soon declared a threat to US security.
When Maduro ignored the democratically elected National Assembly in 2017, the United States banned all financial transactions with the Venezuelan state, and the EU also imposed new sanctions.
After a presidential election marred by fraud, the US in 2019 introduced a ban on trading with all state agencies in the country, including the state oil company, PDVSA, while the UK confiscated Venezuelan gold reserves from British banks.
Oil revenues constitute about 97% of Venezuela’s revenues. The sanctions contributed to a decline in oil production, which was already in decline, and caused gross national product to fall sharply.
Inflation, which was already at very high levels, turned into hyperinflation (over 1,000% a year), which had repercussions, although not those expected by the opposition, the US and Europe.
Here are six lessons we learned from the Venezuelan experience.
Sanctions often hit the wrong target
In the case of Venezuela, as is happening now in Russia, banks and private companies refused to maintain commercial relations with Venezuelan companies, even though, if they had done so, the sanctions would not have been violated.
This, which could be called “excessive compliance”, is a reaction to the fear of both being sanctioned and of generating a negative reputation.
In this way, the sanctions also affected important opposition figures in the business community, who were cut off from markets and foreign funding.
The consequence was an increase in divisions within an already fragmented opposition.
Sanctioned countries find new partners and new paths
What happened next was that Venezuela found new trading partners and new ways of both making and receiving payments, as the South American state was excluded from regular payment systems.
Shortly after financial sanctions were introduced in 2017, Venezuela launched its own cryptocurrency, the Petro, developed in collaboration with Russian experts.
The Russian oil company Rosneft was already established in Venezuela. Its presence increased after its main boss, Igor Setchin, was added to the US sanctions list for the annexation of Crimea in 2014.
Ties were also strengthened with sanctioned Iran, Syria and Turkey, which were helped by the sale of oil and agricultural imports.
When China slammed the brakes as a creditor, Russia lent Venezuela about $17 billion. In other words, sanctioned countries unite.
The United States has increased the use of sanctions by 50% under Donald Trump’s presidency. The rise has continued with Joe Biden in the White House, even before the recent sanctions against Russia.
The more countries that are sanctioned, the larger the group that band together to find common solutions and compete in a US-controlled, dollar-based world economy.
Sanctions have become a scapegoat
Inside Venezuela, what the opposition and its supporters in the United States and Europe had hoped for did not happen: that strangling the regime for money would lead to the power system capitulating, and that Maduro would be pressured to leave.
On the contrary, Maduro tried to convince people, with some success, that the economic problems were due to sanctions.
The sanctions became a scapegoat and overshadowed years of corruption and financial mismanagement.
Sanctions can strengthen authoritarian leaders
When the economic crisis turned into a humanitarian crisis, sanctions became so unpopular that even a very unpopular president like Maduro managed to mobilize around nationalist resentment and loyalty to the motherland.
At the same time, the regime became more authoritarian and based its support on a narrower group of military and elites.
Sanctions bolster the informal and criminal economy
As a result of both the previous crisis and the sanctions, more and more Venezuelans were forced to enter the informal economy, and some also entered the criminal economy.
International organized crime has also increased its reach, in part with ties to both the government and Russia.
Sanctions make it difficult to relinquish power
All this contributed to Maduro having less and less incentive to leave power. He is accused in the United States of drug trafficking and has an open case at the International Criminal Court in The Hague. In other words, he doesn’t have a bright future as a former president.
The United States also lacks a clear strategy for reducing sanctions and what it would take to achieve it. For Maduro supporters, there was little reason to believe it would be worth switching sides.
The ban on buying oil from Russia has given a new twist to the story, as US representatives traveled to Venezuela last week to discuss possible easing of oil sanctions in order to secure a little more supplies if there is an oil standoff. Russian.
At the same time, a modest increase in oil revenues, liberalization of the use of the dollar, trade liberalization and privatizations have given Venezuela a small economic boost.
With the price of oil in the clouds, Maduro has stronger trading chips than he has had in a long time.
Clearly, there are many differences between sanctions that seek to prevent a brutal war of invasion and those that seek regime change. And Russia is not Venezuela.
But Venezuela’s experience gives reason to be cautious in implementing measures that strengthen national cohesion, criminal networks and alternative alliances, and that weaken the forces on which we intend to build a relationship with Russia.
Neither a sense of justice nor a desire for revenge are good compasses when it comes to sanctions policy.
Translation of Giulia Gaspar
