Venezuela’s political crisis is deepening, with worrying consequences for Venezuelans, the country’s neighbors, and the entire Western hemisphere.
The United States now faces a serious question of economic statecraft: how to design a set of policies that advances the cause of Venezuelan democracy by inflicting pain on the Maduro regime while minimizing the impact on the population, the region, and US interests.
In response, on September 12, the US Treasury imposed new sanctions targeting sixteen Maduro-affiliated individuals from the National Electoral Council, the Supreme Tribunal of Justice, and the National Assembly for impeding the electoral process and obstructing the release of the election results, while the US State Department imposed visa restrictions limiting their ability to travel or do business with the United States.
A broader approach, however, is needed. Washington must work with the opposition and regional allies, craft a smart sanctions policy based on lessons learned, and provide Venezuela’s leaders an exit strategy.
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How the opposition outfoxed Maduro
Venezuela’s democratic opposition launched a new strategy to contest what they knew would be a deeply flawed presidential election. Rather than boycotting the vote as they had done in the past, they unified the disparate opposition parties under one banner to contest national, regional, and local elections—and demonstrate the lack of popular support for the ruling United Socialist Party (PSUV) and its leader Nicolás Maduro.
The Unitary Platform held a primary that selected Maria Corrina Machado as its presidential nominee. It then supported a substitute nominee, Edmundo González Urrutia, when Machado was banned from participating in the election.
The opposition faced a great deal of intimidation throughout the process, and was keenly aware that Maduro would not give up power easily. The Unitary Platform was confident, however, that contesting the elections could dramatically transform Venezuelan politics and create the opportunity for change.
This approach succeeded in showing that the regime vastly overestimated its support across Venezuelan society. It’s now clear that González won by a wide margin—the opposition cleverly took photographs of the physical voting receipts and published them, demonstrating that Maduro lost the election.
The United Nations, the United States, and a number of Latin American countries have all recognized González as the winner. Brazil, Colombia, and Mexico have called for Venezuela to publish the results and have them independently validated as the constitution requires.
Maduro has instead doubled down by controlling decisions by the National Elections Council and Supreme Court, and calling for the arrest of González, who has escaped to Spain. With the military’s support, it now appears that Maduro will remain in power past the end of his term on January 10, 2025, despite his shameless lack of legitimacy at home and abroad.
The unintended consequences of sanctions
While the United States must support Venezuela’s democratic opposition, it must also consider the impact economic sanctions could have within Venezuela and across the Western hemisphere as a whole.
Harsh sanctions of the past—and fear of more to come—have substantially degraded the Venezuelan economy and created a migration crisis. Around 7.7 million Venezuelans have fled, mostly to neighboring countries, including nearly 3 million in Colombia alone.
The United States has also been deeply affected; on some days last year, as many as 3,000 Venezuelans attempted to enter the United States.
Energy is critical for changing Caracas’ behavior
Migration from Venezuela is driven by the state of the economy, which is determined by the level of oil production and exports, as well as the ability of Venezuela to produce adequate quantities of gasoline for transportation and diesel for power generation, public transport, agriculture, and industry.
The US Energy Information Administration estimates that Venezuela’s crude oil production has fallen from about 3.2 million barrels per day (bpd) in 2000 to just over 0.7 million bpd in September 2023. Sanctions have been a key driver of these declines. Until recently, Venezuela has had to sell its oil at steep discounts.
Exports in 2024 have averaged between 0.5 and 0.6 million bpd, with profound effects on national income. While modest in global terms, Venezuelan exports influence global supply and price, given the fragile world economy and severe sanctions on Russian and Iranian oil supplies.
Lessons learned
The challenge for the Biden administration is to craft a sanctions policy that incentivizes the Maduro regime to alter its behavior while minimizing harm to the population of Venezuela and its neighbors.
The United States has learned a great deal from past failures, including the maximum pressure campaign of the Trump administration, which banned US and non-US investment and trade in hydrocarbons with Venezuela. It resulted in mass migration from the country and major shortages of food and electricity.
All of this proved deeply unpopular in Venezuela, including among the opposition. It also proved wholly ineffective in dislodging Maduro.
Instead, a wise sanctions policy should have five key elements:
First, do no harm. An effective policy crafted over the past year licenses private companies to invest in Venezuela’s oil production as long as they control all material aspects of the project, including monies earned from oil sales. The only payments to Venezuela are for taxes and royalites deposited with the Central Bank.
This policy has been largely successful. It sustained and modestly expanded Venezuelan oil production, displacing Iran as a supplier of diluent, funneling Venezuelan oil to US and global markets, and reducing discounted oil sales to China. Specific licenses have also created a system of transparency and accountability, overseen by the US Treasury Department. This system should be expanded, rather than returning to the failed maximum pressure policy of the past.
Second, follow the lead of the opposition. Venezuela’s democratic opposition has called for punishing the regime and not regular Venezuelans. This is essential to the opposition’s political viability.
Recent polls show that large majorities of Venezuelans reject sectoral sanctions. While the opposition calls for continued pressure on the regime to release legitimate election audit results, it has not asked for additional economic sanctions.
Third, work with neighbors. Venezuela’s neighbors have a political, economic, and ideological stake in managing this crisis. While critical of the Maduro regime, neighboring countries have objected to further sanctions. Some, like Brazil, have even called for lifting existing sanctions.
Venezuela’s neighbors are suffering the most direct consequences of the crisis, given the number of migrants taking refuge in their countries. Even Mexico will be affected, as the United States continues to put pressure on it to prevent Venezuelans from crossing the border.
By working with partners, the United States is not subcontracting diplomacy, as some have claimed; it is building the most effective coalition possible. Whatever steps the United States takes would have direct consequences on those countries—all of them democratic allies—and their views should be respected.
Fourth, use smart sanctions that target members of the regime and their enablers. The United States announced new sanctions targeting these individuals, limiting their ability to travel or do business. It also impounded a presidential aircraft which violated US sanctions.
In the medium to long term, sanctioning regime leadership and their enablers could impact the decision-making of government officials, the military, and PSUV party leaders when deciding whether to pressure Maduro to leave.
Fifth, create an exit path for the regime. The regime and Maduro himself face prosecution if they leave power today. The military is deeply entrenched in the economy and their future role would be unsettled in the event of a political transition.
Therefore, a successful transition requires a pathway to avoid an existential risk to Maduro if he departs, as well as to the Chavista leadership and the military. Other countries have considered immunity, political participation, relocation, and power sharing as options. The sanctions imposed today are most useful as measures that can be revoked in the event of a better and more equitable political outcome.
Use sanctions wisely
It is tempting to resort to draconian measures that sound appealing on the campaign trail, but are counterproductive to US interests. The Biden administration should stay the course, focusing on sanctions against the regime and its members while ensuring that it does not aggravate the migration crisis Venezuela’s neighbors face today.
In turn, any future presidential administration must carefully calibrate its approach with an eye toward avoiding yesterday’s mistakes in the hope of a brighter tomorrow for Venezuelans.
David L. Goldwyn served as special envoy for international energy under President Barack Obama and assistant secretary of energy for international relations under President Bill Clinton. He is chair of the Atlantic Council’s Energy Advisory Group.
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Image: Venezuelans around the world have protested in support of opposition presidential candidate Edmundo Gonzalez in the aftermath of disputed Venezuelan elections. September 10, 2024. REUTERS/Susana Vera