The time has come for the U.S. and Venezuela to move beyond ultimatums and sanctions

Venezuelan flags in Caracas, Venezuela, on Feb. 15. (Gaby Oraa/Bloomberg News)
Venezuelan flags in Caracas, Venezuela, on Feb. 15. (Gaby Oraa/Bloomberg News)

If truth is the first casualty of war, irony might be the clear victor so far.

How else to appreciate the scene last weekend when a high-level delegation of U.S. officials landed in the Venezuelan capital, Caracas, to discuss oil supply? That’s the same Venezuela that just the other day Washington hard-liners had consigned to “the exclusive club of rogue nations” and pummeled with waves of bruising economic sanctions and criminal charges. And yet, with bombs falling on Ukraine and the flow of oil from Russia to the West in jeopardy, suddenly Caracas is back on Washington’s speed dial.

Sure, extraordinary times call for unusual measures and even noisome partners. President Biden also has more existential concerns, such as keeping his beleaguered presidency from self-combusting. Could renewed shipments of Venezuelan crude help compensate foregone Russian oil, lower fuel prices, contain inflation and spare Biden a debacle in the midterms?

On paper, the move makes sense. Venezuela sits on the world’s largest proven oil reserves. Before being blacklisted in 2019, it sent around 580,000 barrels of heavy oil per day to U.S. refineries in the Gulf of Mexico, according to the Venezuelan Rice University economist and oil expert Francisco Monaldi. The United States made up for the shortfall by turning to other suppliers, including Russia. So, in theory, reopening the Venezuelan spigot should help.

But good luck with that. In its current state of disrepair, Venezuela’s oil industry could spare little more than 200,000 barrels per day — “a drop in the barrel”, Monaldi told me. Long term sanctions on Russia might open the way for a greater share of Venezuelan oil in the United States, all the more important now that Saudi Arabia has snubbed Biden’s entreaties. However, the massive investment required to rebuild Venezuelan capacity — about $12 billion per year to raise production to 2 million barrels a day, Monaldi estimates — is off the table as long as the country remains a sinkhole for foreign investment.

More than a fill-up, Venezuela-U.S. relations need a reboot. Many Venezuelans and Cubans in Florida and regime-change-or-bust Republicans will demur, but re-engagement with Nicolás Maduro could offer a way out of a diplomatic cul-de-sac that has cornered Caracas and Washington for two toxically polarized decades, with knock-on effects across the Americas.

Indeed, the countries and companies now queuing to punish Vladimir Putin would do well to take note. The impasse in Venezuela is a cautionary tale about the frustrations and folly of trying to engineer national behavior through maximalist demands and bruising sanctions.

With a far feebler government and a one-engine economy, Venezuela is a credible security threat to no one but its own people, whose flight from misery has created the second biggest refugee crisis after Syria’s. And yet, after cascading financial penalties, multiple red notices and official persona non grata, Maduro and his Bolivarian inner circle are stronger than ever, while the opposition remains divided and in disarray.

Venezuela’s descent into economic dysfunction is the result of years of malign neglect and self-dealing populism. Yet more than 15 years of sanctions have brought no evident improvements, much less reform. The country is only now beginning to recover from the largest economic contraction in recorded Latin American economic history, according to Tulane University economist Francisco Rodriguez. His research shows that gross domestic product shrank by 74.3 percent in the past eight years and real per capita incomes shrank by 71.8 percent from 2012 to 2020. This is the sixth largest contraction in world history. The national poverty rate soared to 94 percent last year, up from 48 percent in 2014.

So will Maduro feel even more empowered now that Washington has come courting? Neither Juan Guaidó, whom the United States and more than 50 other countries still recognize as Venezuela’s rightful president, nor any other of the country’s democratic opposition had a seat at the table during Washington’s latest overture.

Yet the bitter truth is that Venezuela’s opposition has been running on fumes. Despite international sympathy, multiple rounds of negotiations from Oslo to Mexico City, and global opprobrium for Maduro, Venezuela is no closer to free and fair elections or the rule of law.

“That’s the risk”, allows David Smilde, of the Washington Office on Latin America. “Yet until about 10 days ago, every stakeholder involved in the Venezuela crisis was pressing to talk about sanctions. Even the opposition was telling the Biden administration they need the power to negotiate sanctions”.

What’s clear is that the way forward has to be different. Repeated studies suggest that when sanctions do not fail, they fall risibly short of their goal of dissuading brutes and promoting a return to institutional democracy.

Venezuela and the United States need a way to climb down from the summit of their ultimatums. Encouragingly, Maduro on Tuesday released two of the six American citizens the State Department claims were wrongly imprisoned. He also said his government will return to the negotiations with the country’s opposition. What Venezuela won in exchange has yet to be announced, but after years of mutual mistrust, diplomatic false starts and Bolivarian bluster, it’s an auspicious new beginning.

Mac Margolis, an adviser to the Brazilian Igarapé Institute, writes frequently about Latin America. He is the author of “The Last New World: The Conquest of the Amazon Frontier”.

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