US Policy on Venezuela: A Road to Nowhere?

The views expressed in this article are those solely of the author and do not reflect the policies or views of the U.S. government or the U.S. Agency for International Development.

Venezuela’s autocratic government signed an agreement with opposition parties October 17, 2023, laying the groundwork for potentially competitive presidential elections in 2024. In return, the U.S. pledged to lift some of its ‘maximum pressure’ sanctions on Venezuela imposed by the Trump Administration. During the 10-year rule of President Nicolás Maduro, Venezuela’s democratic institutions eroded and the economy has collapsed. Yet the October Agreement led some experts to declare ‘cautious optimism’ that a democratic transition might be forthcoming. If proven true, then Venezuela would be a resounding success story for U.S. sanctions. Unfortunately, this outcome appears unlikely, and Venezuela may yet be another tragic tale of the inefficacy of sanctions policy.

Venezuela: From Riches to Rags

Oil was discovered in Venezuela in the early 1900s and fueled the country’s development. By the 1970s, Venezuela had the highest per capita income in Latin America. Mismanagement and corruption accompanied the oil boom. In 1998, socialist Hugo Chávez was elected president and while he reduced poverty, he also undermined the oil industry, accumulated debt, nationalized private enterprises (including oil projects), and severely weakened democracy.

Following Chávez’s death in 2013, Nicolás Maduro assumed the presidency and was reelected in 2018 in an election widely considered unfair and undemocratic. Maduro consolidated power, quashed dissent, taken political prisoners, and enabled rampant corruption. In response, the Trump Administration, supported by a coalition of Latin American countries, imposed ‘maximum pressure’ sanctions against Venezuela to force Maduro out. These sanctions cut Venezuela off from U.S. financial markets, prohibited transactions related to Venezuelan debt, and froze all assets of the state oil company and Maduro’s government. In addition, the U.S. recognized opposition leader Juan Guidó as the interim president.

The Gains from U.S. Sanctions

Sanctions have hampered Venezuela’s economy and weakened Maduro’s regime. Venezuela’s GDP shrunk three-quarters between 2014 and 2021 and in 2020, oil production plummeted to its lowest level since 1945. Reports suggest that members of Maduro’s traditional power base have become increasingly dissatisfied due to the bleak economic situation and polls hint that the opposition would win a free and fair election.

Amidst these pressures, Maduro’s government signed an October agreement in Barbados with Venezuela’s opposition parties. The parties agreed to reforms which could enable a free and fair contest in Venezuela’s upcoming 2024 presidential election such as the presence of independent media and international observers and an update of the voter registry. In response, the Biden Administration temporarily lifted key sanctions on Venezuela. This is exactly how sanctions are supposed to work: international economic pressure weakens a dictatorial regime, forcing it to the bargaining table and laying the groundwork for a democratic transition. Accordingly, some analysts expressed hope that Venezuela may be turning the corner.

The Costs of U.S. Sanctions

However, U.S. sanctions on Venezuela had severe consequences. U.S. sanctions contributed to the steep decline of Venezuela’s economy, which has caused a severe shortage of basic goods such as food, drinking water, gasoline, and medical supplies. The United Nations (UN) estimates that 7 million Venezuelans require humanitarian assistance. The Office of the UN’s High Commissioner for Human Rights has expressed ‘deep worry’ about the severe impact of U.S. sanctions on the Venezuela people. Amnesty International has raised similar concerns. One controversial study found that U.S. sanctions disproportionately harm the poorest and most vulnerable Venezuelans. The sanctions caused 40,000 deaths in 2017-2018 alone. More than 7 million Venezuelans (out of a population of 30 million) fled the country, many have made their way to the U.S. southern border and worsened the broader regional migration crisis.

Despite the economic pain, Maduro’s government has become more autocratic. Maduro consolidated power and the former U.S. Special Representative for Venezuela argued in 2023 that “in no way whatsoever is Venezuela today freer than” it was previously. Maduro’s government holds 282 political prisoners, carried out extrajudicial killings of dissenters, and barred the new leading opposition figure, María Corina Machado, from holding office. In January 2021, Maduro’s allies took control of the National Assembly, the last opposition-controlled power center in the government.

Venezuela’s economy may be adapting to sanctions. Venezuela increased oil production to 770,000 barrels per day in September 2023, up from a low of 500,000 bpd in 2020 (albeit still far below the 3.4 million bpd in 1998). The economy began growing slightly in 2021 and 2022 after shrinking from 2014 to 2021 and inflation fell from 130,000% in 2018 to 234% in 2022.

U.S. sanctions have geopolitical repercussions. Venezuela’s isolation pushed it closer to U.S. adversaries Cuba, Russia, Iran, and China. Venezuela has the largest oil reserves of any country in the world, so keeping Venezuelan production offline contributes to higher global oil prices and increases the reliance of some countries on Russian oil despite U.S. attempts to also isolate Russia. Other leaders in Latin America have become agitated at U.S. policy on Venezuela. Mexico’s President López Obrador boycotted the U.S.-hosted Summit of the Americas in June 2022 partially because the Biden Administration refused to invite Maduro. The recent elections of left-wing leaders in Brazil, Colombia, and Peru has also led these countries to abandon their formerly anti-Maduro stances, undermining the U.S. approach.

The negative consequences of sanctions align with academic literature skeptical of sanctions’ effectiveness. A study of more than 200 sanctions regimes found only a handful of success stories and the Peterson Institute for International Economics argued that “a rapidly changing global economy means that unilateral economic sanctions are decreasingly useful yet increasingly costly.” Literature highlights that sanctions bolster authoritarianism, worsen human rights, increase poverty among the general public while elites remain shielded, can create a ‘rally-around-the-flag’ effect in favor of incumbent autocrats, and do not increase the probability of success of peaceful campaigns for political change.

The Verdict and the Future

Unfortunately, hopes that sanctions would enable a democratic transition after the Barbados Agreement seem unjustified. After signing the agreement, Maduro’s government violated the deal by ordering the arrest of key opposition figures. Maduro also held a public referendum on the oil-rich Essequibo region of neighboring Guyana, which Venezuela has long-claimed. Venezuelans supposedly approved the referendum to absorb Essequibo, yet evidence suggests that this was yet another fraudulent vote.

Furthermore, the opposition’s chosen presidential candidate, María Corina Machado, remains barred from holding office and Maduro’s government harshly interfered in the opposition’s primary elections. Maduro also retains control of the National Electoral Council and the judicial and security systems. U.S. sanctions relief may generate billions in revenue for Maduro, which he can use to buy votes ahead of the 2024 elections. And, senior officials report that Maduro is unwilling to risk losing power at the ballot box and will only allow enough electoral freedom to earn sanctions relief but not enough to threaten his rule.

If Maduro refuses to allow a free election and transition in 2024, U.S. policymakers must decide whether the current sanctions, with the severe pain they are inflicting on the Venezuelan people, are worth it. Despite Venezuela’s descent into autocracy, the country is not a genuine threat as other regimes under ‘maximum pressure’ sanctions such as Iran, Russia, and North Korea are. Meanwhile, the U.S. also maintains close relations with other autocracies with detestable human rights records such as Saudi Arabia and Egypt.

An alternative approach of engagement may therefore be appropriate. While sanctions have certainly worsened Venezuela’s economy, decades of mismanagement and corruption is the true cause of Venezuela’s decline. Even if all sanctions were lifted immediately, energy companies are hesitant to return and $58 billion in investments would be required to restore the energy sector. Thus, if the U.S. ends sanctions, Venezuela would not immediately bounce back and the U.S. could use the carrots of investments rather than the sticks of sanctions to incentivize change. Lifting sanctions might also alleviate humanitarian suffering, mitigate the migration crisis, improve U.S. standing in the region, and pull Venezuela away from U.S. adversaries.

Engagement may present the U.S. with new opportunities to support Venezuelan civil society and foster gradual, deep-rooted change in Venezuela rather than pursuing a narrow-minded strategy to immediately oust Maduro. Ultimately, if U.S. sanctions on Venezuela have no end in sight and are doing more harm than good, the U.S. must reexamine its priorities and act to help all Venezuelans.

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Hellmeier, S. (2021). How foreign pressure affects mass mobilization in favor of authoritarian regimes. European Journal of International Relations, 27(2), 450-477. https://doi.org/10.1177/1354066120934527

Wood, R. M. (2008). “A Hand upon the Throat of the Nation”: Economic Sanctions and State Repression, 1976-2001. International Studies Quarterly, 52(3), 489–513. http://www.jstor.org/stable/29734248