FORO CUBANO Vol 3, No. 23 – TEMA: BLOQUEO ECONÓMICO –
Effectiveness of economic sanctions as a strategy for regime change in American foreign policy: Case of Venezuela
Por: María Isabel Puerta Riera
*Profesora de Ciencia Política, Valencia College; firstname.lastname@example.org
The effectiveness of sanctions as part of the tool kit of American foreign policy is being put to the test with the escalating political, economic, and social crisis in Venezuela. The depth of the crisis has given the Donald Trump administration a pretext to increase the scope of sanctions against Nicolás Maduro’s government, amid events that are threatening to destabilize the region with migration spillover. The US State Department, since 2006, has branded the Venezuelan government as uncooperative with its anti-terrorism efforts, thus setting in motion the application of sanctions as an instrument to put pressure on the Venezuelan state’s behavior. The United States began to issue incremental sanctions for terrorism, drug-trafficking, human rights violations, and corruption, targeting financial and – most recently – oil mineral operations, in an attempt to challenge the autocratization of the regime, hoping to change its trajectory toward a more democratic and political transition (Walldorf, 2014).
Some have criticized economic sanctions as an unethical mechanism to force regime change (Weisbrot & Sachs, 2019; Rodriguez, 2019), while others point to increased levels of democratization in those authoritarian countries subject to sanctions (Von Soest and Wahman, 2014). Whatever the perspective, the efforts made by the Trump administration have not yielded the expected results. Instead, the US has encountered a resilient political regime capable of weathering the strongest economic and financial sanctions, while a heavy burden is brought on a population experiencing an excruciating humanitarian crisis that some consider a direct consequence of the sanctions. This article addresses the crisis and the effects of the policy, assessing the impact of the current package of sanctions on the worsening of the crisis in Venezuela, in an attempt to provide a set of possible outcomes for the country and the region.
Economic sanctions in American foreign policy: a background
The origins of economic sanctions as a foreign policy tool can be traced to Ancient Greece, although it was not until the 20th century that it became common practice in the Western Hemisphere (Coates, 2020), representing an important part of the foreign policy portfolio most countries develop to advance their strategic foreign policy agenda. However, the influence of economic sanctions has to be seen through the evolving nature, from when it was first applied as a bolstering device during war time to its later use as a replacement for armed confrontations in the form of financial tools directed at influencing on specific political outcomes. As Coates states, “sanctions thus served as the centerpiece of the multilateral enforcement mechanism of world peace” (Coates, 2020).
The use of economic sanctions has developed into a powerful approach for political change. While they may not always realize their desired outcomes, they are still considered to be effective when used as leverage in a conflict. Nonetheless, there are opposing views about the success of sanctions as an instrument for regime change, and even more so when they are adopted unilaterally or without the support of the United Nations. This unilateral tactic is considered to be ineffective, since in most cases, those targeted by economic sanctions tend to develop ways to circumvent their impact. The actions taken to avoid their effects, for some, highlights their limited value.
Venezuela: from the Obama incremental policy to the Trump ‘all options on the table’ approach
The issuance of sanctions against Venezuela as a political strategy dates to 2005 when the George W. Bush administration considered the Hugo Chávez government to not be in compliance with international narcotics agreements. As a consequence, it imposed economic sanctions on individuals and entities directly involved with the Venezuelan government, designating them under the Foreign Narcotics Kingpin Designation Act. These decisions were followed by an annual determination by the US of the government’s failure to engage in anti-terrorism efforts in 2006 that has been renewed, most recently in May 2020 (Ribando, 2020).
As the political crisis intensified after Chávez was succeeded by Nicolás Maduro, the suppression of human rights and the escalating repression obliged the United States Congress to pass the Venezuela Defense of Human Rights and Civil Society Act of 2014. This required the president to impose visa restrictions and block the assets of those responsible for the violations. These measures have been continued by the Trump administration. As of June 2020, the US Treasury Department has imposed 98 individuals under financial sanctions in addition to 91 Venezuelan officials, including President Maduro and his inner circle, Supreme Court justices, high-ranking military officer, state governors, and other cabinet members. Fulfilling the promise of lifting sanctions for those who abandoned the government, General Manuel Christopher Figuera was removed from the sanctions list on May 2019 following a failed coup attempt (Ribando, 2020).
In addition to the administration’s rhetorical commitment to the Venezuelan democratic cause, there has been substantial bipartisan support in the US Congress to address the situation by passing several bills and funding provisions to help mitigate the ongoing humanitarian crisis, amplified by the current COVID-19 pandemic. However, there is a distinctive approach between the Obama administration, which heavily relied on diplomacy, and the Trump administration, which grew frustrated by the gradualness of such an approach (Camilleri, 2018). This was evident when Trump insisted that ‘all options were on the table’ for Venezuela in 2019, suggesting that his administration seriously considered a military intervention if a political transition was not in the horizon. The reaction across the region was swift and strong. Governments strongly rejected any military incursion into the country and reaffirmed their support for a peaceful and diplomatic transition.
Effectiveness of sanctions on regime cohesion and powerlessness for regime change
So, how successful has the current sanctions regime been in achieving its goals? What are the human costs associated with this policy—and were they avoidable?
There are two schools of thought regarding economic sanctions: one that favors economic sanctions as a means of influencing the behavior of bad actors through coercion; and the other that sees sanctions to have a limited effect of targets but a larger and more consequential effect on the population at large. Scholars have shown that sanctions are more efficient if they are part of a multilateral initiative, when they are applied jointly with diplomatic efforts, and when they are implemented with a strong scrutinizing mechanism. The success of sanctions also depends on the nature of the autocratic regimes being targeted. For instance, personalist dictatorships are more susceptible to their effects than military regimes (Escribà-Folch & Wright, 2010). Also, sanctions are best used as an instrument for persuasion rather than coercion since, if they are meant to induce gradual change, they tackle a specific behavior that the recipient of the sanction can modify so it can lead to its removal, otherwise, it will have little to no impact (Cohen & Weinberg, 2019). In practice, sanctions have led to transitions in some cases (e.g. South Africa), while in others, they have failed to achieve their projected outcome (e.g. Cuba, North Korea, Venezuela).
Among the most pressing issues to consider is the burden put on the general population. The effects of the current COVID-19 pandemic has renewed calls to lift sanctions on Venezuela. The debate has examined the impact of the decision made by the Trump administration to impose sanctions on the state’s oil company, Petróleos de Venezuela, S.A (PdVSA), blocking its operations and extending it to the mining business, which represents a severe cut in the country’s revenue. However, a closer look into the preceding conditions challenges the assumption that this course of the policy is solely to blame for the severe humanitarian crisis.
Critics argue that sanctions have thwarted oil production, thereby precipitating the industry’s collapse and the country’s economic crisis, but the oil sector had been consistently showing signs of deterioration due to mismanagement and lack of investment. The industry started to unravel after the 2003 general strike and between the syphoning of oil revenue, increasing debt, and the prominent role of the military in the daily operation of the business, there was a decline in productivity and a significant loss of expertise.
Another issue at stake is the impact sanctions have on the capacity to satisfy social demands like healthcare. Critics claim that the lack of supplies and deterioration of the country’s public infrastructure is a direct result of economic sanctions that has barred the country from accessing financial markets. Bahar et al (2019) argue that between 2013 and 2016 medical equipment imports dropped 68%. This shows that years of neglect by Venezuelan government has resulted in shortages and a failure to live up to its public duty, although the government is now portraying itself as victims of the current sanctions regime.
Another critical area of contention is the country’s electrical sector, which is plagued by widespread malfunction and inefficiency. Since 2010, it has been showing signs of deterioration as massive power outages periodically hit the country. The argument against sanctions is that they are blocking the access to financial markets to supply the industry with technical needs. However, as has been reported, mismanagement has also played a role in the decline of the electrical grid. By the time financial sanctions were enacted, Venezuela had been already excluded from financial operations in the international market.
As the COVID-19 pandemic further complicates the political crisis, the returning migrants and the precarious conditions of the country – in terms of facilities and medical supplies –highlights the enormous extent of the humanitarian crisis, which some claim as reason to lift sanctions. However, the conditions in the country had been deteriorating long before the pandemic struck. Food scarcity was, among others, a critical issue and, once the oil revenue started to decline, the government turned to the expropriation playbook Chávez once used. This time it was not enough to offset the decreasing food imports, and the cyclic period of scarcity has turned into a structural problem, extending into the healthcare, utilities, and education. These crises have translated into precarious quality of life for Venezuelans.
It is fair to say that the sanctions are affecting people’s lives, especially the most vulnerable, but it would be disingenuous to ignore and absolve Nicolas Maduro of the responsibility he has had in the crisis. An already critical situation has worsened, precisely because of the dire conditions that preceded the issuing of sanctions. The government has found in the sanctions regime an excuse to elude accountability, but the economic and financial trajectory, as well as the country’s domestic indicators, paint a very different picture: one of a country with a destabilized economy, a weak financial system, and a controlled social structure incapable of any economic initiative to counter the state’s paralysis.
While sanctions have had a direct consequence on the most vulnerable, since they were implemented as a means to force Maduro out of power rather than persuade him of making changes, there is also concern on the corruption of the regime and the lack of trust in its willingness to help the people, considering how the livelihoods of Venezuelans have deteriorated due to his poor decisions and mismanagement. On the other side, the implementation of coercive sanctions has not rendered the expected result: Maduro and the military have chosen isolation, as Cohen and Weinberg find, taken that leaving power represents a higher cost than weathering the storm. If the offer is an insubstantial amnesty agreement, there is no doubt the decision will be to keep that status quo. Trump administration policy has been flawed from its inception when instead of directing pressure on modifying behavior, it insisted on pushing for regime change. Finally, only a combination of sanctions with diplomatic efforts can lead to gradual improvement of democratic practices that can successfully lead to a transition.
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 The basic purpose of economic sanctions throughout history has essentially remained the same, namely, restricting foreign trade and finance or withholding economic benefits such as state aid from targeted states or other targeted non-state actors to accomplish broader security or foreign policy objectives (Alexander, 2009: 10).
 On July 31, 2017, the Trump Administration added President Maduro himself to the sanctions list, one of only four heads of state in the world subject to such a measure (Camilleri, 2018: 191).
 There has been bipartisan support in Congress for targeted sanctions against Maduro officials, but opinions on broader sanctions vary. Some support economic sanctions as a means to pressure the Maduro government. Others, concerned about the humanitarian effects of those sanctions, have called for a suspension of sanctions during the Coronavirus (COVID-19) pandemic. In December 2019, Congress enacted P.L. 116-94, an act that includes provisions from the VERDAD Act (S. 1025) that, among other measures, extend sanctions regarding corruption and undemocratic actions enacted in P.L. 113-278 through 2023 (Ribando, 2020).
 ‘Venezuela’s oil production had been declining through 2016 and the first half of 2017, but the speed of that decline accelerated markedly in the second half of 2017, coinciding with the adoption of financial sanctions, which barred new borrowing by the government and the state-owned oil company PDVSA firm’ (Rodriguez, 2019: 4). See Graph Nº 1 in the Appendix.
 Venezuela’s daily oil output declined by 24 percent between 2005 and 2016. This decline became even more pronounced during the first half of 2017 when production decreased by 242,000 barrels per day relative to the same period in the previous year (Bahar, Bustos, Morales-Arilla, Santos, 2019).
 ‘Thus, any sanctions that reduce export earnings, and therefore government revenue, thereby reduce the imports of these essential and, in many cases, life-saving goods’ (Weisbrot & Sachs, 2019: 2). See Graph Nº 2 in the Appendix.
 ‘Imports of medicines and medical equipment fell by 68 percent between 2013 and 2016’ (Bahar, Bustos, Morales-Arilla, Santos, 2019).
 ‘Further, Venezuela’s electrical sector relies upon equipment provided by international suppliers such as General Electric. The sanctions prevented the Venezuelan government from paying these companies, thereby increasing reliance on hydroelectric power generation’ (Weisbrot - Sachs)
 ‘In the following years, the state oil company, Petróleos de Venezuela, and the state energy company Corpoelec paid millions of dollars in mostly no bid contracts to politically connected friends, according to experts and sales documents seen by The Wall Street Journal.
Analysts and opposition critics say that bribes and kickbacks were paid on many of these contracts. Since then, some of the officials and contractors involved have either been indicted on corruption, bribery and money laundering charges or pleaded guilty to them.
One company, Derwick Associates, formed by a number of well-connected young businessmen with scant experience in the power business, received about $1.8 billion in contracts from Venezuelan state companies to buy and install turbines, paying a US company about $1 billion to do the work. Derwick officials said they paid no bribes to any Venezuelan officials and the prices charged by the company reflected the high costs of doing business in Venezuela’ (Dube, R. and Castro, M., 2019).
 ‘In sum, the evidence indicates that by August 25, the ability of the Venezuelan government to issue debt was already severely limited if not inexistent, and that investors had either anticipated sanctions or considered their impact immaterial’ (Bahar, et al., 2019).
 ‘The sanctions reduced the public’s caloric intake, increased disease and mortality (for both adults and infants), and displaced millions of Venezuelans who fled the country as a result of the worsening economic depression and hyperinflation’ (Weisbrot-Sachs). See Graph Nº 3 in the Appendix.
 ‘The government tried to redistribute the country’s wealth by aggressively taking over hundreds of private companies and hundreds of thousands of acres of land. This policy was designed to shift ownership from private hands to government control ‘(Benzaquen, 2017).