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Trump administration announces sanctions targeting Venezuela's oil industry

National security adviser John Bolton listens as President Donald Trump speaks during a Cabinet meeting at the White House on Aug 16. Washington Post photo by Jabin Botsford

WASHINGTON - The Trump administration escalated its efforts to force Venezuelan President Nicolás Maduro from power Monday, blocking all U.S. revenue to Venezuela's national oil company and calling on members of its armed forces to switch their allegiance to the man the United States now recognizes as Venezuela's head of state.

Any attempt to harm remaining U.S. diplomats in Venezuela, or violence against the newly recognized president, Juan Guaidó, "will be met with a significant response," White House national security adviser John Bolton said.

He declined to define that response "because we want the Venezuelan security forces to know how strongly we think that President Guaidó, the National Assembly, the opposition, and most importantly, American personnel, [should not be] harmed."

President Donald Trump "has made it very clear . . . all options are on the table," said Bolton, who announced the sanctions at a White House press briefing alongside Treasury Secretary Steven Mnuchin.

For the moment, the administration is depending on economic and diplomatic measures to squeeze Maduro, who has refused to leave and charged the United States with trying to overthrow his government. Pentagon officials have indicated they have no orders to prepare for military action toward Venezuela. But by starving Maduro of a critical source of cash, the Trump administration has dramatically increased the pressure on his government.

Maduro, responding in televised remarks to diplomats gathered in Caracas, said: "Never before was there an open coup attempt led from Washington. Today John Bolton asked for a coup, a desperate blow. John Bolton is offending Venezuelan soldiers. He offends international rights. There's no limit to the extremist group that took over the White House. They're like the Ku Klux Klan."

"With this measure, they want to rob our company Citgo," he said, vowing that "We will take legal, commercial and logistical measures in the coming hours."

Bolton said that Venezuelan "official and military personnel" were already "heeding this call" to change sides, noting that the military attache at the country's embassy in Washington has publicly recognized Guaidó's government, as has the Venezuelan Consulate in Miami. He also said that several unnamed generals who last week publicly pledged loyalty to Maduro were already in contact with the opposition.

Maduro, Bolton said, had "allowed the penetration" of Venezuela "by adversaries of the United States," including Cuba and Iran, posing "a strategic significant threat." But he made no mention of China, one of Venezuela's biggest creditors, and Russia, which has supplied extensive aid to the Maduro government, owns or controls oil and gas fields there, and is Venezuela's biggest weapons supplier.

The measures announced Monday place sanctions on PDVSA, the Venezuelan state oil company, blocking $7 billion in U.S.-based assets and more than $11 billion in lost export revenue over the next year, Bolton said.

Virtually all of those assets belong to Citgo, the U.S.-based PDVSA subsidiary that owns three Gulf Coast refineries and a nationwide network of pipeline and gas stations, and employs thousands in this country.

Revenue from Citgo, which imports Venezuela's heavy crude oil, and refines and distributes it in the United States, provides much of the cash income currently available to Maduro to run the country.

Any drop in U.S. imports of Venezuelan crude would also affect refining giants Valero and Chevron as well as PBF Energy, which has five refineries around the country, according to Height Securities, an investment advisory service. With transportation constraints limiting the ability of Canadian crude to reach the U.S. Gulf Coast, the refiners could have trouble replacing lost Venezuelan imports, Height said.

Mnuchin said there would be little impact on U.S. oil supplies. "Gas prices are almost as low as they've been in a very long period of time," he said, noting that there would be no "big impact" on the affected refineries "in the short term."

Neither Bolton nor Mnuchin provided more than scant details of how the sanctions would work, or how and when the money could be distributed to the opposition. Analysts and oil company advisers were still trying decipher the announcement, and Treasury officials said they were not yet prepared to answer questions about the hastily put-together measures.

"We have continued to expose the corruption of Maduro and his cronies, and today's action ensures they can no longer loot the assets of the Venezuelan people," Bolton said. When there are "rightful leaders" in Venezuela, Mnuchin said, the blocked money "will be available to Guaidó."

At least 20 other countries, most of them in the Western Hemisphere, have joined the United States, which recognized Guaidó, 35, as the legitimate president of Venezuela on Jan. 23. At a United Nations Security Council meeting Saturday, several leading European governments threatened to recognize Guaidó, the elected president of the opposition-controlled National Assembly, unless a plan for new elections was announced by the end of this week.

Mnuchin said that "Citgo assets in the United States will be able to continue to operate," and that Venezuela can continue to export oil to this country, "provided that any funds that would otherwise go to PDVSA instead will go into a blocked account in the United States." Venezuelan oil already "at sea" and paid for would not be affected, he said.

But if Maduro can't access the funds from oil sales, he could move output to other countries, which have some spare refining capacity for heavy crude oil.

"They've forced Venezuela to self-impose their own sanctions," said Russ Dallen, a Florida-based managing partner at the brokerage Caracas Capital Markets. "Anytime you buy a cargo of Venezuelan oil in the U.S., the proceeds are going to go into these Treasury-designated special accounts."

Venezuela's oil flows to Russia and China - its main benefactors - have been largely to pay off loans. Sales to the United States have been worth roughly $28 million per day, Dallen said.

Such a blow to the government's revenue stream could deteriorate an already dramatic scarcity of food and medicines. Crippling hyperinflation has broken the socialist nation, fueling widespread hunger, spreading disease and prompting a historic wave of Venezuelan migrants. In Venezuela, the government is responsible for a large portion of imports, meaning shortages of food and medicine could deepen as the government loses access to cash from oil sales to the United States.

"There's no way the population won't be affected in the short term," said Luis Vicente Leon, head of Datanalisis, a Caracas-based polling and political analysis firm. "If this strategy isn't successful quickly, the effect on the people will be devastating. "

Guaidó on Monday announced his intention to have foreign accounts of Venezuela transferred to the opposition, pledging financial oversight and transparency. He has also vowed to start the process of naming new heads of PDVSA and Citgo, "to permit our recovery of an industry that is now going through a dark moment. "

In the coming days, he said, he would seek to bring a caravan of shipments of aid in through Venezuela's borders. Analysts, however, called it unlikely that the military or Maduro's government would permit the convoys to pass.

"There is no way the government is going to allow the internal financial system to deal with Guaidó, or that the military is going to let it in," said Philip Gunson, a Caracas-based senior analyst at the International Crisis Group. "What are they going to do, bring it in a suitcase?"

This article was written by Steven Mufson and Anthony Faiola, reporters for The Washington Post.

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