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Venezuela protests to determine US policy steps



By Argus


Petroleumworld 01 24 2019

The outcome of protests organized by Venezuela's opposition-led National Assembly to compel President Nicolas Maduro to cede power may determine Washington's next policy actions.

National Assembly speaker Juan Guaidó, addressing a large crowd of protesters in Caracas, today declared himself the country's acting president.

Demonstrations in Caracas and other cities this morning followed a night of sporadic protests and clashes with armed forces. There are early signs of splintering in the military, but it is too early to predict the day's outcome.

Guaidó acknowledged that his declaration "will have consequences," an allusion to the Maduro government's threat of violence in response to such a declaration.

The White House is expected to react to Guaidó's declaration later today. Any signs of success for the opposition will accelerate the process for withdrawing US formal recognition from the Maduro government and conferring it to the National Assembly a step with legal ramifications, among other things, for ownership of Venezuelan assets in the US and control over revenue derived from oil exports.

Conversely, a crackdown on the opposition and protesters will force Washington's hand to tighten the sanctions pressure on Maduro, through an embargo on oil exports or designating his government as a "state sponsor of terror." The latter designation, by itself, would not preclude oil trade with the US. But it would affect such trade indirectly by making it difficult to process payments, since US and international banks are wary of engaging in transactions with countries carrying that designation.

US vice president Mike Pence, in a video address yesterday to the people of Venezuela, called Maduro "a dictator with no legitimate claim to power" and reiterated support for the National Assembly as the only legitimate institution. "The US supports the courageous decision by Juan Guaidó, the president of the National Assembly, to assert that body's constitutional powers, declare Maduro a usurper, and call for the establishment of a transitional government," Pence said.

US senators Marco Rubio (R-Florida) and Rick Scott (R-Florida) and Florida governor Rick DeSantis (R) met with President Donald Trump yesterday to urge a more forceful course on Venezuela. "We have strongly encouraged (Trump) to recognize Guaidó as the interim president, as he is, rightfully, under the constitution," Rubio said.

Rubio said he urged Trump to use the "state sponsor of terror" designation against Maduro's government. Administration officials discussed the possibility in recent months, describing Maduro's actions as a national security challenge to the US. Congressional Democrats generally back the administration's harder line against Maduro but warned Trump against the "terror" designation without a clear justification.

Rubio pointed to extremist group the ELN, which has claimed responsibility for a car bombing on 17 January in Bogotá, Colombia, and whose members are known to take refuge in Venezuela,and to former guerrilla group the Farc, which helped destabilize that country for years.

"If you look at the ELN, which detonated the bomb, if you look at where FARC stages its operations from, there is no doubt that Maduro is a national security threat not just to the US but to the region," Rubio said.

Administration officials have held discussions recently with US refiners to assess the effects of potential sanctions disrupting the flow of oil from Venezuela to US Gulf and west coast facilities. But tighter global heavy crude oil supplies will complicate the possible US response.

An embargo on US imports of Venezuelan crude would inconvenience US refiners but "crude price differentials would solve the problem within a few weeks," investment bank Societe General head of oil research Michael Wittner said today at the Argus Americas Crude Summit in Houston. Venezuelan crude flows could head to Asia, while US refiners rely more heavily on sour crude from Canada and the Middle East.

"It is a matter of pricing it," Wittner said. "It is a little bit of a dislocation. But we think it would resolve quickly."

The premise behind the Trump administration's policy to Venezuela has been to encourage formation of a credible alternative to Maduro, sparing the US from applying sanctions that could hurt US refiners and the Venezuelan population.

Now that such an alternative is emerging, the administration will have to consider its next step. But Washington is wary of offering an immediate recognition to the National Assembly, only to see it falter in efforts to consolidate its constitutional authority.

The US and seven other members of the Organization of American States already have called for a special meeting on 24 January to consider developments in Venezuela. Guaidó already has named a new representative to the organization, to replace the Maduro-appointed envoy.



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