While in Argentina over the weekend, Secretary of State Rex Tillerson remarked to reporters that the imposing of oil sanctions and restrictions against Venezuela’s oil sector is now on the table. US oil sanctions are considered the nuclear option and would close off Venezuela’s economy to the single source of dependable income it has left. US and international sanctions already in place against Venezuela have not had the intended effect. If anything, the moves have emboldened Venezuelan strongman Nicolas Maduro to dig in his heels and go for broke. In January, 2018 Maduro announced he will be seeking a new term in office. The presidential election has been scheduled for 30 April of this year and with the majority of opposition candidates and leaders banned from running, Maduro is expected to skate to an easy victory.
If the presidential election proceeds, and the Trump administration imposes an oil embargo in response, the impact on markets, supply, and output will be significant. 2018 has seen an overall tightening in the oil market and a supply disruption now is sure to cause reverberations that weren’t felt when there was a crude superabundance. If Venezuela faces an oil embargo its economy will collapse entirely and that could cause an undesirable chain of destabilization among its neighbors, and other Latin American nations. The prospects of sanctions bringing a scenario like this to life are real. Caribbean nations rely heavily on cheap Venezuelan oil and have resisted Tillerson’s calls for a hemisphere-wide effort to challenge Maduro. US, Mexican, and Canadian oil officials, and diplomats are forming a working group to try and find an alternative to Venezuelan oil for nations in the Western Hemisphere that are reliant on it at the present time.
President Trump favors harsher sanctions against Venezuela, though its uncertain if he’s willing to turn to his nuclear option just yet. As mentioned above, the current sanctions in place have not motivated Nicolas Maduro to begin the reform process. If US efforts to create an anti-Maduro coalition show signs of success between now and the end of April, expect the Trump administration to begin thinking seriously about oil sanctions, or an outright embargo against Venezuela by 1 May.
A confidential United Nations report suggests North Korea is exporting commodities in direct violation of the international sanctions that have been levied against the Pyongyang regime. The report, submitted by a panel of experts to the UN Security Council, accused North Korea of exporting, or attempting to export oil and other commodities that are prohibited in resolutions, from January to September, 2017. A host of multinational oil companies are also under investigation for their roles in supplying petroleum products to the North, although no specific company names were revealed.
According to the UN report, North Korea has netted $200 million from the shipment of banned commodities. False paperwork, evasive techniques, and circuitous routes were employed to cover up the North’s involvement, but it was not enough. Evidence of military cooperation between North Korea and Syria to develop the later’s chemical weapons capabilities was also discovered.
It’s unlikely that the UN will penalize Pyongyang with additional heavy sanctions with less than a week to go before the start of the 2018 Winter Olympics in South Korea. The North has made overtures to South Korea in recent weeks, and will be sending a team of athletes to the games in Pyeongchang. The UN is not about to rock the boat when North Korea has been making the effort (albeit a self-serving one) to behave itself. If the Security Council even whispers about sanctions between now and the beginning of the games it will be a PR jackpot for the North Koreans.
Consequently, do not expect North Korea to face penalties for the sanction violations. There remained a bit of hope in the UN that sanctions imposed by the Security Council might pave the way towards a turn around by Kim Jong Un. That is not going to be the case. With the sanctions so easy to circumvent, no incentive exists for the North Korean government to behave, let alone even care if the sanctions remain in place or not. And it is not as if the UN Security Council is in any position to enforce the sanctions when two of its members are not so clandestinely enabling Pyongyang to skirt a number of the sanctions now in place.
Until recently it has been generally accepted that the greatest threat to Poland lay to the east in the form of the Russian Federation. Under Vladimir Putin’s leadership, Russia has responded decisively to what it perceives as NATO and European encroachment of its traditional sphere of influence. Russia’s involvement in the Ukraine crisis following Euromaidan and the subsequent War in Donbass can be linked directly to its fear of NATO or the European Union co-opting Ukraine and molding it into a pro-West nation-state. Moscow cannot let this happen for a variety of reasons. As the fighting in Ukraine reached a stalemate, Russia began to shift its attention to the Baltics and its former satellite states in Eastern Europe. Russian military exercises set around the periphery of the Baltics and Poland, coupled with NATO military deployments to the region heightened tensions, and made the prospect of a future Russian-NATO clash in Poland seem a reasonable scenario.
While Russia remains a clear threat to Poland, its status as the greatest could be facing some competition. A newer menace to Poland and its sovereignty is developing in Brussels at the headquarters of the European Union.
The EU and Poland are moving towards a confrontation that could prove to be a crucial test for the Union. The right wing Law and Justice government in Warsaw has undertaken a series of moves that the EU regards as a challenge to EU principles. Even though Poland remains a proper democracy in every regard, the government’s attempts to reform the voting system, and judicial system rub Brussels the wrong way. Added to this is Poland’s refusal to accept refugees as part of the EU attempt to distribute asylum seekers from North Africa and the Middle East across Europe.
In December, the European Commission invoked Article Seven of the Lisbon Treaty, giving Poland three months to reverse its judicial reforms or face EU sanctions. This action projects the current differences as being a matter of the EU bullying Poland because it does not approve of the domestic decisions being made in Warsaw. Brussels claims otherwise, of course, but the fact remains that the European Union wants Poland to reverse its reforms and come in line with the supra-national body’s principles. In short, the EU seems determined to punish Poland for what it views as Polish defiance.
The brewing confrontation fits in well with a project on Poland I’m in the process of planning. Later this week I’ll post about it and then separately next week provide a deeper analysis of the EU-Poland rift.
As Venezuela remains perched on the brink of dissolution and Venezuelan President Nicolas Maduro continues stripping away the last remnants of democracy in the once vibrant land’s government, the United States has decided to begin hitting Maduro where it hurts. On Friday, it was announced that President Trump has signed an executive order imposing new sanctions on Venezuela. These will focus on Venezuela’s outstanding debt which has been a major economic vulnerability for the country. Venezuela, and its state-owned oil company PDVSA, owe international investors upwards of $100 billion. Sixty percent of the debts were issued in the US and are subject to US law. The new sanctions will stop Venezuela from borrowing money from international capital markets. They will also Maduro’s government from refinancing existing debts that are coming due later in 2017, likely setting up a financial crisis for Maduro to contend with in the fall.
The nuclear option for the United States has always been to prevent Venezuela from exporting oil. The chaos such a move could unleash on international energy markets makes it unpalatable to say the least. The sanctions ordered on Friday are a workable alternative to the nuclear option. For example, Citgo, which is PDVSA’s US energy company, can continue to sell gas in the US. However, it cannot send its profits back to Venezuela where it could finance PDVSA, and the Maduro government.
The next move for the Trump administration will be centered around diplomacy. The US has to make certain that nations like China, and Russia do not step in to fill the financing void that US sanctions will create. More importantly, Maduro needs to be informed that fiscal collapse can be headed off by restoring Venezuela’s democratic institutions. Washington has hinted at this possible scenario, but so far Maduro has not reacted to it. For his part, Maduro has launched a counterattack against US sanctions, and it is aimed at a domestic audience. “All they’re trying to do to attack Venezuela is crazy,” he said on Friday. “With the efforts of our people, it will fail and Venezuela will be stronger, more free, and more independent.”
In essence, Maduro has brought a knife to a gunfight. He is fighting an economic battle with nothing more than stale socialist rhetoric. Behind the scenes, he is likely hoping for intervention by China or Russia to keep his socialist paradise from going down the tubes completely. If that doesn’t come about, Maduro and Venezuela will be dangerously short on options and time.
Vladimir Putin is not taking the possibility of fresh US sanctions lightly. With sanctions legislation aimed at Russia about to land on President Trump’s desk, the Russian leader understands perfectly well that Trump is not going to veto the bill and send it back to the House. The legislation will be signed and a new round of US sanctions against Russia will be set in place. Putin has opted to retaliate before the legislation is even signed, and to do so in a fashion which guarantees a US response.
On Sunday Putin announced that the US diplomatic mission to Russia will have to reduce its staff by 755 personnel by 1 September. The reduction in US staff had been announced on Friday, however, today’s announcement was the first to include concrete numbers. Russia also made it known that it would seize two US diplomatic properties in Russia, a move similar to action the US took against Russian properties in America this past December. Putin also added, somewhat ominously, that further retaliation will come if the sanctions are passed.
Since January, the Trump administration and its Russian counterparts had been hoping for an improvement in US-Russia relations. It was not to be following accusations that Russia had interfered in the 2016 US presidential election. The accusations have contributed directly to the creation of sanctions and a straining of the relationship between Moscow and Washington. Now, the tit-for-tat exchange is on the verge of escalating. President Trump could very well decide to let these sanctions act as the US response to Sunday’s announcement by Putin. Yet, if further action is taken by Russia, it will result in a proportionate response by the US. If this keeps up into the fall, the United States and Russia might find themselves in a nasty diplomatic scrap, with very few exit options.
*Author’s note: Regrettably, Today’s Dirt will not be posting Part II of the ‘The Case For Military Action Against North Korea.’ My employer has requested that I refrain from writing and posting any articles centered on North Korea and potential US military action against it for a period of time given what is happening right now. I understand the reasons for my employer to ask this of me, and have agreed. After Labor Day, we will revisit the issue and hopefully can work something out. I apologize. *