The Trump administration has, for now, opted against hitting Venezuela’s oil sector with the harshest possible sanctions despite disavowing the re-election of President Nicolas Maduro as a “sham.” The White House did issue new financial sanctions on Caracas and state oil producer Petroleos de Venezuela(PDVSA) this week, but pulled up short of a full-scale embargo on U.S. refineries importing Venezuelan crude or banning U.S. companies from selling Venezuela the light petroleum diluent the crumbling country needs to make its heavy oil usable for refining. Consider these the nuclear options of Venezuela sanctions.
The decision to hold off on such nuclear options is prudent given the current state of global oil markets. Oil prices have surged recently to multi-year highs of around $80 a barrel, mainly on the back of supply fears related to renewed sanctions on Iran. The last thing the market needs now is more headlines about sanctions wiping out yet another OPEC member’s production.