Trump slaps sanctions on Venezuela to restrict access to U.S. debt market

U.S. President Donald Trump signed an executive order that prohibits dealings in new debt from the Venezuelan government or its state oil company on Friday in an effort to halt financing that the White House said fuels President Nicolas Maduro’s “dictatorship.”

The order is Washington’s biggest sanctions blow to date against Maduro and is intended to punish his leftist government for what Trump has called an erosion of democracy in the oil-rich country, which is already reeling from an economic crisis. 

The new sanctions ban trade in any new issues of U.S.-dollar-denominated debt of the Venezuelan government and PDVSA because the ban applies to use of the U.S. financial system. 

As a result, it will be it tricky for PDVSA to refinance its heavy debt burden. Investors had expected that PDVSA would seek to ease upcoming payments through such an operation, as it did last year, which usually requires that new bonds be issued. 

Additional financial pressure on PDVSA could push the cash-strapped company closer to a possible default, or bolster its reliance on key allies China and Russia, which have already lent Caracas billions of dollars. 

The decision also blocks Citgo Petroleum from sending dividends back to the South American nation, a senior official said, in a further blow to PDVSA’s coffers. 

“Maduro may no longer take advantage of the American financial system to facilitate the wholesale looting of the Venezuelan economy at the expense of the Venezuelan people,” U.S. Treasury Secretary Steven Mnuchin said on Friday.

 

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