On Friday, August 25, 2017, President Trump signed an Executive Order that placed financial sanctions on Venezuela.
These financial sanctions bar any U.S. institution from buying any new debt from Venezuela or PDVSA, Venezuela’s state-owned oil company.
According to a White House statement, “It also prohibits dealings in certain existing bonds owned by the Venezuelan public sector, as well as dividend payments to the government of Venezuela.”
Nonetheless, in order to protect the U.S.’s oil imports from Venezuela, these sanctions exempt any transactions between the U.S. and Citgo, PDVSA’s U.S. subsidiary.
If this exemption had not been added, the Venezuelan economy would have collapsed under the sanctions. This is because oil revenues make up about 95% of their export earnings, and the U.S. buys nearly half of their oil exports.
Additionally, without the exemption, U.S. oil companies would have had to raise their prices and would have lost profits.
President Trump ordered these sanctions to combat Venezuelan President Maduro’s leadership. Under Maduro, Venezuela has strayed from democracy, as he has made efforts to elect a new assembly that supports him. This new assembly would essentially rewrite Venezuela’s constitution to eliminate the National Assembly that opposes his rule.
This is interpreted as having the intention of transforming Venezuela’s democracy into a dictatorship; because of this, the U.S. has placed these economic sanctions on the already financially-strained country.