Sanction squeeze as Venezuela sells $570 million of gold to fight import restrictions
Liam Sheasby, News Editor
20 May 2019, 1:20 p.m.
Banco Central de Venezuela have reportedly sold almost 14 tonnes of gold in the past fortnight, for a total of $570 million. The news, reported by Bloomberg, does not specify a buyer, though it is heavily rumoured to be the United Arab Emirates.
The gold – 13.7 tonnes worth – was sold in a batch of 9.7 tonnes on May 10th and smaller lot of 4 tonnes on May 13th. The latest sale means that Venezuela has sold 23 tonnes since the start of April, but Maduro had already come under fire back in February for a previous gold sale.
The decision to sell is a move by the Maduro administration to counter US Treasury sanctions on the South American nation and their state companies. Sanctions were first introduced in 2017 but have been ramped up this year. The Venezuelan central bank hopes to use the funds – primarily Euros – to restart imports to counteract the shortages in food and medicine.
The country had hoped to repatriate the majority of its gold reserves from the Bank of England, similar to a previous return made under former president Hugo Chavez, but the BoE has placed the return on hold due to the government uncertainty. Click here to read our article about this.
Why is Venezuela in crisis?
Venezuela’s economy under President Maduro has been rife with hyperinflation, and there are also allegations of politicians being bribed on a regular basis by an unchallenged drug trade within the country. The impact of such unchecked inflation has been a collapsing economy, with the cost of goods and services rocketing past affordable levels for even the richest.
A general election was held in 2018, with Nicolás Maduro proclaimed the winner, but Guaidó has disputed the result, suggesting that the record-low turnout was indicative of a population who don’t believe the democratic process can work. The country’s National Assembly voided the result in January, with Guaidó – the assembly’s speaker – installed as Acting President.
President Nicolas Maduro and Acting President Juan Guaidó
To date, 54 countries recognise Guaidó as the leader of Venezuela, but major opposition includes Russia, China, Turkey, Cuba, and neighbouring Bolivia. Maduro’s government also refutes the claims of any election fixing, referring to the fact the United Nations were invited to observe and report on the general election last May.
How legal are the US sanctions?
The US Treasury department has implemented sanctions on Venezuela’s state companies. Allied nations, including the UK, have also agreed to follow these sanction rulings. The aim is to freeze the Maduro administration out and force them to leave office; whether by resignation or by an uprising.
The US State Department has repeatedly condemned the Maduro government, accusing them of stealing from the public. The official line reads as follows: “The United States condemns all attempts by Maduro and his supporters to steal resources from the Venezuelan people.
“We encourage companies, banks, and other entities, whether in the United States or in other countries, not to participate in the former Maduro regime’s fire sale of Venezuelan resources.”
On the face of it, the United States’ approach seems fair: if President Maduro is corrupt and is letting his country fall into ruin for financial gain then countries should challenge the regime. The problem is that there is limited proof that such corruption is ongoing, and the US sanctions are doing considerable damage to a country whose interests it proclaims to have at heart.
US Vice President Mike Pence, who has previously stated that “Maduro must go”.
Former UN special rapporteur Alfred de Zayas (also former secretary to the UN Human Rights Council) called the US sanctions “economic warfare” and presented evidence to the UN and government ministers last September, detailing how sanctions on an already-ailing nation were hitting the poorest and most vulnerable the hardest.
The Centre for Economic Policy and Research (CEPR) in London has since reported that the sanctions are not legal, claiming they breach US law, international human rights law, and contravene treaties that the US has previously signed. The report states the following:
The unilateral sanctions imposed by the Trump administration are illegal under the Charter of the Organization of American States (OAS). There are many provisions in the Charter that prohibit these sanctions, but among the most clear and unambiguous are articles 19 and 20 of Chapter IV:
Article 19: No State or group of States has the right to intervene, directly or indirectly, for any reason whatever, in the internal or external affairs of any other State. The foregoing principle prohibits not only armed force but also any other form of interference or attempted threat against the personality of the State or against its political, economic, and cultural elements.
Article 20: No State may use or encourage the use of coercive measures of an economic or political character in order to force the sovereign will of another State and obtain from it advantages of any kind.
For President Trump to enact these sanctions his administration must achieve approval to declare it a national emergency. This has been achieved, but the report points out how US law – in order for such a declaration – requires a nation (in this case Venezuela) to pose “an unusual and extraordinary threat to the national security” of the United States. It is evident that Venezuela poses a threat to itself, but highly speculative to suggest it threatens the superpower that is the USA.