The prize was tempting: a chance to stem the wave of refugees heading for the US border in an election year, improve the supply of non-Russian oil and gas to world markets and return a major Latin American nation to democracy.
But the unravelling of the Biden administration’s agreement with the Venezuelan government has left the US facing the worst of both worlds: the failure so far of its negotiating strategy and a likely return to a sanctions policy that has failed before.
Keen to move away from a Trump-era policy of “maximum pressure” financial penalties designed to unseat authoritarian President Nicolás Maduro, the Biden administration negotiated with the regime for more than a year at secret talks. They reached an understanding that crippling US sanctions on oil and gas — the lifeblood of Venezuela’s economy — would be lifted in return for steps towards free and fair presidential elections later this year and the release of wrongfully detained US citizens.
A formal agreement reflecting the US-Venezuelan understanding was signed between the Venezuelan opposition and the Maduro government in Barbados last October.
Washington backed the deal with sweeping concessions, lifting sanctions not only on Venezuelan oil and gas but also on mining exports and secondary market trading in Venezuelan debt. Alex Saab, an international financier for Maduro, was granted clemency on US corruption and money laundering charges and released from jail.
Maduro’s government, meanwhile, freed some political prisoners, agreed to accept flights deporting Venezuelan migrants from the US and made promises about reforms in future to help ensure competitive elections.
Within days, the Barbados accord started to unravel. The Maduro government suspended the results of an opposition primary and later upheld a ruling banning the victorious candidate, María Corina Machado, from running. This year it launched a fresh crackdown, with several dozen opposition activists arrested.
Maduro even revived a long-simmering territorial dispute with neighbouring Guyana in December, threatening to annex two-thirds of its land by force, though he later backed down.
“It was a mistake to hand over everything to Maduro with almost nothing in return,” said Venezuelan opposition politician Leopoldo López. “It was very predictable what would happen next. As he has done so many times before, Maduro did not keep his side of the bargain.”
A senior US state department official, speaking on condition of anonymity, rejected the criticism, telling the Financial Times: “Our view is that engagement was the best way to use the leverage that sanctions helped create to get reforms.”
Keen to try to keep the Barbados deal alive, the Biden administration initially held back from punitive measures. But this week the US government reimposed sanctions on Venezuela’s mining sector and announced that oil and gas sanctions would be returned in April unless there was progress on political reforms.
Maduro’s vice-president Delcy Rodríguez rejected what she termed a “crude and inappropriate blackmail and ultimatum” and threatened to halt deportation flights and review all existing co-operation.
Despite this week’s developments, the senior state department official said the Biden administration had not given up. “We still believe the electoral road map process is the most viable path to competitive elections in Venezuela this year and we continue to support it,” he said.
But the fast-deteriorating situation has dismayed both the doves who wanted to persist with negotiations and the hawks who never believed Maduro was serious about a competitive election.
Tom Shannon, a former top state department official who now consults for Washington law firm Arnold & Porter, said the risk was that “the Biden administration will end up owning a failed Trump policy and will make it theirs”.
“Maduro will argue that foreign powers are attempting to define how Venezuelan electoral institutions work and who is a candidate and who isn’t,” Shannon said. “It‘s a weak argument but it’s one that resonates in Latin America.”
The unravelling of the US-Venezuela understanding has also dismayed investors betting on a rapprochement to unlock lucrative opportunities to exploit Venezuela’s once-vast oil industry and increase the secondary market value of billions of dollars of government debt.
“We are pretty disappointed and very worried that things will go back to how they were in 2018-19,” said one investor holding a position in Venezuela debt. “The US has put itself in a corner. There is no way that María Corina Machado will be allowed to run, yet the US has said publicly she needs to be on the ballot.”
Maduro has yet to announce an election date but is widely expected to run again after a decade in power, despite approval ratings of just 20 per cent, according to Datanalisis, a Caracas-based research group.
After assuming power following the death of his revolutionary socialist mentor Hugo Chávez in 2013, Maduro oversaw a drastic economic collapse and responded by clamping down on dissent.
About 7.7mn Venezuelans have fled, with many making their way north to the US, creating a migration crisis for President Joe Biden as he campaigns for re-election.
Juan Cruz, Donald Trump’s top White House official for Latin America, said that while he had advocated engagement with Maduro, the Biden administration “were outmanoeuvred. They agreed to a wishy-washy agreement.”
“You need to play hardball with Maduro. And this administration won’t,” he added.
The situation now looks bleak. Virtually nobody believes Machado will be allowed to run. The pro-market former lawmaker won the opposition primary with more than 90 per cent of the vote, and has filled squares across the country, presenting a real threat to Maduro.
Machado has vowed to fight the election despite her ban. But some think she might be persuaded to stand down in favour of an opposition candidate more palatable to Maduro, allowing the Biden administration to keep the Barbados process alive.
Asked about this theory, the state department official said it was for the Venezuelan opposition to decide. “Our policy is designed to support the aspirations of the Venezuelan people and the democratic opposition,” he said. “[O]ur policy is not about any one candidate.”
Geoff Ramsey, a Venezuela expert at the Atlantic Council who has supported the Barbados process, said the White House did not want to return to a policy of sanctions on Venezuela. “You can imagine a scenario in which María Corina is not a candidate and endorses another candidate,” he said. “For the US, that would be an acceptable outcome.”
Michael McKinley, a former top state department diplomat, disagreed. “Without a reversal of the ban on María Corina Machado, the Biden administration will have to reimpose sanctions in April,” he said.
“Many companies, however, have already re-established ties with the Maduro regime and are unlikely to be fully deterred; it will be difficult to sustain the effectiveness of snapback sanctions.”
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