Iran, Cuba, North Korea, Sudan, and Syria are close allies of Venezuela – all state sponsors of terrorism. Venezuela will feel right at home.
To list or not to list, that has become the question. The Bush Administration is reportedly considering whether or not to list Venezuela as a State Sponsor of Terrorism. The review may be long over due. It took on added interest a few weeks ago when Colombia found information that may concretely link terrorist groups in the region to Venezuela and Cuba.
The State Department designated Cuba in March 1982, and rightly so. Cuba met the legal criteria at the time for doing so; and under today’s standards it shall remain on the list for some time. Unlike the Cuba case, one of the several distinguishing considerations with regards to a Venezuelan designation include the sale of petroleum to the U.S. It may also impact businesses run by Venezuelans residing in the U.S. While neither a ringing endorsement of pursuing the listing in challenging economic times, even if the Administration were to place Venezuela on some list or lists, we are very far off from a complete shut down of economic relations with Venezuela.
Countries determined by the Secretary of State to have supported international acts of terrorism face a whole range of potential economic sanctions under three U.S. laws. They are rarely, if ever, implement all at once. Quite the opposite. The restrictions include limiting U.S. foreign assistance (of which there is little if any going to Venezuela today), banning defense-related exports and sales (already restricted in 2006), restricting the export of dual use items, and a whole slate of miscellaneous restrictions on financial and related transactions.
Whatever is done, if anything, sanctions can be crafted in such a way to express clear displeasure with the Venezuelan government, yet not too harsh so as it create unintended consequences such as a spike in oil prices or related matters. Despite the rhetoric from Venezuelan leader Hugo Chavez, the Venezuelan government needs access to the U.S. market now more than ever. We are in the unique position to implement a balanced set of sanctions whose benefits to the U.S. are substantially outweighed by any harm that could befall certain sectors of our economy.
One area that should be seriously considered for a cut is a U.S. defense contract with Venezuelan companies to provide gasoline to the Navy. According to a recent report by the Heritage Foundation, the U.S. Navy has a $60 million a year contract with Citgo, a wholly-owned subsidiary of a Venezuelan state-owned company. Under the contract, Citgo provides the Navy with gasoline. While set to expire in 2010, if the Navy can secure services from another provider, it should be allowed to break this contract. The sanctions will give them a solid legal excuse to do so.
Other options for a first wave of new sanctions include limiting U.S. exports of luxury goods or increasing duties on select Venezuelan exports to the U.S. If Venezuela refuses to cooperate with Colombia and U.S. efforts to combat terrorism in the region, a second wave of sanctions and diplomatic pressures can be implemented including denying companies and individuals tax credits for any income earned from business in Venezuela or opposing loans and other financial to Venezuela from the World Bank, the International Monetary Fund, and other global financial institutions. The various excluded persons and entities lists can be expanded to include more Venezuelan companies and individuals with which Americans are precluded from engaging in business transactions.
The various aforementioned options, and many others, can be done without ever touching the petroleum exports (with the exception of the Navy contract). Venezuela will need access to the U.S. market to refine its petroleum for some time. Chavez may be rhetorically-challenged, but money and access to our market he clearly understands. Most observers agree that he will not push his luck on this front. Moreover, depending on what INTERPOL and U.S. authorities authenticate from the Colombian laptops, he may be in an even less of a mood or political position to cause trouble.
A terrorist haven or state sponsor of terrorism designation will put more options on the table as far as U.S. sanctions and, in the process, send a signal to responsible nations that it may want to take a closer look at dealings with Venezuela. It will also complement ongoing efforts by Colombia to combat terrorist groups that are receiving support from Cuba, Venezuela, and possibly other countries. Iran, Cuba, North Korea, Sudan, and Syria are close allies of Venezuela – all state sponsors of terrorism. Venezuela will feel right at home.