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.”
Maduro, who has frequently blamed the United States for waging an “economic war” on Venezuela, said the United States was seeking to force Venezuela to default — but he said it would not succeed.
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, reports Reuters.
It suggests a weakening in already strained relations between the two countries. Just three days ago, Maduro said the relations between Caracas and Washington were at their lowest point ever.
“All they’re trying to do to attack Venezuela is crazy,” said Maduro on a TV broadcast on Friday. “With the efforts of our people, it will fail and Venezuela will be stronger, more free, and more independent.”
Venezuela faces a severe recession with millions suffering food and medicine shortages and soaring inflation. The South American nation relies on oil for some 95 percent of export revenue.
Citgo Petroleum [PDVSAC.UL], the U.S. refiner of Venezuela’s ailing state-run oil company PDVSA, is “practically” being forced to close by the order, warned Maduro, adding that a preliminary analysis showed the sanctions would impede Venezuelan crude exports to the United States.
He said he was calling “urgent” meetings with U.S. clients of Venezuelan oil.
The new sanctions ban trade in any new issues of U.S.-dollar-denominated debt of the Venezuelan government and PDVSA [PDVSA.UL] 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.
“They want us to fall into default,” said Maduro, adding that just under two-thirds of Venezuelan bond holders are in the United States.
Maduro insisted that Venezuela would continue paying its debts.
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.