US threatens trading houses with sanctions, asks not to buy oil from Venezuela

The United States told some large trading houses this week they should stop trading jet fuel with Venezuela or face sanctions, ratcheting up pressure aimed at removing Venezuelan President Nicolas Maduro from power, according to two industry sources. According to the two sources familiar with the calls to several large Swiss- and British-based trading houses, which were made by U.S. State Department officials, the move is aimed at restraining commercial and military flights in Venezuela.

The U.S. officials told them that diesel trade with Venezuela was still considered legal for humanitarian reasons. The U.S. Department of State did not immediately respond to a request for comment.

The pressure, part of Washington's effort to oust Maduro in favour of opposition leader Juan Guaido, follows similar requests made in March. U.S. officials told global trading houses and oil refiners then to reduce dealing with Venezuela or face sanctions themselves, even if the traders were not prohibited by U.S. sanctions. U.S. officials have been trying to end deliveries of gasoline and refined products used to dilute Venezuela's heavy crude oil to make it suitable for export.

The United States, along with nearly 50 countries around the world, calls Guaido Venezuela's legitimate leader and has thrown its support behind him in efforts to push Maduro from power, but the effort has stalled in recent weeks. Venezuela’s economy has long relied on oil, which prior to sanctions accounted for more than 90 per cent of the country’s export revenues. The OPEC member has among the world’s largest reserves, but production has declined from more than 3 million barrels per day two decades ago to less than 800,000 bpd as of April, according to OPEC figures based on secondary sources.

Venezuela state oil company PDVSA's crude and fuel exports have dropped to around 800,000 bpd so far in May, down from 1.4 million bpd just before sanctions, according to PDVSA's trade documents and Refinitiv Eikon data. As the United States boosts oil and natural gas output, it has increasingly been using its energy clout in foreign policy. At an energy conference in Houston in March, U.S. Secretary of State Mike Pompeo laid out a vision of working with energy firms to isolate Iran and Venezuela. 

(With inputs from agencies.)