New US sanctions on Venezuela: Time for action

President Trump is right in imposing new sanctions on Venezuela because of "the continued usurpation of power [and] human rights abuses."  This move freezes the properties and assets of both Venezuela's government and individuals in business with Venezuelan officials in the United States.  Additionally, it prevents Crystallex — a Vancouver-based mining company — from seizing petroleum company Citgo's assets in compensation for the Venezuelan government's 2008 expropriation of its mining concession.

Understanding the legal battle between Crystallex and Venezuela is key to understanding why we should support the new sanctions.  Doing so requires us to reach back even farther than Hugo Chávez, to a time when politicians like Chávez promoted the state ownership of the commanding heights.

In 1991, the Venezuelan government started a joint venture with the Canadian mining company Placer Dome, which owned 70 percent of the partnership that created a new mining company called MINCA.  Claiming title to part of the Las Cristinas mine, Crystallex sued MINCA in 1998.

In 1999, Placer Dome sold its stake to Vanessa Ventures, another Canadian mining company, for a supposed ridiculous price of $50.  This sale enraged Chávez, the new caudillo of Venezuela — a country by then going on 40 years of social-democratic rule.  Chávez, an old-fashioned socialist-nationalist, argued that it was an insult to "Bolívar's land" to sell one of the world's largest gold deposits for such a price.  He then ordered the Bolivarian National Guard to seize MINCA's property and assets, and he signed an order to expropriate Las Cristinas.

Crystallex's 2001 annual report stated that the company viewed "this [as] very favorable, particularly in the context of the productive discussions we have had with the government and their enthusiastic response."  In 2002, Chávez gave the Las Cristinas concession to Crystallex, which the previous year had reported its highest revenue in company history, shareholder equity of CAD$144 million and mining operations in Uruguay and Venezuela.  By 2003, per its financial report, shareholder equity almost doubled relative to the previous year, surpassing CAD$257 million.

In 2008, Chávez canceled Crystallex's concession to Las Cristinas while nationalizing the country's gold mines.  Crystallex got a taste of its own medicine.  Its last public financial report — third quarter of 2012 — showed assets of US$8.2 million and a deficit of around US$766 million, but it sued Venezuela's state-owned petroleum company PDVSA for $1.4 billion as compensation for the expropriation of Las Cristinas.

In February 2019, a court in Philadelphia allowed Crystallex to take control of Citgo, one of the most valuable companies in Venezuela's state-owned oil consortium.  On July 29, a federal court confirmed that decision.

Like some Eastern European countries, such as Georgia, Venezuela needs a massive privatization program, but a takeover is not the way to right a wrong.

Interim president Juan Guaidó's officers have been plagued by accusations of corruption, which provides further justification for the new sanctions.  His administration and its staff have proven to be largely part of the status quo.  National security adviser John Bolton's last statements on Venezuela seem to demonstrate that the United States' relationship with Guaidó's interim government has reached its limit.  Dialogues between Maduro's regime and Guaidó's interim government have not produced the results desired by the Trump administration, making the collaboration no longer worth its costs.  One of those costs is the administration's tolerance for Guaidó's admiration of American Democrats, who promote policies akin to those that led to Venezuela's current condition.  The new sanctions might pressure Guaidó to change his strategy, which is only extending the suffering of Venezuelans while the leaders are living a life of luxury.

As Bolton said, "the time for dialogue is over.  Now is the time for action."  The new sanctions are actions that allow time for the political situation to be resolved without losing one of Venezuela's most valuable assets.

Rafael Acevedo is a research associate at the Free Market Institute at Texas Tech University and founder-director of Econintech, a free market–oriented think-tank.  Previously, he was an associate professor at Universidad Centroccidental Lisandro Alvarado in Venezuela.  He is the editor of the book Prosperity & Liberty: What Venezuela Needs.  Twitter: @RAAcevedoR.

President Trump is right in imposing new sanctions on Venezuela because of "the continued usurpation of power [and] human rights abuses."  This move freezes the properties and assets of both Venezuela's government and individuals in business with Venezuelan officials in the United States.  Additionally, it prevents Crystallex — a Vancouver-based mining company — from seizing petroleum company Citgo's assets in compensation for the Venezuelan government's 2008 expropriation of its mining concession.

Understanding the legal battle between Crystallex and Venezuela is key to understanding why we should support the new sanctions.  Doing so requires us to reach back even farther than Hugo Chávez, to a time when politicians like Chávez promoted the state ownership of the commanding heights.

In 1991, the Venezuelan government started a joint venture with the Canadian mining company Placer Dome, which owned 70 percent of the partnership that created a new mining company called MINCA.  Claiming title to part of the Las Cristinas mine, Crystallex sued MINCA in 1998.

In 1999, Placer Dome sold its stake to Vanessa Ventures, another Canadian mining company, for a supposed ridiculous price of $50.  This sale enraged Chávez, the new caudillo of Venezuela — a country by then going on 40 years of social-democratic rule.  Chávez, an old-fashioned socialist-nationalist, argued that it was an insult to "Bolívar's land" to sell one of the world's largest gold deposits for such a price.  He then ordered the Bolivarian National Guard to seize MINCA's property and assets, and he signed an order to expropriate Las Cristinas.

Crystallex's 2001 annual report stated that the company viewed "this [as] very favorable, particularly in the context of the productive discussions we have had with the government and their enthusiastic response."  In 2002, Chávez gave the Las Cristinas concession to Crystallex, which the previous year had reported its highest revenue in company history, shareholder equity of CAD$144 million and mining operations in Uruguay and Venezuela.  By 2003, per its financial report, shareholder equity almost doubled relative to the previous year, surpassing CAD$257 million.

In 2008, Chávez canceled Crystallex's concession to Las Cristinas while nationalizing the country's gold mines.  Crystallex got a taste of its own medicine.  Its last public financial report — third quarter of 2012 — showed assets of US$8.2 million and a deficit of around US$766 million, but it sued Venezuela's state-owned petroleum company PDVSA for $1.4 billion as compensation for the expropriation of Las Cristinas.

In February 2019, a court in Philadelphia allowed Crystallex to take control of Citgo, one of the most valuable companies in Venezuela's state-owned oil consortium.  On July 29, a federal court confirmed that decision.

Like some Eastern European countries, such as Georgia, Venezuela needs a massive privatization program, but a takeover is not the way to right a wrong.

Interim president Juan Guaidó's officers have been plagued by accusations of corruption, which provides further justification for the new sanctions.  His administration and its staff have proven to be largely part of the status quo.  National security adviser John Bolton's last statements on Venezuela seem to demonstrate that the United States' relationship with Guaidó's interim government has reached its limit.  Dialogues between Maduro's regime and Guaidó's interim government have not produced the results desired by the Trump administration, making the collaboration no longer worth its costs.  One of those costs is the administration's tolerance for Guaidó's admiration of American Democrats, who promote policies akin to those that led to Venezuela's current condition.  The new sanctions might pressure Guaidó to change his strategy, which is only extending the suffering of Venezuelans while the leaders are living a life of luxury.

As Bolton said, "the time for dialogue is over.  Now is the time for action."  The new sanctions are actions that allow time for the political situation to be resolved without losing one of Venezuela's most valuable assets.

Rafael Acevedo is a research associate at the Free Market Institute at Texas Tech University and founder-director of Econintech, a free market–oriented think-tank.  Previously, he was an associate professor at Universidad Centroccidental Lisandro Alvarado in Venezuela.  He is the editor of the book Prosperity & Liberty: What Venezuela Needs.  Twitter: @RAAcevedoR.