By Ron Kirk
September 30, 2021 at 5:00 am ET
Venezuelan leadership has inflicted incredible suffering and poverty on the Venezuelan people. Sadly, Western policy toward the country has exacerbated this misery.
The course we are on is helping adversaries like Iran and Russia. Sanctions currently prevent Western companies from engaging with Venezuela and prohibit them from seeking repayment on the billions of dollars that Venezuela owes them. This approach has given less-friendly foreign powers a toehold to expand beyond Venezuela to undermine our goals in the region. The more entrenched these countries become, the harder it is to re-establish democratic principles. As the security threat grows, the Venezuelan people will continue to suffer and very likely lose the tools needed to restore their previously vibrant industrial sectors.
There is a better answer – one that allows Western companies to engage with Venezuela. That answer is consistent with Secretary of State Antony Blinken’s recent statement that “there are real opportunities to leverage the private sector, which is our greatest competitive advantage in making the right kinds of investments in our own hemisphere.”
As a first step, the United States must assure Western investors that Washington will protect their interests and rights when engaging with Venezuela. If entrepreneurs – including Venezuelans who fled and must be encouraged to return – do not have that confidence, the country’s renewal and rebuilding will falter. In this vacuum, Iran and Russia will continue to influence the region with their business practices and customs.
But the U.S. policy under the prior administration did the opposite: Rather than protecting Western companies against Venezuela, the Trump administration interfered with U.S. judicial processes undertaken by legitimate creditors of Venezuela that were trying to obtain compensation they were owed for Venezuela’s thefts of their properties during the early 2000s.
The U.S. government sought to save these assets for Venezuela to incentivize a return to democracy. But, instead, this intervention insulated the culprits who seized and misappropriated billions from industries backed by Western investment. The sanctions allowed investors from Russia, China and Iran to get paid – but not companies from the United States and its allies.
For example, in the case of Crystallex, which owned a mine seized by Hugo Chavez, successor Nicolas Maduro is thumbing his nose at America’s judiciary. U.S. courts have repeatedly ruled that the rightful owner must be repaid by selling Citgo Petroleum Corp., the Venezuelan-owned oil company based in the United States.
Citgo owns refineries in the United States that are well-placed for processing the heavy crude oil from Venezuela, making it an important outlet for Venezuelan oil. As court after court has made clear, it is only a matter of time before the victims of the brazen theft will be made whole by the sale of Citgo’s assets. But U.S. sanctions have yet again prevented the U.S. courts and Crystallex from moving forward with the sale of Citgo’s assets to satisfy Venezuela’s debt.
To put real pressure on Maduro, the Biden administration should allow the U.S. courts to move forward with giving Western investors the recompense they are owed. Not only would this give Western investors the confidence to deal with Venezuela once again, but it would be a win for the rule of law.
Allowing Western companies to engage with Venezuela and sell Citgo would avoid a foreseeable, disastrous outcome where Maduro entrusts Iran and Russia to oversee Venezuela’s oil industry and other assets. He is likely to enrich hostile actors without fulfilling the obligations owed to the very investors who will be essential to rebuilding the Venezuelan economy and enabling the United States to restore democratic values.
On the other hand, allowing Citgo to be sold will demonstrate Washington’s commitment to protecting legitimate creditors – now and in the future – who follow the necessary legal processes to obtain the redress they are due. On issues ranging from human rights to the environment to labor standards, Venezuela’s future is contingent on the confident return of Western resources and know-how.
There is a better, more hopeful path if decision-makers in Washington, Ottawa, Bogota, Lima, Oslo and other national capitals committed to saving Venezuela confront the reality staring us in the face. We cannot expect a different result if we hold to the previously imposed, poorly conceived and demonstrably failed policies.
The United States still has time to seize this opportunity because it is still able to control how assets like Citgo survive. Imagine if Citgo were partly owned by a large Western oil company and partly owned by Venezuela to benefit the Venezuelan people. The value of the asset, no longer a piggy bank for corrupt leaders, would grow overnight. Venezuela, which needs the Citgo refineries to process its crude oil, would be incentivized to partner with the new Citgo. And the new owners of Citgo would be incentivized to invest in rebuilding a new Venezuela.
Led by new owners, who live by the rule of law, the revitalized industry would truly benefit the Venezuelan people who would reap the benefit. Importantly, this outcome can counter the otherwise irreversible malign presence of Iran and Russia. The Biden administration should adopt a fresh approach to its sanctions policy.
Let’s change course before it is too late.
Ambassador Ron Kirk is Of Counsel to Gibson, Dunn & Crutcher LLP, which represents Crystallex International Corp., and served as United States Trade Representative from 2009-2013.
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