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The U.S. government held its fire against Venezuela on Monday, choosing not to slap sanctions on the oil-dependent nation's energy sector, but analysts say those penalties could still be coming.
The U.S. Treasury Department instead sanctioned embattled President Nicolas Maduro after he held a vote over the weekend to overhaul the nation's legislative body and sweep away the political opposition. The vote was a prelude to rewriting Venezuela's constitution, which would fortify Maduro's grip on power as his nation remains mired in economic crisis and rocked by deadly street clashes.
But the sanctions against Maduro himself are unlikely to knock him off the course he's plotted toward dictatorship, making it likely the United States will eventually impose economic sanctions, analysts say.
"Maduro is not going to be deterred, so the question is what happens when the new constituent assembly starts dismantling the existing institutions or we have further bloodshed. I think we will start to see escalating economic measures," Helima Croft, head of commodity strategy at RBC Capital Markets, told CNBC.
While the penalties put Maduro in a notorious club with sanctioned dictators like North Korea's Kim Jong Un and Zimbabwe's Robert Mugabe, those leaders are still in power, analysts noted.
"Personal sanctions make it harder for the elite to benefit from corruption and increase the punishment associated with it. But, as the experience of sanctions elsewhere shows, it can take a long time to achieve the desired effect," Stuart Culverhouse, chief economist at frontier market investment firm Exotix Capital, said in a recent research note.
Sanctions against Venezuela's oil industry could have ripple effects across the energy sector, creating winners and losers from American gas pumps to African export terminals. They could also contribute to a total collapse in Venezuela, rather than an orderly transition of power, some say.
It's risky for the United States to hit Venezuela where it hurts because the two nations' oil industries are intertwined.
Many U.S. Gulf Coast refineries are configured to process the heavy crude that Venezuela pumps. In 2016, the United States imported about 740,000 barrels a day from Venezuela, which sits on the northern coast of South America, a relatively short trip to the Gulf Coast.
The most severe measures would bar U.S. imports of Venezuelan crude or prevent state oil giant Petróleos de Venezuela, S.A., or PDVSA, from transacting in U.S. dollars. But the Treasury Department is considering less severe penalties, The Wall Street Journal reported.
One measure reportedly under review is a ban on sales of U.S. light crude oil and condensate to Venezuela, which PDVSA uses to dilute its heavy crude before selling the oil to refineries. That would force PDVSA to buy those light grades from further afield, potentially Libya, Algeria and Nigeria, according to Andrew Lipow, president at Lipow Oil Associates.
"The fact is that U.S. supplies are five days away from Venezuela, whereas these other suppliers are several weeks away," said Lipow. "The cost would increase."
Venezuela's oil production has already fallen as PDVSA struggles to fund investments, so any higher costs would only ratchet up the pressure. But market disruptions could raise crude prices and squeeze profit margins for Gulf Coast refiners, including those owned by top users of Venezuelan crude like Valero, Phillips 66, Chevron and the Venezuelan state-owned Citgo.
It could also make winners out of firms that operate tanker ships such as Frontline and Nordic American, who would benefit from booking trips to Africa rather than the Gulf Coast, Lipow said. The United States shipped about 75,000 barrels a day of these petroleum products to Venezuela last year.
U.S. shale drillers stand to benefit in almost any sanctions regime because the disruptions are likely to reduce supply, which boosts oil prices. U.S. crude has been stuck below $50 a barrel for much of the year, making it hard for many of them to turn a profit.
Many refiners upgraded their facilities in recent years to allow them to process lighter oil grades. Those facilities would have the option of refining oil from U.S. shale fields, which would be a boon to American drillers, said Hillary Stevenson, director of oil markets at Genscape, an energy market data firm.
An outright ban on importing Venezuelan crude or financial sector sanctions would amplify all of these impacts, analysts say. They could lead to higher gasoline prices and layoffs at some refineries, particularly Citgo. It would also pile significantly more pressure on refinery profit margins.
"It is important for the administration to carefully consider the effects of any proposed sanctions, which would not prevent Venezuelan crude from being sold elsewhere on the world market while potentially having a detrimental effect on U.S. refineries that are set up to process the type of crude oil produced in Venezuela," Phillips 66 told CNBC in a statement.