Trump seeks to free Venezuela’s billions in assets frozen after earthquakes

(Bloomberg) — The Trump administration and Venezuelan officials are exploring ways to release billions of dollars in frozen assets held abroad, looking to help the South American country recover from twin earthquakes without placing more burdens on American taxpayers, according to people familiar with the discussions.

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The plan is intended to help acting President Delcy Rodriguez’s government rebuild without requiring Washington to exceed the $386 million it has already pledged, said the people, who requested anonymity because they were not authorized to speak publicly. Venezuela still does not have access to billions of dollars through the International Monetary Fund, gold in the Bank of England and various other offshore accounts.

President Donald Trump, who has long criticized foreign entanglements, wants to avoid allocating significant funding to Venezuela while maintaining long-term control over the country as part of the “Donroe Doctrine” to bring Latin America back under US influence. Washington has been coordinating closely with Rodriguez since the ouster of powerful President Nicolas Maduro in a night raid on January 3.

“We will do more,” Secretary of State Marco Rubio told reporters on July 19. “The Venezuelans will do more. We are trying to help them get global financing and credit and also to rebuild them. They are still working out the total cost, and it will be significant, whether removing the rubble or building new things.”

One complicating factor is that the United States wants to be careful in monitoring how Venezuela uses its money, given its history of corruption and waste, some people familiar with the matter said. They said this is one of the reasons for the slow and systematic distribution of funding. The United States has been similarly deliberate about distributing funds generated from the sale of Venezuelan oil.

Getting Venezuela back on its feet after the June disaster would help set the course for economic growth, political stability, and a robust pipeline of oil and infrastructure projects profitable for U.S. companies. But the earthquakes caused $19.6 billion in damage to buildings and infrastructure, according to the World Bank, and any delays or hitches in financing would put an additional burden on the United States to obtain more support.

The natural disaster, which occurred on June 24, has killed nearly 5,400 people so far, and injured thousands more. Experts say rebuilding will take years. But the United States is deeply invested in Venezuela’s economic stability, seeing huge gains for private companies to invest up to $100 billion in the next decade to fix the country’s crumbling oil apparatus.

Much of the US government’s aid came in the form of funding for international groups such as Catholic Relief Services and UNICEF, along with supplies such as hygiene kits for survivors.

“For Trump, the challenge will be to portray Venezuela as a piggy bank, rather than a charitable cause,” said Benjamin Gedan, a senior fellow and director of the Latin America Program at the Stimson Center. “This will be difficult, given the devastation caused by the earthquakes, as well as the long list of pre-existing investment climate challenges.”

Indeed, Rodriguez’s government has withdrawn $346 million of its money held in IMF reserves – a process that would not have been possible had Venezuela not restored its relations with the IMF, with support from the United States. Venezuela still has about $4.2 billion in Special Drawing Rights from the International Monetary Fund.

SDRs can be exchanged with another IMF member country or group of countries for dollars or other currencies. But the SDR holder must pay interest on the difference between its holdings and its allocations, which could complicate the calculation for Venezuela.

The United States eased seven-year sanctions on Venezuela’s central bank and other state banking institutions on April 14, which should help the government regain control of about 30 tons of gold held at the Bank of England. Gold is currently tied up in a lawsuit related to the UK government’s recognition of an opposition government after a disputed election in 2018. The Bank of England did not immediately respond to a request for comment.

There are other offshore accounts in banks around the world, perhaps worth hundreds of millions of dollars.

Some US officials insist that reconstruction should reinforce, rather than replace, the broader US strategy in Venezuela, claiming that the earthquake has not changed the economic rationale underlying US policy. Trump has often stated that increasing oil production in Venezuela would benefit both countries. Even after the earthquakes, Venezuelan officials continued to press for deals that would revive production.

The earthquakes further depleted Rodriguez’s popular support. Families affected by the disaster have blamed them and the rest of the Chavez movement, which has ruled Venezuela for two decades, for a slow and halting emergency response.

Disapproval rose to 63.3% in June, nearly five percentage points higher than in May, while nearly two-thirds of survey respondents disapproved of the government’s handling of the earthquakes. About 45.7% said that electing a new president was a higher priority than reconstruction, compared to 32.6% who preferred reconstruction first.

Rodriguez’s increasing weakness at home could ultimately strengthen Washington’s hand.

“The response to the earthquake has highlighted the fact that Rodriguez and her government are acting as if they need and want an alliance with the United States,” said James Bosworth, founder of political risk consultancy Hexagon. “It wants more American support, aid, funding, and even military cooperation.”

Washington also shook public opinion by supporting the resumption of talks between the government and at least part of the opposition. These elections are scheduled to begin on August 1 between the 2015 democratically elected National Assembly and the current legislature. The goal is to create conditions for “credible, free, and fair elections,” Michael Kozak, the State Department’s senior official for Western Hemisphere affairs, said during a Senate hearing.

So far, this process has ignored Nobel Peace Prize laureate Maria Corina Machado, the most popular opposition leader of all time. She has been living outside Venezuela since leaving to receive the award before Maduro’s ouster, and her attempts to return have been thwarted by local officials working with the United States. Its lack of participation in election-related discussions may make it difficult for the Trump administration to convincingly show that it is returning Venezuela to democracy.

“The tense aspect of US policy is that the Delcy Rodriguez government’s weak response to the earthquakes has made people tired of the United States,” said David Smilde, a sociology professor and Venezuela expert at Tulane University in New Orleans. “They are working with it on the promise of a better tomorrow.”

‘It’s up to the Venezuelans’

Speaking on July 23 in Manila, Rubio said it was “up to Venezuelans” to decide whether Machado would play a role in the country’s political transition, but added that he believed she could.

Any lasting reconciliation will require broad representation in Venezuelan society, Rubio said, describing Machado as an “important element” with a support base. He also warned that political transitions take a long time, especially after many years of Chavismo, Venezuela’s version of socialism.

If support for Rodriguez continues to weaken, or protests over the government’s handling of the earthquakes grow, Trump may have to decide whether his commitment to Venezuela’s future extends to its current leader.

“Trump has a history of changing his mind and cutting his losses when the tide turns against him,” Bosworth said. If the situation turns against her, Trump may turn against the ruling regime in Venezuela tomorrow.”

Trump has consistently avoided any move that would require keeping US troops in Venezuela long-term. The initial strike to remove Maduro was carried out mostly by air, with military personnel quickly entering and leaving the country. The United States deployed military personnel after the earthquake to assist in recovery and relief efforts. About 1,000 remained there.

Kimberly Breyer, who served as assistant secretary of state for Western Hemisphere affairs in Trump’s first administration, said there was little appetite for the kind of U.S. financial investment that was needed in previous occupations of countries like Iraq and Afghanistan with boots on the ground for so long. She said Trump remains firm on his views against long-term commitments abroad.

“The idea is to minimize the use of American taxpayer money, or to make sure that anything that is used is paid back over the long term,” she said. “This does not represent a 180-degree turn in terms of nation-building on the part of the United States. But will the United States come and provide support and help them rebuild? Of course,” he added.

–With assistance from Andreina Itriago and Jorgelina do Rosario.

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