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E.U. Ministers Approve Venezuela Arms Embargo

The new European pressure on Venezuela comes as the country reels from an economic crisis that has caused near-quadruple-digit inflation, driven up poverty rates, ruined public services and depleted stocks in grocery stores and pharmacies, causing widespread hardship and compelling the emigration of hundreds of thousands of Venezuelans.

Though Mr. Maduro is widely unpopular, he has used the judiciary and other divisions of government to tighten his hold on power, jail prominent critics and demoralize the opposition, which has suffered deep schisms following a dismal showing in regional elections last month in which the ruling United Socialist Party of Venezuela was able to buttress its dominance.


Nicolás Maduro of Venezuela at a news conference in Caracas last month. Credit Federico Parra/Agence France-Presse — Getty Images

The European Union’s foreign ministers cited those elections, which were scarred by allegations of fraud and electoral trickery, as an impetus for its decision on Monday, and they called on the Maduro administration to allow “a comprehensive and independent audit” of the results.

“These developments have accentuated the political polarization in the country,” the group said.

In a statement, the Maduro administration called the new European restrictions “illegal, absurd and ineffective.”

Also on Monday, the government, seeking to ease Venezuela’s economic crisis and avoid a default, began talks in Caracas on renegotiating a crushing foreign debt that has drained its treasury of money to import food and medicine.

Though many major investors around the world balked at an invitation to the meeting, citing safety concerns amid the capital’s violence and the possibility they could run afoul of American sanctions, scores of bondholders or their representatives attended the hourlong gathering. It was held at a regal government building here known as the White Palace.

But government officials at the meeting presented no firm proposals to attendees, Reuters reported, and no future gatherings were scheduled. That left bondholders and analysts struggling to figure out whether the Maduro administration had any sort of strategy to resolve its debt problem.

“I don’t think they have a fully constructed plan,” said Diego Ferro, an executive at Greylock Capital, an investment house that holds Venezuelan bonds though its representatives did not attend the meeting. “To organize this meeting in Caracas at this moment seemed to be more of a political statement on their part than to have a really constructive dialogue. Nothing should really surprise.”

Mr. Maduro has said he hopes to restructure Venezuela’s $ 63 billion in bonds, most of them issued by the government and the state-run oil company, Petróleos de Venezuela, known as Pdvsa. He has made payments on the country’s foreign debt a cornerstone of his economic policy, even at the expense of food, medicine and other critical imports for the country.

Over the weekend, Mr. Maduro reiterated that commitment, according to news services, declaring that Venezuela would “never” declare default.


The Venezuelan ambassador to the United Nations, Rafael Ramírez, center, after a Security Council meeting on Monday about the situation in his country. Credit Jewel Samad/Agence France-Presse — Getty Images

But many analysts both in Venezuela and abroad have questioned the sincerity of Mr. Maduro’s attempt to refinance the debt, saying that were he indeed serious, he would not have named Tareck El Aissami, his vice president, as head of the effort. The Trump administration imposed sanctions on Mr. El Aissami this year, barring American financial institutions from doing business with him.

All told, Venezuela owes more than $ 120 billion, including the bond debts, oil payments to Russia and China and outstanding claims by oil service companies.

Further complicating the economic picture for Venezuela, its crude production has dropped below two million barrels per day, to its lowest point in 28 years. Oil is the government’s main source of revenue.

The economic and political pressures on Venezuela were also underscored on Monday at the United Nations, where the Security Council held an informal meeting to discuss the deteriorating situation in Venezuela and its threat to regional stability.

Notably absent was Venezuela’s ambassador, Rafael Ramírez, who held a news conference in which he denounced the meeting as “a hostile act” by the United States and a violation of Venezuela’s sovereignty.

“We will resolve our issues on our own and in peace,” he declared in a Twitter post.

China and Russia, both Security Council members, refused to attend, suggesting that any push by the United States and others for Council action on Venezuela would probably meet strong resistance.

Separately in New York, a derivatives industry trade organization met to discuss Venezuela’s debt situation and whether late bond payments earlier this month from Petróleos de Venezuela constituted a so-called credit event. Such a determination by the group, the International Swaps and Derivatives Association, might allow debt holders to collect on a kind of insurance against default known as credit default swaps.

The group postponed its decision until Tuesday.

Source: NYT > World

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