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US condemns Venezuela election, readies sanctions

Washington — The US on Monday formally condemned Venezuelan President Nicolas Maduro'selectoral victory as an exercise in fraud and said new sanctions wereforthcoming.

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"The United States stands with democratic nations in support of theVenezuelan people and will take swift economic and diplomatic actions tosupport the restoration of their democracy," US Secretary of State Mike Pompeosaid in a statement.

On Monday afternoon, President Donald Trump issued an order prohibitingthe purchase and sale of any Venezuelan government debt, including any bondsissued by PDVSA, the state oil company, and Venezuela's Central Bank.

State Department officials Monday declined to comment on additionalpotential sanctions the US was considering, but US Deputy Secretary of StateJohn Sullivan told reporters Sunday that oil sanctions were "under activereview."

Officials at State, the Department of Energy and within the White Househave been studying potential, oil-related sanctions on Venezuela for months,but have declined to impose them due to the potential impact on US Gulf Coastrefiners who continue to import Venezuelan crude.

David Goldwyn, president of Goldwyn Global Strategies and a special envoyand coordinator for international energy affairs at the Department of Stateduring the Obama administration, said an import prohibition was unlikely nowdue to relatively high oil prices.

"I really don't think they will ban imports in this price environment,"Goldwyn said.

ICE July Brent was 49 cents higher at $79/b Monday afternoon.

Francisco Monaldi, the Latin American energy policy fellow at RiceUniversity's Baker Institute for Public Policy, said the US is likely toimpose new restrictions on exports of light crude and refined products used asdiluent in the production and transport of heavy crude oil in Venezuela.Monaldi said these restrictions may impact as much as 200,000 b/d of diluentexports from the US and up to 300,000 b/d of extra heavy oil production inVenezuela.

"This will have some additional effects on [Venezuela's] alreadycrumbling oil industry," Monaldi said during an Atlantic Council call.

Venezuelan oil production fell to 1.42 million b/d in April, down 50,000b/d from March and down 560,000 b/d from a year earlier, the InternationalEnergy Agency said last week. Since December 2015, Venezuelan output hasfallen by roughly 1 million b/d, to its lowest levels since January 2003 whena strike dropped output to 620,000 b/d.

A corresponding decline has taken place in US imports of Venezuelancrude, which averaged less than 409,500 b/d in February, down more than 28,700b/d from January and down 269,250 b/d from February 2017, according to thelatest US Energy Information Administration import data. US imports ofVenezuelan crude have declined nearly 46% in two years, according to the EIA.

Maduro on Sunday night declared victory in a presidential electioncriticized by much of the international community as corrupt and illegitimate.

"The United States condemns the fraudulent election that took place inVenezuela on May 20. This so-called "election" is an attack on constitutionalorder and an affront to Venezuela's tradition of democracy," Pompeo said."Until the Maduro regime restores a democratic path in Venezuela through free,fair, and transparent elections, the government faces isolation from theinternational community."--Brian Scheid, brian.scheid@spglobal.com

--Edited by Kevin Saville, newsdesk@spglobal.com