Trump Weighs Tying More Venezuela Sanctions to Maduro's Actions

(Bloomberg) -- The White House is prepared to levy additional sanctions on Venezuela to counter repression by President Nicolas Maduro in the crisis-torn nation, with restrictions on oil trade among the most severe options being considered.

"You can expect that every time Maduro does something outrageous, the White House will respond with additional sanctions," Senator Marco Rubio, a Republican from Florida, said in an interview with Bloomberg Television. "For every action there will be a strong reaction, and the great news is other countries are going to join us."

White House officials have prepared a menu of possible additional sanctions against Venezuela, according to a person familiar with the planning who asked not to be identified discussing internal deliberations. The U.S. already froze Maduro's assets in the U.S. this week in response to his move to rewrite Venezuela's constitution.

Officials are divided over the idea of restricting imports of crude from Venezuela, a major source of income for the cash-strapped country, the person said. 

Venezuela, a founding member of OPEC, has the world's largest proven reserves and is South America's largest oil exporter. It's the third-largest supplier to the U.S. -- sending 10 percent of its imports last year -- and the top supplier to refineries on the U.S. Gulf Coast, home of the largest cluster of them in the world.

Read More: U.S. Announces Sanctions Against 13 Venezuelan Officials

Oil companies have warned that limits on Venezuelan oil imports could disadvantage Gulf and East Coast refiners designed to handle the country's heavy crude and cause gasoline prices to spike. Some administration officials also worry the action could exacerbate the country's worsening humanitarian situation.

Maduro, who has faced four months of violent protests that have left more than 110 dead, followed through on his plan this week to hold elections for a constitutional assembly. His government also seized opposition leaders Leopoldo Lopez and Antonio Ledezma from their homes and threw them in jail.

President Donald Trump condemned that action.

"The United States holds Maduro – who publicly announced just hours earlier that he would move against his political opposition – personally responsible for the health and safety of Mr. Lopez, Mr. Ledezma, and any others seized," Trump said in the statement Tuesday. "We reiterate our call for the immediate and unconditional release of all political prisoners."

The next set of U.S. sanctions are likely to first involve designations of more individuals, according to a person familiar with the deliberations. Curtailing financial transactions or restricting trade in crude oil or fuel between the nations could come next,  though neither step appears imminent, the person said.

Such a staged approach "gives Maduro multiple opportunities to relent," Kevin Book, managing director of ClearView Energy Partners LLC, said in a research note to clients.

Sen. Rubio: Venezuela Oil Sanctions Are Possible (Video)

Rubio, who says he's been in touch with Trump and Vice President Michael Pence on the issue, said the administration is moving "very incrementally, very strategically, very targeted and very smart."

In the energy space, a first step could be blocking exports of light U.S. crude oil to Venezuela, possibly followed by limits on oilfield service companies doing business with the country, the person said. A third option is limiting imports of heavy Venezuelan crude, possibly with progressively larger limits on the trade.

Venezuela's state-owned oil company, Petroleos de Venezuela SA, has already begun searching for alternate buyers of its heavy crude, in advance of possible U.S. sanctions, Bloomberg reported Tuesday. About a third of all oil produced in Venezuela is processed at American refineries on the Gulf Coast. Shipments to the U.S. were worth about $12 billion last year.

--With assistance from Kevin Cirilli

To contact the reporter on this story: Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.net.

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Mark Drajem