We use the differential access to credit of oil firms in Venezuela’s Orinoco Basin to identify the economic effects of financial and oil sanctions on firm output. Using a panel of monthly firm-level oil production from 2008-2020, we provide estimates showing that financial and oil sanctions led to large losses in oil production among firms which had access to international credit prior to sanctions. The estimated effects explain around half of the output drop experienced in those firms since the adoption of sanctions, and argue that in the absence of sanctions, production in the Basin would be between three to five times its current level.
The sanctioning of the Maduro regime may not seek to generate a change in Venezuela. It may rather seek to deter other budding authoritarianisms from developing in the region. Venezuela’s opposition should have no expectations that sanctions will help them recover democracy.
with Jeffrey Sachs. Published on The Hill.